The Eighth Annual Global Conference on Environmental Taxation
 
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INNOVATION, TECHNOLOGY AND EMPLOYMENT IN THE TRANSPORT SECTOR 
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Workshop 4: Global Market-Based Solutions to Climate Change

“Option CC / G-77 and China" - Inventing a south-south
technofiscal policy to douse global warming

Prof. Margaret Okorodudu-Fubara, Obafemi Awolowo University, Nigeria

“Option CC / G-77 and China” aims at provoking a paradigm shift in global attitude to Climate Change and the problem of Global Warming. Climate Change was yesterday’s unresolved problem. Today we are still debating it for solution as the problem lingers. We cannot afford to let it remain tomorrow’s problem. The international community must reassess its mindset and human activities exacerbating global warming on a catastrophic scale.

The audience will be taken through a crafted proposition on how developing countries can challenge the world with an alternative Climate Change Preventive Plan rooted in cross fertilizing/endogenous technology innovations, and allied environmental fiscal policy reforms. “Option CC/G-77 and China” entails a radical departure from The Berlin Mandate (FCCC/CP/1995/L.14, April 7, 1995) excluding developing countries from specified commitments levied on developed countries and the economies in transition under the Kyoto Protocol.

The position then necessitating that approach to the climate change issue has changed. Some countries in the G-77 and China are now close to emitting GHGs at levels soon to surpass some developed countries. No country in the world today is “greenhouse gases-emissions-free”. All countries are “joint culprits” in this heinous assault on Mother Nature. Together they should bear responsibility to clean up the Earth in “equitable manner/proportion” on the basis of “capability and contributory responsibility” (CCR).

Here we propose an “alternative plan” to the Berlin Mandate…tagged the “Option Climate Change slash Group of 77 and China”. All hands must be on deck to rescue planet Earth from the imminent scourge of global warming. Every country is at risk…developing countries, because of their level of economic development are more threatened by climate change related disasters. This Option would spur much needed sustainable economic development in these countries.

“Option CC/G-77 and China”. What does this translate into? Developing countries, members of this Group under a revised Kyoto Protocol will have “to meet a binding target of stabilizing emissions at their 2005 level by 0-10% of greenhouse gas emissions by 2015 (same year set for realization of the Millennium Development Goals) for the upper level developing countries; 2020 for the middle level developing countries; and 2025 for the least developing countries. The 30+ pages paper is a detailed revealing exposition of viable “techno/fiscal policy dimensions of the proposed “Option”.

 

Carbon Emission Rights: the Key to an Optimal Policy Approach?

Ken Piddington, Prof. Frank Scrimgeour, University of Waikato, New Zealand

This paper explores the scope for climate change policy in general, and the allocation of carbon emission rights in particular, to enhance wider social goals. We note the importance for NZ policy to be developed with special regard to the significant threats that are already emerging in the south-west Pacific. These include the prospect of sea level rise and changes in oceanic chemistry which will affect vulnerable small island states, and the deep impacts of the continuing drought in large areas of Australia, including the main centres of population.

Given a world-wide move to a combination of trading mechanisms and fiscal devices that reflect the contribution of GHG to climate change, we see opportunities as well as challenges. One of the opportunities is to take a fresh approach towards the initial allocation of carbon emission rights and to look at three innovative departures in the New Zealand context;

- granting annual allocation of rights to all citizens resident in NZ from birth (such rights would not however be tradeable until age 18)

- consideration with neighbouring countries of the possibility of ‘portability’ of such rights, and

- exploring the incorporation of these portable rights into a regional trading mechanism, with special attention to the development needs of Pacific Island nations.

Each of these dimensions opens up a new range of benefits for individuals and communities. (At the national level the clear benefit will be any increment in C absorption and a consequent reduction in New Zealand’s Kyoto deficit.) The accumulation of credits until age 18 might could facilitate the reduction of student debt, and the attainment of tertiary skills which will be particularly useful in a C constrained world. The portability provision could ease the resettlement costs faced by long-term migrants and enhance their contribution to the destination economy. (A variant could also see the New Zealand Government extending future tax concessions to its own citizens when they return home).

It would be an illusion for the international community to think that the adoption of a series of economic instruments simpliciter will achieve environmental policy success. The paper presents new approaches to environmental policy design that enhances the probability of introducing environmental appropriate fiscal reforms that achieve ongoing environmental, economic, and social benefits.

 

The Revival of the World GHG Tax

Prof. Philippe Thalmann, EPFL Swiss Federal Institution of Technology Lausanne

Considered unpractical and unfeasible, the global carbon tax was thrown out of the Kyoto protocol. It is coming back on the scene in a new dress, be it because it finally appears less cumbersome than the flexibility mechanisms provided for in the Protocol or for its revenues, that could help poorer countries prepare for the climate changes that are now considered inevitable. We intend to assess the potential for a global GHG tax: what rates are needed for different targets (internalization of external costs, emissions target, and revenue target)? What impact would it have for the main regions of the world? How could it be made acceptable to all main regions of the world? How could it be implemented practically? How does it compare with other instruments designed to reach the same target such as tradable emissions?

We will use a global computable general equilibrium to simulate different GHG tax solutions.

 

Harmonized Universal Carbon Taxing

Prof. Aviel Verbruggen, University of Antwerp, Belgium

International Climate Policy Regimes are today dominated by trials to set up tradable permit systems that are not delivering in setting a transparent and predictable carbon price pattern reflecting the costs and risks of rising greenhouse gas concentrations in the atmosphere. As an alternative uniform global carbon taxing regimes are proposed [Cooper, 2005], lacking however answers on the three contentious issues to be solved [Nordhaus, 2005]: 1) the level of emission reductions; 2) the distributions of the emission reductions across countries and 3) the transfers to low-income countries.

Focusing on energy and carbon intensities [Pizer, 2005] (rather than absolute quantities) reveals narrow correlations between intensities and end-use prices [Verbruggen, 2006], the latter steered by energy and carbon taxing. Long-run price (tax) elasticity of ~-1 provides the basis for country-specific, dynamic energy and carbon taxing patterns that can be hooded by a global agreement at UNFCCC level. This agreement spells out three issues: 1) a common % of GDP that countries (grouped in GDP classes) have to raise domestically as energy and carbon taxing revenues; 2) a country-specific ramping rate in lowering intensities starting from the present levels; 3) rules for the transfer of small shares of the tax revenues from rich to poor countries depending on both their performance on the first two issues. Full freedom is assigned to every participating country in developing and implementing the domestic tax reform that accompanies the climate policy regime.

The propositions are assessed for the standard criteria of effectiveness, efficiency, fairness and administrative feasibility. The evaluation shows that only a universal taxing agreement provides the necessary thrust to empower the transitions necessary to face the climate change challenges.

 

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