The advisory panel in the ongoing COP28 meeting, taking place in UAE, from November 30 to December 12, 2023, suggested “Tax the bad”. This is done with the combined aim of gathering funds to tackle climate change and to reduce the emission of greenhouse gases by using ‘Carbon Taxation’ as a tool.
What Is Carbon Tax?
If you want less of something, “TAX IT”. In simple words, a carbon tax puts a cost on the use of fossil fuels and Greenhouse Gases (GHG) emissions which makes the goods and services derived from these more expensive for businesses to produce and consumers to purchase.
This is a win for the environment as it reduces the use of such pollutants and incentivizes the transition to cleaner energy sources.
Why Have Not All Countries Adopted Carbon Taxation?
There is much debate on this instrument and only 46 countries have imposed carbon taxes because of its ambiguity. A country is coded as having a
“carbon tax” even if it has imposed it on any one of its sectors and not on the entire economy.
For example, Argentina has levied taxes on fossil fuels when they are used for heating purposes and to fuel stationary motors, but has not imposed them on a lot of other sectors which contribute to emissions.
Another reason is that many least developed and small island countries do not have the resources to restructure their economies after raising the cost of a critical resource, the juice that makes them run.
The Effect Of This Form Of Carbon Pricing
Experts say that this is a wonderful tool to allocate funds to combat climate change, but it will be sustainable and effective only when well-structured.
Climate is a “Global Common Public Good” and climate change affects us all. Russia is one of the top emitters of carbon dioxide and does not have an explicit carbon pricing system, while the “Carbon Border Adjustment Mechanism” introduced by the European Union disproportionately affects countries like India.
Carbon taxation has been a topic of discussion a lot of times in the meetings of the Conference of Parties, however a well-designed model is still on the way.
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