© Stringer China / Reuters / Daniel Munoz
With the upcoming COP21, carbon tax attracts more supporters than ever. At least when it comes to the rhetoric. On Tuesday, French president François Hollande received major economic leaders to discuss this specific matter. A few weeks ago, IMF boss Christine Lagarde rallied to the same side: "Now is just the right moment to introduce carbon taxes." As a matter of facts, this option still hasn't gone mainstream.
Taxing carbon aims at enforcing the polluter pays principle with two possible levers:
1. A tax raised when buying carbon-based fuels. As a pioneer on this path, Sweden introduced it in 1991 and has raised its level up to 168 euros per ton of CO2.
2. A carbon market on which economic actors would trade emission permits. There are now 17 of them in different regions, covering an estimated 12% of the world emissions.
A huge market in China…
Christine Lagarde is arguing for carbon taxes rather than emissions trading. It would bring more revenues to governments. Also, the EU emission trading scheme, launched in 2005, is described as largely inefficient by many analysts, with a price down to 7 euros per ton of CO2.
China, responsible for almost 30%% of world emissions, chose to implement a huge national carbon market from 2017. Beijing thus highlights its will to tackle environmental issues but keeps raising eyebrows with an option perceived as complex, opaque and possibly inefficient.
The carbon tax, criticized for being another tax, only exists in 15 countries according to the World Bank, a strong advocate for this option. An other issue arises with economic competitiveness. Enterprises threaten to relocate production. The situation gets even more complex with the lack of tax harmonization and the difficulty to bring major polluters on board.
Local initiatives in the USA
In the United States, two Democratic Senators proposed a revenue-neutral carbon tax in June. They immediately faced Republican opposition. Al Gore’s support to such a tax in the nineties immediately got him labeled as a communist.
Poor fella won't get a high five from Christine Lagarde.
Meanwhile, California and a coalition of nine Eastern states already run regional markets. In Washington state, environmental economist and stand-up comedian Yoram Bauman’s initiative for a tax carbon has raised more than 300.000 signatures this fall. The fee would go from 15$ per ton to a cap of 100$ over the next 40 years. Enough to curb emissions, while greenhouse gas concentrations just hit a new record?