Wednesday, December 18, 2024

The impacts of climate change are accelerating — but climate actions and solutions are, too.

 

The impacts of climate change are accelerating — but climate actions and solutions are, too.

Current Trends in Climate Action 

As you may know, 2024 has been the most heated year on records and climate disruptions keep worsening. Public policies regarding climate mitigation may be slowed down by various forms of political obstructionism, even in major countries, but this does not change the fact that the pressure climate crisis keeps growing,  its impacts are accelerating, and technological solutions keep improving, so the situation offers grave threats and also many opportunities.

Over the past three years, there has been a notable increase in global commitments to climate action, with 131 countries adopting net-zero pledges. This reflects a growing recognition of the urgency to address climate change despite political and economic challenges.

The U.N. global climate action portal (Nazca: Non-State Actor Zone for Climate Action)  that gathers the commitments and actions of non-state actors, including regions, cities, companies, and organizations involved. At this time, it identifies no less than 43,136 actors engaged in climate action (such as the net zero commitment): these include 194 countries, 14,439 cities, 304 regiones, 5,900 organizations, and 20,511 companies. From the interactive map displayed on the website   it is possible to identify in one click what are, in each country, the actors engaged in climate action, as well as the last update to the nationally determined contributions. It is the most impressive display of global coordination of data. 

The portal features an intuitive interactive map that allows users to visualize global climate actions easily. This design enhances user engagement and facilitates access to information about climate commitments across different regions and sectors. The ability to filter data by actor type (e.g., cities, companies) adds to its usability. The portal exemplifies data science through its aggregation and visualization of vast amounts of data related to climate actions. It compiles commitments from thousands of entities, enabling users to analyze trends, compare actions between different actors, and identify gaps in climate commitments.

To be included on the Global Climate Action (Nazca) map, an organization needs to register their climate action commitments through the United Nations Framework Convention on Climate Change (UNFCCC) platform, essentially providing details about their climate initiatives, targets, and progress on the dedicated portal, which allows them to be showcased on the interactive map as a participating non-state actor in the fight against climate change



 Global map of the Non-State Actors for Climate Action Zone (Source: UNFCCC), see reference.

The willingness to integrate environmental and climate policies keeps spreading. 

Climate risks at the forefront of financial previsions for 2025  

Conditional Value at Risk (CVaR), also known as Expected Shortfall, is a tool that quantifies the expected loss of an investment or portfolio in scenarios where losses exceed a certain threshold (the Value at Risk, or VaR). Climate Value at Risk has emerged as a valuable new tool for assessing and managing climate related risks, evaluating the different kinds of climate risks (acute physical risks, chronical physical risks, policy/legal risks, technology risks, market risks and reputational risks)It provides quantitative insights that support informed decision-making. 


For companies, the report estimates that “215 out of the 500 largest companies in the world could lose about one trillion dollars due to climate change. Most of these risks are reported to materialize from 2024 onwards.  But “The transition to low-carbon economy presents an untapped growth potential and will determine which companies emerge as future innovators and take advantage of these opportunities via the successful development or growth of key low-carbon technologies”

The report also evaluates the impact of climate risks for regulators, stating that “their capture by capital frameworks requires a more forward-looking approach than used for many other risks, and scenario analysis and stress testing will play a key role in this. 


Financial outcomes of COP 29 in Baku, November 2024

Following the international events calendar, the annual Conference of the Parties (COP 29)  was held this year in Baku, Azerbaijan, from November 11 to November 11, centered of Climate Finance.  

In spite of facing huge obstacles and obstructions, the developed countries agreed to a new goal of at least 300 billions annually by 2023 to support climate action in developing countries. This is triple the previous commitment of $100 billion per year. The overall financing target including both public and private contributions is set to reach at least $ 1.3 trillion per year by 2035.

Energy transition At COP28, countries committed to phasing out fossil fuels and significantly increasing renewable energy capacity, aiming to triple renewables and double energy efficiency by 2030. Although this goal remains at risk, the world is on track to reach only 66% of this target.   Reports indicate that while renewable energy investments have surged, especially in solar energy, clean energy investments have reportedly doubled compared to fossil fuels—but fossil fuel subsidies remain at an all-time high, hindering overall progress. 

