Posts Tagged ‘carbon tax’

Carbon market or carbon tax? – Give Washington a trade war carrot and stick

Thursday, August 23rd, 2018

The world can reign in Trump’s America for a new security…

by Felix von Geyer

The world has been waiting since 1997 for Washington to take meaningful and effective action on climate change.

Between the tweets, statements, retractions, and double bluff surrounding double positives, discerning coherent straight lines through the scatter diagram of Trump’s bluff and vitriol political style is akin to aluminium chaff thrashed out by naval warcraft seeking to divert the honing device of enemy missiles, real or imaginery. In the wake of Manafort and Cohen, one can expect only more of the same.

More white hairs pervade Trump’s Administration than grey cells, their collective political imagination honed in a bygone time hazed with political nostalgia. As Trump’s style embraces pugilistic revisionism, so it threatens to knock the post-second world war era of international co-operation whose spirit embedded US interests and values within multi-lateral regimes that provided America permanent pole position on the world’s starting grid of international political economic order.

Now anxious the supposed Pacific Rise of China will lose America the race to win the Grand Prix of the international political and economic order makes Trump further rescind on the post-Cold War new security agenda the world urgently needs but the United States still fails to lead.

Security stopped being a nuclear military security; a deeper security agenda in the 1990s embraced environmental, political, economic and even human security once Moscow’s bankruptcy through US-inspired low oil prices ended the Cold War.

If Europe ever expected the US to take an economic hit for the sake of the environment however, then the EU had another thing coming, a former career staff US climate change policy framer told me somewhere in the wake of the economic crisis.

Ironically, a decade ago, projected climate change costs to the economy were estimated at 1.8% of US GDP by 2100. Last year, America lost 1.66% of its GDP to climate change.

Yes, eighty years early, the economic hit from the environment came ahead of schedule but Trump’s response instead liberates US coal and automotive industries from any responsibility in redressing the global issue of climate change, the issue that terrorizes humankind beyond all borders.

The reality check is that any responsibility for saving the world now lays with the rest of the world. The US government – namely Republican politicians – long ago abdicated any federal responsibility on addressing climate security. For humanity to survive, the world must save America from itself and force the US towards a new security.

In a world where power is sometimes defined as A making B do something B ordinarily would not do, that would require a big carrot and an even bigger stick.

Encouraging the United States requires a carrot. So, the world should invite Washington to roll-out a global carbon market and suggest it be traded in US dollars as with every other major commodity.

Moreover, money through a certain percentage of all trade deals, akin to a Tobin tax but only on traded carbon credits, could furnish the coffers of the United Nations climate change mitigation and adaptation funds which Hillary Clinton said would receive US$100 billion of funding per year from 2020 onward at the 2009 Copenhagen climate change conference.

Yes, a global carbon market traded in US dollars would benefit the US economy, particularly the US Treasury and, the tighter the cap, the higher the price and the greater the role and strength of the US dollar. Taken a step further, a cryptocurrency hedged against the price of carbon could also be leveraged. The US dollar could see its history since 1945 shift perspective from gold to petrocurrency, now to carbon and more.

So, what if Washington fails to jump on such a generous opportunity? Simply, if the rest of the world fails to make Washington eat a fat supply of carrots for the benefit of everybody, they must transcend Trump`s bullying style.

Quite simply, impose a straightforward carbon tax against the US in place of retaliatory tariffs. Surely, the world over would applaud and support this necessary move?

Where the Trump Administration is hitting America’s traditional allies with sticks in the form of tariffs over steel and aluminium requires Canada, the EU and China to respond:- not just with a stick, but a moral staff. A new security agenda requires transcending old style politics.

Unlike Trump`s tariffs over steel and aluminium and retaliatory measures by Canada, EU and China that all likely flout World Trade Organisation rules, carbon taxes in the shape of border adjusted tariffs would be legal under WTO rules. The WTO said as much almost a decade ago in its joint WTO/United Nations Environment Program Trade and Climate Change report produced in the run up to the 2009 Copenhagen climate change conference.

Ironically, in 2009, carbon taxes or border adjusted tariffs were intended for use against developing countries like China and India to force them to address their future emissions trajectory set to outstrip current US emissions, or at least plug the so-called carbon leakage gap should countries like the US and Canada face the economic consequences of reducing their emissions while developing countries did not.

