Beyond Carbon Pricing: Tax Reform is Climate Policy

Abstract

The incrementalism of carbon pricing, which includes carbon taxes and emissions trading, has led us astray. It has been proffered as a key component of climate policy, yet evidence clearly shows that its effects are marginal. It provides limited emissions reductions and has provoked considerable political controversy in key large‐emitting countries. More importantly, pricing carbon means viewing climate change as a market failure, rather than as a problem of societal transformation. But rapid decarbonization will require more than market corrections; it demands strong state intervention to reorganize the economy. In this maximalist view, the state must create public goods, rather than merely prevent public bads. This article seeks to expand our collective political imagination about climate policy, moving beyond mundane fights about the appropriate design of carbon pricing. Instead, we need to think bigger. Aggressive climate policy begins with a reassertion of state sovereignty. Multinational corporations use ‘offshore’ tax havens to avoid paying taxes. By closing loopholes on corporate tax evasion, states reaffirm one of their fundamental functions: taxation. This reform would repatriate billions of dollars in missing capital, and help create the political conditions for meaningful action on decarbonization. Tax reform, not just carbon pricing, is climate policy too.

Biodiversity targets will not be met without debt and tax justice

“…Meanwhile, the average global statutory corporate tax rate has gone from 40% in 1980 to 24% in 2020, with an actual tax rate much lower in many jurisdictions 23 . Furthermore, both low taxes and tax avoidance allow corporations to amass further wealth, increasing their influence in governing processes 24 . G7 countries recently reached an interim agreement on tax reform that will have multinational corporations pay a minimum tax rate of at least 15% in each country they operate in.…”

On the Merits and Limits of Nationalising the Fossil Fuel Industry

“…Larger firms are also more likely to be able to avoid enforcement actions or penalties for non-compliance, and to engage in forms of ‘creative compliance’/‘gaming’ (Baldwin, Cave, and Lodge, 2011; McBarnet and Whelan, 1991). The fossil fuel industry has proven itself highly adept at capturing and gaming regulatory and tax systems (Bergin and Bousso, 2020; J. F. Green, 2021; Stokes, 2020). By contrast, a fossil fuel company controlled by suitably-motivated government owners would by definition be motivated by the public interest objectives that govern its mandate, thus eliminating the motivation for strategic evasion of regulations (see action 4 on our list in section 2.1).…”

Results-Based Financing (RBF) for Modern Energy Cooking Solutions: An Effective Driver for Innovation and Scale?

“…Carbon market prices, especially in the voluntary market, are highly variable and ranged from an average of around $2 to $12 t/CO 2 in 2019, with an average of $3.5 t/CO 2 paid in the clean cookstove market [75]. Furthermore, the concept of offsetting has itself been very controversial, with commentators querying whether these incentives were really working to reduce emissions and how rigorous procedures were [76,77].…”