If policies of some governments proclaim that they will be keeping  or even increasing their fossil fuel subsidies in thee coming years, this can slow down the energy transition but not prevent it, because the environmental pressure of extreme temperatures and climate events, keep growing and clean technologies are increasingly the least expensive technologies. 

Emissions Projections: Current projections suggest that emissions may peak before 2025 if existing policies are effectively implemented. However, these reductions are not sufficient to meet the goals set by the Paris Agreement, which requires a 43% reduction in emissions by 2030 

Challenges in Local Implementation: Analysis shows that many national climate plans lack strong urban initiatives, with only 27% containing robust urban strategies. Furthermore, only a small percentage of G20 cities have aligned their targets with global warming limits of 1.5 degrees Celsius. As countries prepare their next round of Nationally Determined Contributions (NDCs) for 2025, there is an urgent need for collaboration between national and subnational governments to enhance ambition and ensure effective implementation of climate actions 


The next global climate meeting, COP 30, is scheduled to be held in Belém, Brazil, in 2025, although the exact dates have not yet been specified, and countries are expected to update their national commitments (NDCs) in this coming year.  

So we can conclude 2024 on a serious but hopeful note that the trends slowing progress toward a more sustainable world will remain a real but not definite obstacle, and wish our readers a happy year 2025.

Final note…New environmental taxation courses offered at CIAT

The CIAT Human Talent Directorate will offer in 2025 two green taxation courses directed at tax administrations officials. One introductory course on environmental taxation in general and one more advanced, focusing on about initiatives in Latin American and Caribbean Countries, covering carbon emissions taxation, national and local levels of action, environmental services initiatives and coordination between agencies. 

UNFCCC MAP
Risk and opportunities using C-Var

httpclimate-commitment-tracker

Posted by at No comments:

Tuesday, February 14, 2023

 


Climate-related financial and tax policies in 2023

By André Dumoulin

After presenting the guidelines of climate policies in the G-7 countries, we dedicate this second part[1] to the policy instruments of developing countries, particularly Latin America.

In the developing countries, the landscape of tax measures related to climate change is changing rapidly, however, sometimes states take urgent and specific measures to face environmental and climate challenges, and state-level policies have little multilateral coordination: There is often a competition between short-term energy investments and national policies with environmental policy frameworks of energy transition and biodiversity preservation.

Multilateral financial organizations, MDB, IMF, World Bank, IDB, continue to take measures to link financing and investments to developing countries with the implementation of measures to limit carbon emissions and preserve biodiversity.[2] On the other hand, the high prices of fossil energies continue to invite maintaining or increasing their production in the countries that export them.  More internal coordination of each state is needed to avoid clashes of priorities in development financing policies, especially since, as a result of the global COVID pandemic, the climate crisis affecting agriculture, and wars, extreme poverty has increased in recent years.   

At the tax level, in some aspects TA databases should be updated to integrate climate change data: If a region of a state suffers from an acute drought or a more intense period of floods than in the past, the programs should be able to anticipate these situations, facilitate the temporary reduction or suspension of taxes of the affected areas, for example real estate taxes and/or the agricultural sector.  It is not desirable to wait for situations of total tragedy such as the floods in Pakistan in 2022, in order to integrate the dimension of the climate emergency into state planning.

 Latin America

A recent study by the Thomson Reuters Foundation analyzes and compares the environmental frameworks related to climate change in Latin America.

"Latin America is expected to be one of the regions of the world where the effects and impacts of climate change will be most intense."(Nationally Determined Contributions). However, only 7 countries have a framework law on climate change (CCFL) in LAC. An CCFL law, as defined by the International Energy Agency, establishes the principles and main aspects of climate change policy. Its objective is to coordinate and support the comprehensive management, in a participatory and transparent way, of climate mitigation and adaptation strategies, complying with the international commitments of the United Nations Framework Convention on Climate Change and contributing to low-carbon development opportunities. The introduction of climate policy in the framework law helps to reduce the possibility of setbacks in this area and provides a mandate to policy makers to move forward with action.

With regard to the seven countries mentioned in the graph, which already have their CCFL, they must continue to promote more ambitious initiatives and in line with the reality that the Intergovernmental Panel on Climate Change points out to us more starkly year after year. [3] The existence of a CCFL allows for more coherence in national policies, although it does not protect against abrupt political changes, as happened in Brazil in recent years. Brazil being the first LAC country that had adopted a framework law on climate change.