US states who have tried to lead on emissions reductions such as California’s Western Climate Initiative and the North-Eastern states’ Regional Greenhouse Gas Initiative, would not be able to receive exemption as the WTO only recognizes nation-states as members or entities. Therefore, a blanket carbon tax would on all US exports would be required.

Again, where the United Nations faces shortfalls in funding its Green Fund to help countries adapt to climate change under the Paris Agreement, much of the revenue from taxing US exports could be diverted accordingly.

Whether Canada as it is forced by Trump to renegotiate NAFTA can co-ordinate this policy with the EU with whom it has a recpricoal Comprehensive Economic Trade Agreement and both EU and Canada share China as an important trade partner, they will need to be in consort to achieve a new security. Bringing the UK on-board who likely aim for an economic trade agreement with Washington in the event of a Brexit Britain will also be critical.

But hopefully the carrot of rolling-out a global carbon market traded in US dollars will help the Trump Administration – and Washington – refix its vision of a security agenda and transcend its current myopic view of US interests and global security.




When a tax is not a tax, Mr Harper

Sunday, September 23rd, 2012

Canada’s government is wrong about carbon pricing – Felix von Geyer

Where politics is about power and interests and who controls the agenda and message in their own image, ideology and self-interest, issues are usually presented as essentially contested concepts that cannot be transcended – the art of the impossible is in fact to do precisely that, transcend them.

So, when a spokesman for Canada’s Conservative government, Fred Delorey accused Canada’s official opposition, the New Democrats, of wanting to impose a carbon price, the biggest thing on show was in fact Prime Minister Stephen Harper’s highly efficient spin machine.

How much longer a government can live on spin and courtesy of a divided majority opposition is a different question to answer. Crucially, the message given this week by the Conservative Party’s strategist and spokesman, Fred Delorey that any price on carbon is a carbon tax is, in short, designed to mislead. In the language of playwright Tennessee Williams, it’s downright mendacity.

Quite simply, the government is wrong. Selling 100,000 carbon credits on the market at, for example, $15/tonne is not a tax. It is an incentive to reduce greenhouse gas emissions at less than $15/tonne.

Back in 2007, former US President Bill Clinton told New Orator that carbon taxes are great because no-one can avoid them: but cap and trade is better as it energizes entrepreneurs.

Some weeks later after he made a speech advocating a carbon tax over cap and trade, Mayor Michael Bloomberg told New Orator a carbon tax would also energize entrepreneurs.

The IMF’s 2008 WEO stated a carbon market is better than a carbon tax if you want a global price for carbon as having the best part of 200 governments agree a carbon price is nigh impossible.

Harper’s press secretary Andrew MacDougall did not respond to New Orator’s comments and questions concerning Delorey’s and the government’s myopic perspective on carbon pricing.

However, Canada’s resource-based sister economy Australia has recently introduced a carbon reduction scheme that at $15 per tonne expects to triple tax-free personal income tax thresholds to AUD$18,000 per year. In Canada, you could almost have free university education for that – and very topical it would be in Quebec as well as allowing more funds to be channeled into education, R&D, environmental science and technology.

According to the government’s own statistics for 2009, GDP was C$1,286 billion and its GHG emissions 690 million tonnes. That equivocates to just under 537 tonnes per C$million turnover. Therefore a C$50/tonne price on carbon would equal about 2.5% of GDP, less than the government’s own estimation of Canada’s 2008-2009 economic shrinkage caused by the global financial crisis.

At $50/tonne, what revenue neutrality and fiscal shifting could be achieved and also invested in a low-carbon future? In short, much.

The political reality however is that any government addressing the carbon tax or cap and trade will face a barrage of pressure against either. Iron pelletizers will cry foul play that they have incorporated more carbon footprint for the benefit of their downstream supply chain. Ditto aluminium producers will argue their carbon intensity has benefits for their downstream clients in terms of lighter transportation, although RioTintoAlcan will likely demand early action credits for emissions reductions resulting from implementing their innovative technologies since 1992.

RioTintoAlcan’s carbon footprint may be good in Quebec where Lac St Jean provides their hydro power, but in coal-fired South Africa, the reality is far different.

