From UPSC perspective, the following things are important :
Prelims level : Nothing much
Mains level : Financing global climate transition
Climate change is a global problem, and a global problem needs a global solution.
- The most recent IPCC report suggests that we might have just over a decade left to limit global warming.
- It says total global emissions will need to fall by 45% from 2010 levels by 2030 and reach net zero by 2050.
- If these targets are not met, tropical regions of the world, which are densely populated in the global South are likely to be most negatively affected because of their low altitudes and pre-existing high temperatures.
- Some impact of this was already felt during the Tamil Nadu water crisis this year.
Sharing the burden
- The global South has historically contributed less to the problem and even at present its per capita carbon emissions are much smaller in comparison to the countries in the global North.
- But they happen to be at the receiving end of the lifestyle choices made by the global North.
- Though time is running out, a genuine global consensus on the mitigation of this problem is missing.
- In the absence of a collective agreement, the environment is becoming a casualty.
- Both worlds need to contribute to averting this danger in their self-interest.
- The burden of adjustment cannot be equal when the underlying relationship between the two worlds has been historically unequal.
- A just approach would involve a global sharing of responsibility among countries according to their respective shares in global emissions.
- Currently, the most accepted model of mitigating strategy has been the carbon trading process. It has its own limitations.
A new burden-sharing model – Just Energy Transition (JET)
- It is premised on a sense of global justice in terms of climatic fallouts and the respective contributions of the countries.
- It will also help the resource-poor developing countries to make the energy transition without having to worry about finances unduly.
A new way for Climate Financing
- Fundamentally change the energy infrastructure. It requires massive investments for the green energy program across the world.
- On the top of the funnel, apart from funding their own energy transition, countries should partially support the transition for the countries at the bottom.
- This sharing of the burden of development should be done in a way that inverts this injustice funnel.
- Countries have to spend around 1.5% of their GDP.
- Global energy transition should be financed through a system of the global carbon tax. Total global carbon emissions are 36.1 billion metric tonnes of CO2. This amounts to a global carbon tax of $46.1 per metric tonne.
- Those at the receiving end of climate injustice are duly compensated for even as the entire world transitions to greener earth as a result of this process of carbon tax sharing.
- Currently, the global average of carbon emissions is 4.97 metric tonne per capita. All the countries with emissions above this level are “payers” to finance energy transition for ‘beneficiary’ countries which are emitting below this level.
- The total amount of “carbon compensation” made by the payer nations comes to around $570 billion. The distribution of this amount across the payer countries is based on their distance from the global average.
- Compensated countries and the distribution of this fund across them is also based on how to lower their emissions are in comparison to the global average.
- Once you add (subtract) the carbon compensation amount to (from) each of the countries, you get the effective carbon tax for them.
- The two top ‘payer’ countries in terms of absolute amounts of transfers are the U.S. and China since their emissions are higher than the global average.
- The effective tax rate for the Chinese is lower than the possible universal tax rate of $46.1 per metric tonne and that’s because their own energy transition (1.5% of China’s GDP) plus the global compensation they make requires a tax rate only of $34.4 per metric tonne.
- The burden of adjustment is only partially falling on their shoulders and only because they emit more than the global average.
Robin Hood Tax
- In terms of ‘compensated’ countries, India comes at the top due to its population size and its distance from the global emissions’ average. India has per capita emissions of 1.73 metric tonnes.
- Countries like France, Sweden, and Switzerland are also in the compensated list. Even high-income countries that have currently kept their per capita emissions low are beneficiaries of this globally-just policy.
It wants all nations to climb down the emissions ladder without necessarily having to give up on their standard of living. It’s a global green Robin Hood tax!