Source: Prensariotila 


It should be noted that some countries such as Ecuador, despite not appearing on this list, have important articles on environmental policy in their political constitution, which could easily be translated into an CCFL.

 

THE C-PIMA

The IMF has developed a tool for the Evaluation of public investment management in relation to climate (C-PIMA, Climate-Public Investment Management Assessment)[4]. C-PIMA involves an evaluation of the five public investment management institutions that are key to a climate-friendly infrastructure: C1. Climate-friendly planning. C2 Coordination between entities. C3 Evaluation and selection of projects. C4 Budgeting and portfolio management. C5 Risk management Each institution is further analyzed according to three dimensions that reflect the key characteristics of the institution.
Tax administrations are not directly responsible for a country's public investment, but they must include climate-related risks among their projections.

A beneficial investment trend for international trade is the "Nearshoring”[5], which, unlike "offshoring", consists, for multinational groups, in favoring production in countries close to the main consumer markets of the products, avoiding the costs of emissions and environmental cost associated with long transports. In AL, Mexico and Colombia benefit from this trend. [6]

The pricing of carbon emissions in developing countries

A progressive source of income in many developing countries[7]

In the absence of effective global cooperation, developing countries need to take a serious look at carbon pricing and, in particular, carbon taxes.  It can prevent individuals and companies from making investments in technologies that are then wasted. For example, power companies will invest in new power plants that use high-carbon technologies. But later they will have to discard them, wasting the investment. A carbon price now provides a strong signal that should help avoid these "lock-in" effects. A second aspect is the importance of sending the message that the authorities are taking climate change seriously.

As a measure of public will to tackle the climate crisis, carbon taxes offer a potentially significant and administratively viable source of revenue. Increasing tax revenues is an important part of the development agendas, and the COVID-19 pandemic has accentuated this need while increasing concern about the sustainability of public finances in some countries. Applying carbon prices in the form of taxes on fossil fuels - as has been done in Colombia and South Africa - is feasible in most countries, since these goods are usually already taxed (or subsidized) to some extent. In contexts where the informal economy accounts for a large part of economic activity, carbon taxes can be less costly administratively than other types of taxes and offer a way to reduce the fiscal gap between the formal and informal sectors.

Some country data:

Brazil

In December 2022, the World Bank announced the Brazil Climate Finance project (Brazil Climate Finance. [8])

The Brazilian Climate Finance Project is a financial intermediation project that aims to encourage companies to reduce their carbon footprint. To this end, the project adopts an innovative results-based financing approach that encourages companies to adopt and implement significant greenhouse gas (GHG) emissions reduction plans. The project would also increase the access of these companies to high-quality carbon markets. The project proposes to leverage private financing to increase the impact in support of the Brazilian net zero emissions target, including the agricultural and terrestrial sectors. Brazil's greenhouse gas (GHG) emissions profile is dominated by agriculture, forestry and land use (AFOLU). In collaboration with Banco do Brasil, the largest bank in Brazil and the market leader in loans to agriculture and land-use-based sectors, the project aims to leverage 1,400 million dollars in private capital and additional CO2 emission reductions by 2030 in a number of sectors, of which the AFOLU sectors are expected to represent an important part.

 Mexico

At the beginning of February 2023, Mexico will inaugurate the largest solar project in Latin America, in the state of Sonora and welcomes the investment of all countries in its clean energy projects, its foreign minister said on Thursday, launching a diplomatic charm offensive amid international concern over controversial energy reforms that increase the role of the state in energy production, which according to its detractors favors fossil fuels. [9]

Colombia: A comprehensive Tax Reform Law will be applied from January 1, 2023.

This reform expands the scope of the carbon tax to include the sale, self-consumption and import of coal (certain exemptions will apply, including coal intended for export). The rates will increase while remaining specific values per ton, gallon or cubic square. It takes a phased approach to the increase in coal rates from 2023 to 2027. The carbon tax will be deductible for Corporate Income Tax (CIT) purposes. [10] 


 
In conclusion, at COP26, held in Glasgow in 2021, countries agreed to progressively reduce the use of coal, the most polluting fossil fuel. India's proposal at COP27 to extend this commitment to all fossil fuels won the support of more than 80 governments, including those of the EU, but was opposed by Saudi Arabia and other oil and gas-rich countries.

