Demand carbon tax at Copenhagen

Dr Bharat Jhunjhunwala

Leaders of the world including Man Mohan Singh, Wen Jiabao and Barak Obama will assemble in Copenhagen later this week to try to work out an agreement on controlling carbon emissions. Huge amounts of energy are consumed in manufacturing industries across the globe. Energy for this production is provided by burning oil and coal. That leads to huge emissions of carbon dioxide which is leading to rise in temperatures. Glaciers on the mountains are melting and the resulting flow of water is leading to rise in sea level which is threatening to engulf coastal cities like Mumbai and New York. The ozone shield in the atmosphere, which prevents harmful ultraviolet rays from reaching the earth, is becoming weak. This is leading to more skin diseases. An increase in natural calamities like typhoons and droughts is also being seen. But all countries continue adding to these emissions in their pursuit of economic growth. A contradiction between the twin objectives of survival and economic progress has come into play. Our leaders will try to hammer an agreement to persuade all countries to forego some economic growth in order to protect the environment.

The Kyoto Protocol is the only legally binding agreement in force on this subject at the present. This agreement provides only for the industrial countries to cut their carbon emissions and imposes no limits on the developing countries. It has not been signed by the United States for this reason. The industrial countries are now demanding that developing countries also reduce their emissions. But the developing countries are not agreeable. They say that their per capita carbon emissions are much less than the industrial countries. The emissions from the United States in 2005, for example, were 23.5 tons of carbon per capita per year against 5.5 tons for China and 1.7 tons for India. The developing countries will suffer a huge reduction in economic growth if they try to cut emissions at this stage of their development. They see the demand for reduction of emissions as a hidden strategy to keep them entangled in poverty.

The second point of contention is the routing of financial aid to the developing countries for adopting clean technologies and for compensating them for their low emissions. The industrial countries had promised to give such financial assistance unconditionally in the Kyoto Protocol. They are now demanding that only those countries will qualify for receiving this aid who implement policies to control emissions because it is seen that leaders of some developing countries siphon off aid for ulterior purposes. But developing countries are not agreeable. They say that such conditions have been used by multilateral agencies to stifle their economic growth. For example, a consensus is emerging that the economic crisis in Argentina was precipitated because of the wrong conditions imposed by the International Monetary Fund. They feel that these conditions will be used to arm-twist the developing countries into following policies that are favourable for the industrial countries.

Both demands raised by the industrial countries appear reasonable to me. This much is true that industrial countries are making much larger emissions per capita. But that does not mean that developing countries be given a license to make unlimited emissions just as tax evasion by the rich does not entitle the poor to evade taxes. The demand that developing countries should commit to reduced emissions, therefore, appears to be justified. The demand for imposing conditions on financial aid is also reasonable just as condition is imposed upon recipient of a scholarship that the student will not bunk classes. The problem lies at the operational level. The WTO, World Bank and IMF do not inspire confidence that they will operate these agreements in a balanced and just manner. Therefore, instead of opposing the demands of the industrial that are essentially correct, the developing countries should come up with alternative suggestions on implementation that are more favourable to them.

A text issued secretly by the Danish Copenhagen Secretariat with apparent consent of the United States, known as the 'Danish Text', accepts the principle that carbon emissions must be calculated on a per capita basis. The Text suggests that the industrial countries reduce their emissions to 2.7 tons per capita in 2050 while the developing countries reduce theirs to 1.4 tons per capita. This differential treatment to industrial- and developing countries is repugnant to the sense of equality and justice. But it is also true that the United States will have to make a huge reduction in emissions from 23.5 to 2.7 tons per capita while India will have to make a small reduction from 1.7 to 1.4 tons per capita. The solution to this may lie in fixing a common target at a later date, say, 1.4 tons per capita for all countries in 2100. The developing countries must demand that the industrial countries front load their reductions while the developing countries may be allowed to delay theirs. This will force the industrial countries to make huge cuts immediately and prevent their using these measures to browbeat the developing countries into economic servitude.

American environmentalist James Hanson has suggested that a 'carbon tax' may be imposed on all countries. The developing countries should support this. They should further demand that the tax should be progressive in nature-those emitting higher levels should pay carbon tax at a higher rate much like the progressive rates of income tax applicable in most countries. The developing countries can also demand that the amount recovered may be used to pay subsidies to countries making low emissions. Afghanistan, Bangladesh, Ethiopia, Niger and Vietnam are presently emitting less that 1.1 tons of carbon per capita. Subsidies will make it attractive for them to maintain these low emissions. They will be compensated and not suffer economic deprivation by abstaining from more emissions.

The industrial countries are especially gunning for China and India-the two countries that are challenging their economic might. It is widely expected that these two countries will be reluctant to accept reduction in emissions at this stage and may be responsible for failure of the summit. The industrial countries are trying to divide the developing countries into two camps to prevent such an eventuality. The argument is that the total carbon emissions made by these countries are very large even though less on per capita basis. China's total emissions are estimated to be more than that of the United States. They are telling the least developed countries that they stand to loose the possible economic aid if they support China and India in killing an agreement at Copenhagen. The Financial Times wrote "The least developed countries should be very careful not to end up as the stooges of major emerging economies." The industrial countries have suggested in the Danish Text that they will provide $10 billion in such assistance every year. China and India should provide a similar sum to the least developed countries and force the industrial countries to accept a progressive carbon tax which would be both just and help them maintain their rates of economic growth.

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