Data analyst company Trucost noted in 2009 that the average carbon footprint of mutual and hedge fund investment targets was 335 tonnes per million turnover; the worst offender China’s biggest coal-fired polluting power stations with over 1,500 tonnes per $million turnover. At $50/tonne, 335 tonnes equivocates to $16,750 per $million turnover, 1.675 per cent of corporate turnover – and that would be to address all emissions, not just reduce them between 25-40 per cent.

Each industry sector faces its own challenges; its own opportunities. Aviation emissions require better navigation and direct flights, otherwise technology improvements will gradually reduce energy consumption, a shift towards biofuels and alternative fuels is the only other alternative and large-scale take-up is difficult to project.

The mining and metals industry can achieve a lot, particularly in metals processing where waste heat recovery technology can make certain reductions; Alcan’s Pecheny technology has again set out to achieve a further 20 per cent emissions reduction over and above the original Pecheny 35 technology that reduced emissions from 6 tonnes of CO2/tonne of aluminium to 2.8 tonnes of CO2.

The cement industry has made its own advances.

It does not take much imagination for the Canadian, or any government yet to seriously address its greenhouse gas emissions, to devise sector-based targets that are deeply science-based, these days trending towards the higher end of the 25-40 per cent reduction target below 1990 levels, and then offer a 1% corporation tax reduction for companies who achieve them.

On face value, it would cost companies nothing if they choose to make no reductions at all.

Importantly, however, the signal to investors is that if they want to maximize their return on investment (ROI), they will need to demand their executive boards to achieve these targets. They will ask for no excuses or otherwise they will start to identify alternative investment targets that are capable of reaching these standards.

More curiously, companies who just miss qualifying for their corporation tax reduction might start to ask for a carbon market in order to buy the surplus emissions from companies over achieving their reductions targets but who qualify for no further reward. This could kick-start both an informal market price for carbon emissions, create a multiplier effect hopefully within the economy among companies addressing their emissions but furthermore sow the seeds for a grass-roots call for a carbon market.

Also, depending on where thresholds are set could include more than just the big emitters, instead embracing a wider selection of Small and Medium Enterprises (SMEs) The subsequent need to verify, audit and report corporate energy and emissions profile would create its own service industry as well as reduce operating costs of companies identifying emissions reductions and energy improvements who  can seek to reduce emissions accordingly, whether through fuel-switching in the case of a power station or reducing sales representatives’ mileage.

So the answer Fred Delorey is that a any carbon price at all is far from a tax. Technology push and market pull or a vice versa scenario of market push and technology pull just requires good government policy, not irresponsible spin.

Australian government to triple income tax thresholds in return for a carbon price

Monday, July 11th, 2011

Australia’s Labour government announced Sunday it will triple the tax-free threshold that Australians can earn before paying tax as part of a government plan to price greenhouse gas emissions at A$23 per tonne of CO2 equivalent starting next year, 1 July 2012.

In a step that Prime Minister Julia Gillard stated would reduce emissions by 159 million tonnes a year by 2020, the Clean Energy Future plan is expected to increase Australians’ individual incomes by 16% or A$9,000 per year while creating an extra 1.6 million jobs by the end of the decade.

The carbon price will increase incrementally by 2.5% per year over three years to 2015 when a full ETS will become operable, according to the government’s plans.

Initial price increases caused by the carbon tax will be compensated by recycling half the overall revenue to households to offset against these price impacts. Four million households will receive assistance that exceeds the expected price increases while 6 million households will receive assistance meeting the price increases while 8 million households will receive some assistance. Government forecasts predict a $9.90 increase in costs for households and the average assistance will be $10.10 per week.

Increases to pensions and family allowances are also promised.

Furthermore, the tax-free threshold will more than triple from A$6,000/year to $18,200 by 1 July 2012 and increase a further $1,200 to $19,400 in 2015.

Clean Energy Supplements equivalent to 1.7% of pensions and family allowances equivalent of up to $338 per year in the case of pensioners will be payable initially in lump sums to families.

Families earning less than $80,000 will receive automatic tax cuts of $300 per year in addition to the increased tax-free threshold.