The final agreement of COP27 repeated the commitment to progressively reduce coal-fired energy, but did not mention oil and gas.

There are concerns about the possibility of a similar dynamic occurring this year at COP28, which will be held in the United Arab Emirates, the OPEC oil producing country. According to UN scientists, the world must substantially reduce the use of fossil fuels in this decade to avoid the most devastating effects of climate change.

The EU also plans to update its 2030 emissions reduction target under the Paris climate agreement, and set a new one by 2040, in order to guide countries towards the goal of reaching net zero emissions by 2050.

 



Posted by at No comments:

Thursday, February 9, 2023

Políticas financieras y tributarias relacionadas con el clima en 2023

 

Políticas financieras y tributarias relacionadas con el clima en 2023

André Dumoulin, traductor y docente. 

Después de presentar las orientaciones de las políticas climáticas en los países del G-7, dedicamos esta segunda parte[1] a los instrumentos de políticas de países en desarrollo, particularmente América Latina.

En los países en desarrollo, el panorama de las medidas tributarias relacionadas con el cambio climático está cambiando rápidamente, sin embargo, a veces los estados toman medidas urgentes y especificas para enfrentar los desafíos ambientales y climáticos, y las políticas a nivel de estado tienen poca coordinación multilateral:  Existe a menudo una competencia entre inversiones energéticas a corto termino y las políticas nacionales con marcos de políticas ambientales de transición energética y de preservación de la biodiversidad.

Las organizaciones financieras multilaterales, BMD, FMI, Banco Mundial, BID, siguen tomando medidas para vincular las financiaciones e inversiones a los países en desarrollo con la implementación de medidas para limitar las emisiones de carbono y preservar la biodiversidad.[2] Por otra parte, los precios altos de las energías fósiles siguen invitando mantener o aumentar su producción en los países que las exportan.  Se necesita más coordinación interna de cada estado para evitar choques de prioridades en las políticas de financiación del desarrollo, sobre todo que, a raíz de la pandemia mundial del COVID, de la crisis climática afectando la agricultura, y de las guerras, la extrema pobreza ha aumentado en los últimos años.    

A nivel tributario, las bases de datos de las AT deberían actualizarse para integrar los datos del cambio climático: Si una región de un estado sufre de una sequia aguda o de un periodo de inundaciones mas intenso que en el pasado, los programas deberían poder anticipar estas situaciones, facilitar la reducción o suspensión temporarias de los impuestos de las zonas siniestradas, por ejemplo los impuestos inmobiliarios y/o del sector agropecuario.  No es deseable esperar situaciones de tragedia total como las inundaciones del Pakistán en 2022, para integrar la dimensión de la emergencia climática en la planificación estatal.

 América Latina

Un reciente estudio de la fundación Thomson Reuters analiza y compara los marcos medioambientales relacionados con el cambio climático en Latino América.

"Se prevé que América Latina Sea una de las regiones del mundo donde los efectos e impactos del cambio climático serán más intensos.

Todos los países de la región ratificaron el Acuerdo de París (AP) y presentaron sus respectivas NDC (Contribuciones nacionalmente determinadas). Sin embargo, solo 7 países cuentan con una ley marco sobre el cambio climático (LMCC) . Una ley LMCC, como definido por la AIE (IEA en Ingles)  establece los principios y los principales aspectos de la política de cambio climático. Su objetivo es coordinar y apoyar la gestión integral, de manera participativa y transparente, de las estrategias de mitigación y adaptación climática, cumpliendo con los compromisos internacionales de la Convención Marco de las Naciones Unidas sobre el Cambio Climático y contribuyendo a las oportunidades de desarrollo bajo en carbono. La introducción de la política climática en la ley marco ayuda a reducir la posibilidad de retrocesos en este ámbito y proporciona un mandato a los responsables políticos para avanzar en la acción.

Con respecto a los siete países mencionados en el gráfico,  que ya cuentan con su LMCC, deben seguir promoviendo iniciativas más ambiciosas y acordes con la realidad que el Grupo Intergubernamental de Expertos sobre el Cambio Climático nos señala con mayor crudeza año tras año. [3] La existencia de una LMCC permite más coherencia en las políticas nacionales, aunque no protege de los cambios políticos abruptos, como ocurrió en Brasil en los últimos años. Brasil siendo el primer país de LAC que había adoptado una ley marco de cambio climático.



