Fair Solution for an International Carbon Tax: Refund It To China.

November 29, 2015

If we apply a carbon tax at the border, on the pretext that the exporting country would tax less carbon in its own market, it is not fair that the importing country retains the revenue of this tax. This may seem surprising when thinking about it the first time, but it is more logical to refund it to the Government of the exporting country! Explanation: 

Many states of the world talk, always vaguely, about a reduction of their greenhouse gaz (GHG) emissions to a certain percentage within a certain period, but still, we need political tools to achieve real reductions. And emissions continue to increase worldwide. A true and profound reflection on these political tools is still extremely poor, while this should be the most important political subject of the 21st century.

The Carbon Tax:

Among these tools, probably the most effective and simple, because the most ‘systemic’, is a Carbon Tax on GHG emissions (detailed article), a tax progressively and strongly increasing every year, which would divide by 6 our GHG emissions in 2050 (1) to remain below the 2°C of increase in global earth temperature. (Division by 6 for Europeans, more or less for other countries) This tool is already in place in many countries but at rates that are way too low in regard to the huge goal the achieve.

PROBLEM:

This carbon tax is by far the tool that seems to be the most simple and efficient (much more than quotas) to prevent climate change… (2)… But there is a big problem, because the various countries of the world will most probably not apply all the same rate of carbon taxes (if they apply one)… And a progressive carbon tax in direction of a high rate (3) would make the various productions of the country/continent who apply it too little competitive on the world market… This would provoke then even more relocations/offshoring, to countries where the fossil energy is not taxed… As a consequence, as this has being discussed, we should then count/estimate/apply this carbon tax at the borders on all products entering the country… And then the problem would be, as this has been discussed too, that this contradicts the WTO agreements exchanges…

SOLUTION:

… unless that we propose to refund the carbon tax revenue, recorded at the border on coming products of the exporting country… …To the Government of this country!

EXPLANATION:

Let’s imagine that Europe would have strong increasing carbon taxes and China not. If, for a fair international competition, we taxed gradually and strongly Chinese products with high emissions of GHG arriving in Europe (like we would tax our national products), China would not agree. And it would have a good reason to disagree, because the immense product of this tax is supposed to be redistributed in a way or another to the non-polluting part of the economy or to the citizens… And China would argue that this is unfair because the product of this tax deducted on imported products would then remain in Europe!

On the contrary, It would be logical to propose to China to refund them the revenues of this carbon tax collected on their products arriving in Europe, amount refunded directly the Chinese State. China could then use that money to reduce other taxes in its country, in fact, reverse it to non-polluting economy part, or its own citizens. This would be much more fair, and China would be much more likely to accept the deal. Since half of the Chinese activity are exports, it would implicitly settle a carbon tax to China on its exported products. And we could do the same for each country importing goods in Europe: The imports from that country would be taxed, at a well balanced amount (only if the carbon in their internal market is less taxed than in europe) and then the revenue of the tax would refunded to the government budget of that country. (4)

CONCLUSION:

Each country or group of countries could then start to apply in its economy its own level of carbon tax, at the level that he thinks good for itself and for the planet. It will then also eventually start to tax the imports everytime the national carbon tax of a given exporting country is lower than its local tax, and will refund to each of those importing country the tax revenues as recorded at the border on products coming from that importing country. This should be a good way to harmonize the global economy in which the different countries or continents would experiment in different levels of carbon taxes!

Today, among the few countries that have already begun to implement a  carbon tax, it is much too weak and partial to actually to really decarbonise the economy. And if Governments have not voted a higher taxes there, this is also probably because this would disadvantage their economies on the world market… It is when it will be decided to equitably balance these taxes internationally that the countries will be able to decide to launch the necessary much higher carbone taxes. Politicians will take real decisions to effectively reduce emissions only if they have a clear vision of how to organize politically and internationally these reductions. This is far from being the case. A deep international reflection on these  economic tools is required.

Note on the past politics: Why kyoto didn’t work

In 1997 most of the countries have voted for an innovative resolution in Kyoto implementing carbon quotas, with a goal of 5% reduction in emissions by 2012 compared with 1990. The objective was still very weak. It was only to climb the first step of the staircase to the decarbonization of our economies. It is clear that at the end of the period, even this first step has not been reached!… Although some people claim the contrary: Most European countries have not reduced their emissions as promised in Kyoto, because in reality they have outsourced a large part of their consumption to China or other countries: When just dividing GHG emissions that occur within Europe, by the European population, we could have the impression that Kyoto has worked, that these emissions have been reduced. However it doesn’t work like that: We have to account the actual emissions of Europeans including consumer products they import from other countries such as China. Then we realise the GHG emissions by European have continue to grow, and still continue to grow today… While since now 10 years some Europeans politicians often repeat in elections that we will need to divide by 4 or 6 our emissions by 2050… We urgently need to fight this hypocrisy with education policies: Urgent political measures for the education to energy and climate)

Alexandre Flet – November 2015

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  1. by 2 in the world, but by 6 for the Europeans… Each European emits the order of 3 tons of carbon equivalent per year, which must be brought back to 500 kilos in 2050, “factor 4” is therefore insufficient, we need to be talking about a factor 6: https://fr.wikipedia.org/wiki/Facteur_4#Pourquoi_le_.C2.AB_facteur_4_.C2.BB_.3F
     

  2. see main article
     

  3. rate of several hundred euros per ton of CO2 equivalent at the end of the progressive increase in 2050… Far from the microscopic and partial carbon tax now applied by some countries and that have virtually no effect on the scale of the necessary decarbonisation
     

  4. It will be sometimes complex to calculate when products are manufactured in a path through several countries, and sometimes by workers that are not necessarily locals. But if there is less tax on labour there will be less need for accountants in this area and more accountants will be able to work in the calculation of taxes on the carbon, the other greenhouse gases and the natural resources.
     

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