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Tax carbon consumers to see real action on climate change

As delegates gather once again for climate talks in Bonn, the question has to be asked: after decades of conferences, committees, procedures and protocols, is the multilateral approach to tackling climate…

Multilateralism, so much hot air. Sebastian Kahnert

As delegates gather once again for climate talks in Bonn, the question has to be asked: after decades of conferences, committees, procedures and protocols, is the multilateral approach to tackling climate change working?

What alternative routes are there that would lead to more action with less discussion? Are unilateral measures – where states take steps to reduce greenhouse gas emissions without international agreements – so far-fetched?

One measure that could have an effect if enacted by economic superpowers such as the US or the European Union is a carbon consumption tax. This is one of several progressive ideas to be presented at the congress Global Challenges: Achieving Sustainability taking place in October in Copenhagen.

A carbon consumption tax, even if introduced by the EU and the US, would be a unilateral measure in the sense that it does not emerge from an organised collective international organisation such as the UNFCCC (the UN climate change body), but rather from the choices of individual states.

Unilateral measures are usually considered to be “politically correct” if building on existing efforts to curb greenhouse gas emissions. But the carbon consumption tax we propose would also reduce greenhouse gas emissions worldwide – action deemed less politically correct as it is deliberately aimed at affecting behaviour in other states. As a tax on products, it would be a trade measure and would consequently have to be designed to legally conform with World Trade Organisation rules in order to survive potential legal challenges. Some states might even reject such initiatives simply because they originate from the US or EU.

Leading from the front

Despite its own complications, unilateralism seems more appealing than multilateralism if the latter fails to deliver results on issues of great importance to future generations. While it may be seen as politically incorrect even to propose such an idea, it could be the only pragmatic and viable solution to today’s global challenges.

A carbon consumption tax would effectively curb greenhouse gas emissions in all countries that want to export their goods to countries that impose it. For a long time such proposals have been seen as some type of “eco-imperialism”, or economic protectionism designed to keep developing countries from access to markets for their products. But the harsh reality of today’s climate challenges may be sufficient to change that view.

First, exporting is entirely voluntary – if countries can find other trading partners with less stringent requirements they are welcome to take their products elsewhere. Second, developing countries – such as China – are themselves beginning to take their own steps to curb pollution because their environmental problems are becoming too large. So a consumption tax may prompt investment in modernised production lines and manufacturing processes, with the subsequent effect of also improving working conditions, which in many developing countries is a cause for concern.

But a consumption tax implemented by the EU and US would go further, effectively assigning responsibility for climate change. Under the UNFCCC and the Kyoto Protocol, developing countries were not subject to any restrictions on greenhouse gas emissions. The language of the agreements refer to “common but differentiated responsibilities”, without further explanation. This leads to a situation where developed countries are faced with environmental measures that are too costly to implement if competing economies in the developing world are not required to do the same.

Changing the focus of regulation

A carbon consumption tax, however, would change the locus of regulation from production to end consumption or use. For example, about a third of China’s greenhouse gas emissions are accounted for by goods exported for use or consumption elsewhere. Shifting the burden from production to consumption would completely reconfigure the current impact on climate change action (or inaction), and if there is still any hope for a legally binding post-Kyoto Protocol with hard targets for at least some countries, this may be as good a time as any to do so.

When analysing the responsibility for climate change, it’s important to note that it is inherently a global problem and part of mankind’s common concern. Emissions from a country such as Denmark affects all other countries just as much as those from China or Britain or the US, and so are of equal interest to all people from all nations.

Why not adopt a legislative framework that puts the burden on the consumer, rather than require nations to enforce against the producer? Decades of enforcing the “polluter pays principle” on a global scale has led to inefficient rules that have produced little, if any, reductions in greenhouse gas emissions, as few countries are willing to shoulder the additional costs.

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