Governments have long tried to price carbon to induce companies to make the dangerous emissions cuts already needed to tackle the climate emergency.
They do this by forcing a file Carbon taxSurcharge per tonne of CO2 emitted or through it ‘Cover and Trade’ Schemes, which give companies limited allocations for the amount of carbon dioxide emissions they can emit, and then allow them to buy and sell those provisions to provide more flexibility.
The idea is that carbon pricing will reduce carbon dioxide emissions over time by making pollution so costly that companies have the incentive to find cleaner ways to work.
However, carbon pricing It was not very effective In cutting emissions at the dramatic levels necessary to avoid the most catastrophic impacts of climate change. And the Taxing carbon It has been proven It is not popular in many places in the world Because it usually means that people have to pay more for the daily costs.
But that hasn’t stopped governments from trying it out.
Jessica F. Green, an associate professor of political science at the University of Toronto whose work focuses on global environmental policy, says this is in part because focusing on the technical aspects of carbon pricing is a good way to avoid addressing the tougher problem of actually ending fossil fuel use.
“We’ve been working on how to measure carbon for 30 years and we’re still arguing about what it is or improving it because it’s easier to do than to actually remove carbon,” Green told me.
Green argues that A. New paper Climate change is notMarket failureIt is being fixed through mechanisms such as carbon pricing. Rather, it says it is a “societal transformation problem” that requires “strong state intervention to reorganize the economy”.
Green says states should aggressively pursue taxation (one of the primary functions of the state), but who rich – The generated funds will be used to finance climate policy.
Not everyone caused the climate crisis equally. Green said the rich cause climate problems.
She called Green to find out more about why carbon pricing, especially carbon taxes, has not worked, and why she thinks it taxes the rich. Our conversation, edited for clarity and length, is below.
What do you think the main idea of your article is?
If something doesn’t work well, we must try something else. That is the whole point. And the What we know from the empirical record of carbon pricing Is that it does little to actually reduce carbon emissions, and even less to facilitate carbon removal.
When countries see emissions reductions, they are often the result of things like improving efficiency or switching from coal to fossil gas. These things aren’t bad, but they won’t lead us to net-zero emissions by 2050, which is what countries agreed to do under the Paris Agreement.
So are you saying we should just forget about carbon pricing altogether? Do you think there is an aspect of policy that is worth saving?
It’s a really tough problem, but I think, in a perfect world, we’ll get rid of it. Because today, for example, there is a file Article In the Washington Post explaining how the American Petroleum Institute is thinking aggressively in supporting a carbon tax – an indication that this policy has been entirely embraced by the people it is supposed to regulate.
When you have big, powerful oil and gas companies who also support a carbon tax, it should be an indication that the ideal conditions under which such a policy could operate will likely not materialize, because these interests are so powerful, and they are entrenched in the governments that try to regulate them.
What about the European Union’s experience with carbon pricing? I feel the European Union has been effective in enforcing a carbon tax, right?
The EU’s story is positive, but it takes Long Team. European Union Emission Circulation System It was first created in 2005 and for the first three years, the program was a wash in terms of emission reductions. (Which is understandable because they were setting off this policy.)
But in the last 11 or 12 years, they’ve made a lot of improvements in the market’s performance. Carbon prices used to be very volatile, but now much more stable – They have already increased.
They really dealt with their sourcing problem – because they had a problem Huge surplus, Causing a market glut and pushing prices down. They created a stabilization mechanism, A. Market stability reserve, Which acts as the central bank controlling the supply.
You look beautiful to me! What is the European Union not getting right?
I looked at studies of actual EU performance: if you try to isolate how much emissions have gone down due to the EU’s emissions trading system, estimates put it at only around one to three percent per year, which isn’t much.
In addition, the European Union is a group of very rich countries with great regulatory capacity. I mean, they are literally armies of bureaucrats working on this issue. And they have a lot of political will. So, in many ways, the European Union has been the most likely case of success – and it’s still not that great.
So it’s a success story in a way, but still not effective enough. I’d like to talk more about what you are proposing that countries do instead of or at least add to carbon pricing. The argument includes urging countries to change their tax policies to eliminate corporate tax havens, is that true?
The basic idea is that each country sets its own laws about the amount of taxes levied on individuals and companies, and the rules regarding transparency. A handful of countries, including the UK through [overseas territories] Like the British Virgin Islands, it has set corporate tax rates very low or nothing at all.
So, if I were a multinational company like Google or Amazon, or an oil and gas company, you could say, “Well, okay, I’m going to incorporate some of my company in the British Virgin Islands. And if I report my earnings, they’ll only be taxed at 3 percent,” “Compared to 15 per cent in the UK. This is literally just money in the bank. As long as I don’t return that money to the UK, I don’t have to pay taxes on that money.”
It gets really complicated – international tax law is very complicated. But there are ways you can create subsidiaries or parts of a company and direct your money in various ways to take advantage of the more beneficial tax laws.
Are there any countries that say they are worse than others when it comes to doing this?
There are a few: Switzerland, the Netherlands and the United Kingdom with their overseas territories and reserves such as the Cayman Islands, Jersey, the Isle of Man and Bermuda; And the Bahamas.
Well, I think I understood how these corporate tax havens work and why companies use them. But what does this have to do with climate change? Does this kind of financial secrecy enable companies to engage in environmental bad behavior without facing economic consequences?
There are two ways. One is straightforward: We know that, for example [many] Companies that do business abroad their wealth is linked to deforestation in the Amazon. These are companies that do bad environmental things, and they have the money to do it in part because they are operating offshore on some of their fortunes.
The second method is indirect. If you think – as I do as a political scientist – that money is power, well: we know that fossil fuel companies are funneling some of their profits abroad, making them richer and therefore more powerful in their ability to influence political processes to slow down the pace. Decarbonization policy.
Closing tax loopholes appears to be a relatively simple thing for governments to do, so why do you think it hasn’t been done?
In my view, it’s actually an easier political sale. Taxing the wealthy resonates much more with people than taxing carbon. First of all, people say, “What is carbon? I don’t know. What does that mean for me? Increasing costs for the basic things that I use every day?”
On the one hand, taxing the wealthy is like saying that states should take care to make sure there are sufficient returns and go to get the bad guys who are not paying their fair share.
How do states really “tax the rich”?
There are several ways to do this. One is one-sided: Countries can only say, “If you have goods or have hired people in country X, this is where you have to report your earnings, and you can’t report your earnings elsewhere.” This is a one-sided procedure. Politically, this can be difficult. It is a matter of political will.
But I think political selling is easier, and technically, in many ways, much less complicated. We do not argue about how to define and sell the absence of a thing [which is what carbon offsets would require] We’re talking about getting the rich to pay their fair share.
Once countries get that extra money from closing tax loopholes, how can we make sure that it really goes into climate policy?
Herein lies the problem. There is no guarantee that the money will go to the “right” climate causes, but it is up to it to really think of climate change as a matter of inequality in the distribution of wealth. What closing the corporate tax gaps will do is make these companies and individuals less wealthy – that is, in fact, an important goal in and of itself.
Because, you know, if One percent of the world’s population Having emitted up to the poorest 50 percent, climate change is really a wealth inequality problem. To the extent that you can restrict the immense wealth of these actors, you are taking a step in the right direction. This is the best answer to this question because it is a really difficult question.
I agree that is definitely the question going forward, and it’s tough to answer it as you say. But I think it’s an easier question to answer than, “How do we make carbon pricing effective?”
I think so too. We now have 30 years of experience in carbon pricing, and there’s not much to show.