Tablas de las leyes marcos de LAC. Fuente: Prensariotila (3)

Hay que notar que algunos países como Ecuador a pesar de no aparecer en esta lista tienen en su constitución política artículos importantes sobre la política Ambiental, que podrían fácilmente traducirse en una LMCC.

 

EL C-PIMA

El FMI ha desarrollado una herramienta para la Evaluación de la gestión de la inversión pública en relación con el clima (C-PIMA, Climate-Public Investment Management Assessment)[4]. El C-PIMA implica una evaluación de las cinco instituciones de gestión de la inversión pública que son clave para una infraestructura respetuosa con el clima: C1. Planificación respetuosa con el clima. C2. Coordinación entre entidades. C3. Evaluación y selección de proyectos. C4. Presupuestación y gestión de la cartera. C5. Gestión de riesgos. Cada institución se analiza además según tres dimensiones que reflejan las características clave de la institución.
Las administraciones tributarias no se encargan directamente de la inversión pública de un país, pero deben incluir los riesgos relacionados con el clima entre sus proyecciones.

Una tendencia de inversión que beneficia a algunos es el “Nearshoring”[5], que a diferencia del “offshoring”,  Consiste, para los grupos multinacionales a favorecer la producción en países cercanos a los principales mercados de consumo de los productos, evitando los gastos de emisiones y riesgos ambientales vinculados con los transportes largos. En AL, México y Colombia se benefician de esta tendencia. [6]

La tarificación de las emisiones de carbono en los países en desarrollo

Una fuente progresiva de ingresos en muchos países en desarrollo[7]

A falta de una cooperación mundial eficaz, los países en desarrollo tienen que plantearse seriamente poner un precio a las emisiones de carbono. Esto puede evitar que particulares y empresas realicen inversiones en tecnologías que luego se desaprovechan. Por ejemplo, las compañías eléctricas invertirán en nuevas centrales eléctricas que utilicen tecnologías de alto contenido en carbono. Pero más tarde tendrán que desecharlas, desperdiciando la inversión. Un precio a las emisiones de carbono proporciona ahora una señal fuerte que debería ayudar a evitar estos efectos de "bloqueo". Un segundo aspecto es la importancia de transmitir el mensaje de que las autoridades se toman en serio el cambio climático.

Como medida de la voluntad pública de hacer frente a la crisis climática, los impuestos sobre el carbono ofrecen una fuente de ingresos potencialmente importante y administrativamente viable. Aumentar los ingresos fiscales es una parte importante de las agendas de desarrollo, y la pandemia del COVID-19 ha acentuado esta necesidad al tiempo que ha aumentado la preocupación por la sostenibilidad de las finanzas públicas en algunos países. Aplicar precios al carbono en forma de impuestos sobre los combustibles fósiles -como se ha hecho en Colombia y Sudáfrica- es factible en la mayoría de los países, ya que estos bienes suelen estar ya gravados (o subvencionados) en cierta medida. En contextos en los que la economía informal representa una gran parte de la actividad económica, los impuestos sobre el carbono pueden resultar menos costosos administrativamente que otros tipos de impuestos y ofrecer una forma de reducir la brecha fiscal entre los sectores formal e informal.

Algunos datos de países:

BRASIL

En diciembre del 2022, El Banco Mundial anuncio el proyecto de Finanzas Climáticas de Brasil (Brazil Climate Finance. [8])

El Proyecto de Financia Climática de Brasil es un proyecto de intermediación financiera que pretende animar a las empresas a reducir su huella de carbono. Para ello, el proyecto adopta un innovador enfoque de financiación basado en los resultados que incentiva a las empresas a adoptar y aplicar planes significativos de reducción de las emisiones de gases de efecto invernadero (GEI). El proyecto también aumentaría el acceso de estas empresas a mercados de carbono de alta calidad. El proyecto propone aprovechar la financiación privada para aumentar el impacto en apoyo del objetivo brasileño de emisiones netas cero, incluidos los sectores agrícola y terrestre. El perfil de emisiones de gases de efecto invernadero (GEI) de Brasil está dominado por la agricultura, la silvicultura y el uso de la tierra (AFOLU en Ingles: Agriculture, Forestry and Other Land Use). En colaboración con el Banco do Brasil, el mayor banco de Brasil y líder del mercado en préstamos a la agricultura y los sectores basados en el uso de la tierra, el proyecto tiene como objetivo apalancar 1,400 millones de dólares en capital privado y reducciones adicionales de emisiones de CO2 para 2030 en una serie de sectores, de los que se espera que los sectores AFOLU representen una parte importante.

