@Green January/February 2021 | Page 22

22 opinion

@ green | January-February , 2021
Source : Cartoon by Bjorn Bull Hansen
... yet , we are adding fuel to the FIre with massive fossile fuel subsidies

House on fire

We are not doing any favour by giving significant subsidies to fossil fuels

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Over the last four decades , it has become increasingly clear climate change not only is caused by humans but also constitutes an existential threat to humanity .

Climate change is caused by greenhouse gas emissions , which climate scientists say must be cut in half by 2030 to not pass the threshold of irreversible catastrophic climate change .
Metaphorically speaking , our house has caught fire , and swift action is required to save it from burning to the ground . In a normal scenario , firefighters would immediately be called to quickly put out the fire with large water quantities .
In the context of climate change , however , we have been very slow to call the firefighters . Not only is our house still increasingly on fire – as evident by the accelerating rate of global greenhouse gas emissions – but we have actively been adding fuel to the fire by giving significant subsidies to fossil fuels , a major source of greenhouse gas emissions .
In fact , the International Monetary Fund has calculated that the annual post-tax fossil fuel subsidies in 2017 corresponded to a staggering 6.5 per cent of the global GDP ( or US $ 5.2trillion ).
It is high time that the global fossil fuel subsidies are removed and that a “ polluter pays ” principle is implemented for greenhouse gas emissions by introducing carbon taxation . The carbon tax should be set to a value that matches the Social Cost of Carbon ( SCC ), so it becomes commensurate with the adverse effects of greenhouse gas emissions on human health and the environment .
A carbon tax will cause carbon-intensive products to become comparatively more expensive than the environmentally friendly alternatives , shifting the market in a green low-carbon direction . The smart thing about carbon taxation is that the prices across the society will be affected proportionally to their individual carbon footprint .
As such , carbon taxation is universally applied fairly and robustly and is not prone to special interest lobbyism .
In Southeast Asia , Singapore is the first and only nation to implement a carbon tax . The Singapore carbon tax is set at SG $ 5 ( US $ 3.7 ) per ton of greenhouse gas emissions , expressed as a ton of carbon dioxide equivalents ( tCO2e ).
Singapore plans to increase the rate by 2023 , and rightfully so , most yardsticks ’ current carbon tax is meagre . The World Bank , for example , recommends US $ 40 / tCO2e as the minimum social cost of carbon .
Likewise , the Paris Agreement recommends using a range of US $ 40-80 / tCO2e to achieve climate targets . A much higher cost of US $ 417 / tCO2e was determined in a recent large global study published in Nature Climate Change ( 2018 ).
In reality , however , only a limited number of countries have implemented a carbon tax of the recommended US $ 40 / tCO2e or higher . Even in the European Union , which is seen as a global leader in legislating for transitioning into decarbonised society , the carbon market price is currently only at US $ 33 / tCO2e .
Only a handful of countries have implemented higher national carbon taxes , such as France ( US $ 50 / tCO2e ), Switzerland ( US $ 96 / tCO2e ) and Sweden ( US $ 127 / tCO2e ).
A commonly heard argument against implementing a carbon tax - or environmental taxation in general - will hurt low-income families by reducing their disposable income . The opposite is true if carbon taxation is implemented as a simple “ Fee and Dividend ” scheme .
Championed by the Citizens ’ Climate Lobby , the monthly national carbon tax revenue is paid out as a monthly dividend in equal proportions to all citizens in this scheme .
Low-income families will typically experience a net economic gain , as the monthly dividend payout likely will be significantly higher than their monthly carbon taxes expenses due to the lower consumption and spending power of low-income families .
In other words , if applied along the lines of the Fee and Dividend scheme , carbon taxation can gain instant approval and popularity among the low-income segment of the population and become a political win .
Another commonly heard argument is that carbon taxation hurts the competitiveness of businesses . Different taxation policies can help alleviate this problem , such as a Carbon Border Tax Adjustment ( CBTA ) imposed on imported goods from countries without carbon taxation .
Moreover , energy-intense domestic industries can be given time to adjust by granting them a tax credit that is gradually phased out . It is also worth mentioning that push for carbon taxation sometimes come from the industry itself .
Case in point , the Confederation of Danish Industry , representing 18,000 companies , has for the past two decades regularly pleaded with the Danish government to impose more strict domestic energy efficiency requirements . Why ? Because looking ahead , they know the impending Climate Crisis will spur global demand for energy-efficient and climate-friendly solutions .
Strict domestic environmental standards will force businesses around the country to develop climate-friendly products while staying relevant and competitive on the global market . It ’ s an excellent strategic business decision to pursue low-carbon solutions .
Last year , the Chief Economist of the World Bank , Joseph Stiglitz , stated that the climate crisis is our “ third world war and needs a bold response because we cannot afford not to act , as our civilisation is at stake ”. Let ’ s make the global implementation of a carbon tax one of those actions . — @ green