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Climate policy initiatives under the microscope at global conference

Charging a price for CO2 in combination with reducing income tax could contribute to the battle against global climate change and environmental degradation without adversely affecting employment and welfare.

[Translate to English:] Økonomiske incitamenter kan bruges til at regulere folks miljøadfærd.

 

Just a few weeks before the Intergovernmental Panel on Climate Change (IPCC) meets in Copenhagen to present its Fifth Assessment Report (AR5), researchers, consultants, policy-makers and other experts in the field of environmental taxation gathered at the Global Conference on Environmental Taxation (GCET) to discuss which principles and practices can help curb human-induced climate change and environmental degradation.

The world community was well represented at the conference with 185 participants from approximately 30 countries from all continents.

“It was one of the largest conferences we’ve ever experienced,” says a satisfied Professor Mikael Skou Andersen, Department of Environmental Science, Aarhus University, who was a co-organiser of the conference.

The large-scale conference attended by key personnel from international organisations such as the World Trade Organization (WTO), the Intergovernmental Panel on Climate Change (IPCC), the International Monetary Fund (IMF) and the European Commission (EC) was organised by the Department of Environmental Science and the Department of Law, Aarhus University, in collaboration with the European Environment Agency (EEA), which has its head office in Denmark.

Participants at the conference discussed research into how financial regulations can reduce or prevent the activities that lead to climate change, pollution and other forms of environmental degradation. The conference featured more than 100 presentations in 28 parallel sessions, including strong keynote speakers such as Professor Thomas Sterner (IPCC) and Counsellor Ludivine Tamiotti (WTO).

Climate import tariff on the agenda

There are a number of challenges involved in regulating a country’s CO2 emission by charging a tariff. A major problem is that additional levies imposed on a country’s companies can reduce their competitiveness in relation to other countries.

“Countries that are charged a price for CO2 risk being undercut by countries that don’t have such a regulation. An interesting question is whether it’s possible to charge an import tariff on energy-intensive goods from countries that don’t have binding climate legislation or a CO2 price, without getting into conflict with the international regulations regarding free trade,” points out Professor Andersen.

Ludivine Tamiotti is Counsellor in the Trade and Environment Division of the World Trade Organization and she provides legal advice. She was optimistic in her opening speech and explained to those attending the conference how the WTO’s rules and regulations come into play, indicating that there are opportunities for regulations.

“It’s possible for countries to impose trade restrictions that protect the environment. The WTO rules and regulations don’t take priority over environmental considerations as long as the green regulations are not applied arbitrarily or as hidden protectionism,” she said, and ran through the relevant WTO rules and regulations. This provided new impetus to the discussion about which specific options are available for CO2 taxation or quota systems.

CO2 quota system on the way in China

Another problem associated with using taxes and levies to regulate the environment is whether there is the political will to put a price on something as airy-fairy as CO2 or the environment in general. However, there are signs that an increasing number of countries have realised that CO2 emission must be regulated one way or another.

“Mexico has introduced a CO2 levy and other Latin American countries have now begun talking about doing something similar. In heavily polluted China, a resolution is being prepared to introduce quotas on CO2 emission in 2015 and – even in Russia – Putin has issued a climate decree,” says Professor Andersen. In their presentation at the conference, he and his partners mentioned the potential for direct and indirect taxation on energy, transport, resource consumption and pollution in selected EU countries.

“There’s a difference between how you make progress in different EU member countries, but in the light of budget deficits in Southern Europe, there’s a great need for a broader tax base. This could be road pricing, for example, or the introduction of green taxes as we know them in Denmark for energy, waste and other greenhouse gases,” he adds.

Thomas Sterner (IPCC) said that the CO2 quota system introduced in the EU has for different reasons not had a significant impact on greenhouse gas emission. It is important to put together the right model.

“In some countries, they combine environmental taxes aimed at reducing greenhouse gas emission with direct support for developing new technological solutions. This model can help to bypass the link between the extent of the BNP and greenhouse gas emission,” he says. In other words, it is possible to reduce greenhouse gas emission without ruining the economy.

IMF in a more active role

Other economic measures could be to reduce or eliminate direct and indirect subsidies to greenhouse gas emission. In order that the CO2 tax burden does not weigh too heavily, the IMF proposes that income taxes should be reduced correspondingly. The EU Commission has been interested in this model for a long time, but it is new for the IMF to also use its influence in this direction.

The different solution models will no doubt enter the scene again when the IPCC presents its Fifth Assessment Report in Copenhagen on 31 October 2014.

“There’s economic and political game playing involved in how the countries can make a commitment to implementing reduction targets. Science has talked about climate change via the IPCC, but the financial, legal and political subjects we discussed at the conference will be central in the coming years, and it’s essential that we acquire more research-based knowledge in this field. In light of the stalled climate negotiations between the countries, these conferences also provide an important forum for open and unconstrained dialogue between researchers and experts from all parts of the world,” says Professor Andersen.

You can read about the conference and presentations here.

For more information, please contact

Professor Mikael Skou Andersen
Department of Environmental Science
Aarhus University
msa@envs.au.dk
+45 8715 8606