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Carbon Tax on Consumption?

Carbon Tax on Consumption?

Sunday, 14 February, 2021 - 06:00
Najib Saab
Secretary-General of the Arab Forum for Environment and Development (AFED) and editor-in-chief of Environment & Development magazine

While the Chinese deputy prime minister was addressing the Climate Adaptation Summit hosted by the Netherlands last week, the Chinese president was concurrently addressing the Davos World Economic Forum, online. The level of representation in the two events clearly indicates where China places its priorities. One message that China promoted at both events was that the coronavirus pandemic, despite its horrors, could constitute an opportunity to rebuild new foundations, leading to a more equitable, clean and healthy planet. But the message to the business leaders in Davos was also explicit in promoting China as the best partner for this new era, under the catchphrases of justice and equality.

When it became evident last summer that the pandemic will have bigger and longer effects on the economy than previously thought, and might prevent the 2021 session of the World Economic Forum from taking place in the Swiss ski resort of Davos, its traditional venue for decades, its chairman Klaus Schwab introduced The Great Reset, a book depicting a post-corona world. In June, the Davos Forum launched a virtual dialogue on the topic, hosting CEOs of major companies and political leaders, leading to its annual meeting last week. The speakers were the same familiar faces, with Schwab paving the way for the discussions by launching a new book entitled Stakeholder Capitalism, which calls for the restructuring of the global economic system by encompassing all groups, not only major investors and shareholders.

Discussions during the virtual sessions, like Klaus Schwab’s slogans, carried many beautiful promises, largely based on the Sustainable Development Goals: from distributing wealth equitably, rationalizing the use of natural resources and protecting the environment, to securing education and health for all. However, the speakers did not offer serious alternatives, such as introducing strict laws and regulations, protecting local production from dumping practices, and adopting tax legislation that equitably distributes responsibilities. Most important of all, a pivotal point that did not attract much attention was reconsidering the practices of globalization that deprive small states, as well as small entrepreneurs, farmers and producers in general, of equal opportunities. If this is not achieved, then how can “stakeholders” be truly transformed into “shareholders”? The dilemma is that as long as Davos remains an exclusive club controlled by the huge businesses that dominate the economy, some of whose size is bigger than the countries themselves, it is unlikely that these businesses will voluntarily give up their privileges for the sake of solving the world's problems.

A central theme at the Davos discussions was helping leaders embrace innovative and bold solutions to overcome the effects of the pandemic. But is it realistic to expect the Davos agenda to be tailored to the people it claims to serve, calling them stakeholders, or to the large corporations that patronize it? Moreover, how can its benefits reach an audience that was no‎t consulted on its targets? What is certain is that for the benefits to reach all, huge corporations will have to give up many of their gains and privileges. This would necessitate an end to companies profiting from polluting and unsustainable activities, unless they are prepared to undertake a radical change in their operations. Will these companies agree to engineer their own downfall, or are laws the only way to force them to change course? Since controls on corporate activities have never been part of Davos’ priorities, the promised stakeholder capitalism would lead to a mere redress of the old practices.

Chinese President Xi Jinping's speech at the Davos conference portrayed flashy messages, under the general title of respect for pluralism in international relations. After calling for innovative economic cooperation policies in the post coronavirus era that support strong, inclusive and balanced growth, Xi renewed China's commitment to sustainable development and green growth, and to bridging the gap between developed and developing countries.

But he stressed, once again, that China is part of developing countries, thus it has the right to a grace period regarding the reduction of carbon emissions. The country now accounts for 28 percent of global carbon emissions; almost double that of the second largest emitter, the United States, at 15 percent.

While affirming China's obligations under the Paris Climate Agreement, Xi announced an ambiguous goal of peaking its emissions in 2030, and starting to reduce them after that, leading to their complete elimination in 2060. China is not alone in this ambiguous position, as many other countries are setting faraway goals as well without committing to specific levels to measure progress annually. This situation can be likened to the owner of a burning house who, rather than extinguishing the fire, uses it as a source of heating and cooking, while promising to put it off in 40 years, when it would have engulfed the whole house and transformed it into ashes.

On the face of it, Chinese rhetoric calls for openness, cooperation and respect for multilateralism. Despite the rhetoric, other major world powers should positively deal with these declared noble goals. It is true that China is exploiting exemptions to increase its production using cheap polluting technologies, and is trying to extend for as long as possible the grace period it acquired as a developing country, to strengthen its new position in the global economy. But it is equally true that companies from other countries exploit this gap to transfer their production operations to China – and import goods cheaply produced there – which amounts to an act of mutual deception.

Will rich countries, that have turned China into a cheap backyard industrial zone, relinquish their thirst for cheap products, or accept that the carbon emissions associated to Chinese goods exported to them be accounted for as part of their own carbon emission? Will China and the countries consuming its products accept to set import tariffs linked to the carbon footprint of each type of merchandise, be it a pen or a car? If that happens, China's carbon emissions could be reduced by more than half. Likewise, will the major oil-consuming countries accept that carbon emissions be calculated according to where oil is used rather than where it is explored and produced?

A carbon tax on consumption may be the most effective and equitable solution to managing resources, protecting the environment and dealing with climate change.

Najib Saab is Secretary General of the Arab Forum for Environment and Development- AFED and Editor-in-Chief of Environment & Development magazine.

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