Programmes to re-train workers and assist industry to transform itself into a clean economy fall under a $9.2 billion Jobs and Competitiveness funding package over the three-year timeframe.

The steel industry specifically will receive $300 million worth of government investment to enhance innovation and technological competitiveness toward a low-carbon economy and its progress reviewed in 2014-2015 under the government’s proposed EITE (Energy Intensive Trade Exposed) Productivity Commission.

Companies in the so-called EITE category claim their operations are rendered commercially uncompetitive against developing country companies that face no constraints on their carbon and other greenhouse gas emissions under the United Nations Kyoto Protocol.

Ms Gillard in conjunction with Minister for Climate Change and Energy Efficiency Greg Combet and Minister for Resources and Energy Martin Ferguson also announced an almost $1.3 billion Coal Sector Jobs Package where the coal industry who will face an effective carbon price of $1.80 per tonne of coal produced due to coal mine fugitive greenhouse gas emissions.

While a small number of gassy mines will likely pay higher costs, the package is aimed at three coal mines in particular whose operation is critical to their respective local communities and economy.

The coal package of A$1.264 billion will reward coalmines that reduce their historical greenhouse gas emissions intensity as opposed to ­absolute emissions. An additional $70 million Coal Mining Abatement Technology Support Package will further seek to enable the coal industry to deploy technology to reduce its emissions.

The government stipulated that it will endeavour to close 2,000 megawatts of brown-coal fired electricity generation.

Manufacturing industries will receive a further $1.2 billion to invest in low-emissions technology and capital equipment with $200 million specifically earmarked for the food processing and metal foundries industry.

Transportation fuel tax credits for industry will be phased out with the exception of forestry, fisheries and agriculture while domestic aviation will see its fuel excise increased in keeping with the carbon price.

Small businesses will be exempt from any future carbon trading mechanism which will be designed to include Australia’s top 500 polluters. However, the government plans to orchestrate a $40 million energy efficiency awareness programme that in line with a new $6,500 business instant asset write-off it hopes will encourage investments into clean energy investments.

Programmes for improving energy efficiency for low-income households, improved energy access for indigenous and remote rural communities are also included.

A Climate Change Authority will be established under the chairmanship of Bernie Fraser, a former head of the Energy Investment Office in the early 1980s and more recently manager of two of Australia’s largest superannuation pension funds.

The CCA will advise the government on how to design and implement its carbon trading mechanism slated to start in 2015.

NGOs in Australia welcomed  the Clean Energy Future plan. The Australian Conservation Foundation made a detailed analysis but was reticent of government plans to continue to subsidize the coal industry and specifically called for the Labour Party to live up to election promises of no new investment in coal.

ACF also called for an end to all fuel subsidies within the three-year timeframe. ACF recently launched report questioning why taxpayers were spending $11 billion in subsidies for the fossil fuel industry.

Brent Hoare of the Green Cooling Association that seeks to phase out refrigerant gases that damage the ozone and cause climate change welcomed the government plan for including other greenhouse gases than just CO2, citing that per tonne, some gases have an average warming potential 4,000 times that of CO2.

“The potential direct emissions abatement that could be delivered by a widespread transition to natural refrigerants is estimated to exceed 15 million tonnes of CO2 per annum which would make an extremely significant contribution to the emission reduction target of 160 million tonnes of CO2,” Mr Hoare told New Orator.

In New Zealand where the government has an in principle linking up between any future emissions trading scheme emanating from Canberra, Climate Change Minister Nick Smith welcomed the Australian government’s announcement of a carbon emissions tax set initially at $A23 per tonne.

“New Zealand officials have been working closely with their Australian counterparts and any changes to New Zealand’s Emissions Trading Scheme will take account of the Australian announcement,” Dr Smith said in a statement to New Orator.

Dr Smith will meet Australian Treasurer Wayne Swan in the next week to further discussions on how to bring the schemes more closely together over time, according to a spokesperson in his office.

In Canada whose economy is similarly founded on mining and oil and gas as in Australia, Green Party leader Elizabeth May told New Orator by e-mail: “It’s brilliant!”

Canadian Environment Minister Peter Kent is yet to comment but he told New Orator last month that he would be announcing a Notice of Intent in July to regulate Canada’s greenhouse gas emissions by sector.