Introducing carbon taxes

Applying tax on carbon dioxide emissions
Taxing consumption of fossil fuels
Taxing production of CO2
Taxing electricity, natural gas, gasoline and other energy sources related to the emission of carbon dioxide with the objective of restricting the consumption of fossil fuels, so reducing carbon dioxide emissions and stabilizing and eventually reducing concentrations of atmospheric carbon dioxide (CO2).
1. It was reported in 1993 that integrated climate-economic modelling studies suggested that a carbon tax of US$126/tonne might meet the IPCC objective of an annual worldwide decrease in carbon dioxide emissions of 1 to 2%. It is estimated that a tax high enough to have significant impact on climate change issues would necessarily have to raise thousands of millions of dollars a year (compared, for example, with the annual UN budget of about $1,000 million).

2. At the beginning of 1998, only five countries -- Denmark, Finland, the Netherlands, Norway and Sweden -- have instituted a carbon tax. The basis of a carbon tax is being prepared by the Swiss government. The Swiss CO2 tax proposal has two specific objectives: (a) compliance with the [Framework Convention on Climate Change] and (b) contribution to the [Swiss Clean Air Strategy]. A CO2 tax was chosen rather than a combined CO2/energy tax, or simply an energy tax, because study showed that: (a) the CO2 tax has a higher impact on CO2 emissions than the two other taxes; (b) the impact on electricity consumption of the combined CO2/energy tax would be slight, considering the tax's insignificance in relation to the market price of electricity; and (c) an increase in the tax on hydropower on the regional level is under discussion and a tax on electricity would have an unwanted cumulative effect (hydropower provides almost 60% of Swiss electricity, the remaining 40% being nuclear-generated).

Main features of the proposed Swiss CO2 tax are: 1. The tax is levied on all fossil energies (petrol, diesel, oil, heating oil, natural gas and coal) on the basis of their carbon content; 2. Gradual introduction in three stages (starting rate 12 CHF (US$ 9) per tonne of CO2, then 24 CHF ($18), and finally 36 CHF ($27) per tonne of CO2; 3. The tax will be levied on both imported fossil fuels and domestic production; 4. Exemption will be made for (a) kerosene for international flights, due to international agreements, (b)non-energy use of fossil fuels, [eg] in the chemical industry, (c) wood and other biomass, and (d) export of fossil fuels; 5. Reimbursement for energy-intensive sectors with a fossil fuel intensity of more than 3% of gross production (turnover); and 6. Exemption for electricity and district heating, as long as they are not produced from fossil fuels. It is proposed to redistribute around three quarters of the funds collected -- estimated in the third stage to be 1,400 million CHF -- with around 7% reimbursement to energy-intensive industries, around 46% directly to the population, everyone receiving equal shares, and around 15% to the business community, helping reduce employers' social security payments. Since the tax is intended mainly as an incentive rather than a fiscal instrument, only a maximum of one third of the revenues is earmarked for the financing of environmental and energy measures in and outside Switzerland. The impact on most industries would be negligible. Due to reimbursement, the tax increase for even the energy-intensive industries does not exceed 1.5% of turnover.

Counter Claim:
1. Although they may have a place in sanctifying the conscience of the richer countries, domestic carbon taxes are unlikely to be either a fair or an efficient system of reducing global carbon emissions. Only internationally-levied taxes could separate efficiency issues from those of equity.

2. Governments would not be prepared to hand over to a central body administering an international carbon tax system sums of money that are hundred of times larger than those they currently pay to the UN system (often with considerable discord).

Type Classification:
D: Detailed strategies
Related UN Sustainable Development Goals:
GOAL 7: Affordable and Clean EnergyGOAL 12: Responsible Consumption and Production