The Development of Global Carbon Taxes: Monthly Update
According to a yearly in-depth report from the World Bank in June 2019, 57 countries have committed to implementing or scheduling carbon pricing initiatives, including a carbon tax. So far, 46 national and 28 subnational jurisdictions have adopted carbon pricing to help reduce their greenhouse gas emissions and keep in line with their 2030 objectives and the Paris Agreement. And since last year’s report, 11 more countries have committed to scheduling carbon pricing for implementation.
“This consists of 28 emission trading systems (ETSs) in regional, national and subnational jurisdictions, and 29 carbon taxes, primarily applied on a national level. In total, these carbon pricing initiatives cover 11 gigatons of carbon dioxide equivalent (GtCO2e), or about 20 percent of global GHG emissions, similar as compared to last year.”
The trend towards applying a carbon tax in order to help the move toward renewable energy has grown in popularity in the past decade. Starting in 1990, Finland was the first country to introduce a carbon tax, with it currently resting at €62/tCO2e (for transport fuels). Its Scandinavian neighbors followed suit in 1991 and 1992. However it wasn’t until the 2000s that more countries began to view carbon pricing as a viable option in their campaigns for reduced GHG emissions.
While many of the new initiatives are at a subnational level, predominantly in the Americas, some new taxes have been introduced at a national level.
In 2018, Argentina introduced a carbon tax covering most liquid fuels. This year, Singapore brought in a carbon tax for all large emitters. South Africa introduced an economy-wide carbon tax, which is the first carbon tax in Africa. And Canada introduced two new carbon pricing initiatives at the federal level.
“Carbon pricing continues to expand with various initiatives under consideration. On the national level, this includes Colombia, Mexico, the Netherlands, Senegal, Ukraine and Vietnam. Within the subnational context, in Canada, Ontario and the Northwest Territories are working on new initiatives, while in the United States (US), New Jersey and Virginia are looking to join the RGGI (Regional Greenhouse Gas Initiative) and other states—such as Oregon and New Mexico—are considering developing their own carbon pricing initiatives,” as quoted from the World Report 2019.
Some further positive efforts include: “Iceland increased its carbon tax rate by 10 percent in 2019 to bolster its effort to reach its NDC (Nationally Determined Contributions) targets, and Portugal is gradually reducing its carbon tax exemptions to transition away from coal. The EU and New Zealand have also significantly reformed and strengthened their respective ETSs to align with their NDCs, and Kazakhstan has relaunched its ETS after a two-year suspension … and California is in the process of implementing significant reforms in its ETS.”
However, despite the efforts being made by these countries, climate change experts believe it is not enough. Low prices in some jurisdictions is causing concern that there will be a failure to reach the 2030 objectives of the Paris Agreement.
“Less than five percent of global emissions covered under carbon pricing initiatives are priced at a level consistent with achieving the goals of the Paris Agreement, i.e. US$40tCO2 to US$80/tCO2 by 2020 and US$50/tCO2 to US$100/tCO2 by 2030. Due to the recent price increases, this represents some progress compared to last year when one percent of the covered emissions were in this range … Moreover, about half of the emissions covered by carbon pricing initiatives are still priced below US$10/tCO2e.”
Carbon pricing continues to be viewed by some governments as detrimental to big business and the economy. Recently we’ve seen government and public pushback in the face of national policies. France saw a freeze of the carbon tax rate, in 2014, the incoming Conservative government repealed a carbon tax law in Australia. And in the US state of Washington, there was a public rejection of a new carbon tax.
Nevertheless, despite this apprehension and lockdown, developments on a global level do continue to be promising. A renewed conversation in international cooperation has seen North America and the EU to create several new dialogues with international partners.
“The European Commission held its first policy dialogue with China’s newly created Ministry of Ecology and Environment, reaffirming continued bilateral cooperation in developing China’s national ETS. At the Global Climate Action Summit 2018, the EU and California agreed that officials from both jurisdictions would increase the frequency of exchanges, including on principles of alignment and the role of carbon pricing… At the 24th Conference of the Parties (COP 24) held in December 2018 in Katowice, Poland, an important milestone was met with the adoption of the Katowice Climate Package, which sets out the implementation guidelines for the Paris Agreement.”
We will be back next month with any updates and key developments on global carbon tax. And we will be looking in depth at some countries’ carbon tax policies, in advance of this years United Nations Climate Change Conference (COP 25), which will take place on the 2nd of December in Chile.
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