Colombia:  A partir del 1 de enero de 2023 se aplica una amplia Ley de Reforma Fiscal.

Esta reforma amplía el ámbito de aplicación del impuesto sobre el carbono para incluir la venta, el autoconsumo y la importación de carbón (se aplicarán ciertas exenciones, incluido el carbón destinado a la exportación). Los tipos aumentarán sin dejar de ser valores específicos por tonelada, galón o cuadrado cúbico. Adopta un enfoque escalonado para el aumento de los tipos del carbón desde 2023 hasta 2027. El impuesto sobre el carbono será deducible a efectos del Impuesto a las rentas corporativas (CIT). [10] 


 México:

A principio de febrero 2023, México inaugura el proyecto solar más grande de América Latina, en el estado de Sonora y da la bienvenida a la inversión de todos los países en sus proyectos de energía limpia, dijo el jueves su canciller, lanzando una ofensiva diplomática de encanto en medio de la preocupación internacional por polémicas reformas energéticas que aumentan el papel del estado en la producción de energía, que según sus detractores favorece los combustibles fósiles. [9]


En conclusión, en la COP26, celebrada en Glasgow en 2021, los países acordaron reducir progresivamente el uso del carbón, el combustible fósil más contaminante. La propuesta de la India en la COP27 de ampliar este compromiso a todos los combustibles fósiles obtuvo el apoyo de más de 80 gobiernos, incluidos los de la UE, pero contó con la oposición de Arabia Saudí y otros países ricos en petróleo y gas.

El acuerdo final de la COP27 repitió el compromiso de reducir progresivamente la energía de carbón, pero no mencionó el petróleo ni el gas.

Existe preocupación por la posibilidad de que se produzca una dinámica similar este año en la COP28, que se celebrará en los Emiratos Árabes Unidos, país productor de petróleo de la OPEP. Según los científicos de la ONU, el mundo debe reducir sustancialmente el uso de combustibles fósiles en esta década para evitar los efectos más devastadores del cambio climático.

La UE también tiene previsto actualizar su objetivo de reducción de emisiones para 2030 en el marco del acuerdo climático de París, y establecer uno nuevo para 2040, con el fin de guiar a los países hacia el objetivo de alcanzar las emisiones netas cero en 2050.

 

 

 


Posted by at 1 comment:

Wednesday, November 24, 2021

 


Carbon pricing:

Carbon prices in the European Union reach a record after COP26

 In a previous blog article, I described the probable expansion of the taxation of carbon emissions, as a consequence of the climate emergency we are experiencing: It is predictable and ineluctable, for the survival of humanity, that the value of non-polluting activities will keep growing and that the economic value of polluting activities should be decreasing. Delaying changes contributes to making them more expensive and chaotic in the future.

In this regard, despite delays in the decisions of COP 26 in Glasgow, carbon prices in the EU have more than doubled the level of early 2021 after the UN climate conference, as they are accepted as an important tool for decarbonization.

CO2 prices in the EU reached a record 66 euros/tonne on November 15, the first day of trading after the UN Climate Change Conference and amid the rise in fuel prices driven by the resurgence of gas supply fears.[1] Current prices are also higher than the 55 euros per tonne of a month ago.

Carbon emission permits in the EU increased by more than 5% and more than double their level at the beginning of the year after the conclusion of the COP26 climate summit .

Carbon markets are a key tool for decarbonization and help countries "cut down" carbon. Europe's carbon emission permits have reached a record high following the conclusion of the two-week UN COP26 climate summit in Glasgow, in which 197 attending countries agreed to reduce the use of fossil fuels.[2]

These record numbers come just after COP26 finally set the standards for a global carbon market, making polluting countries and companies pay for carbon emission permits and allowing them to trade in emissions offset credits. Carbon markets are critical to reducing carbon emissions in Europe and fostering new investments in clean and green technologies such as carbon capture and storage and green hydrogen in developing countries. [3]






Carbon Price Inequality Raises Competitiveness and "Carbon Leakage" Concerns[4]

Discrepancy among G-20 members on the price of carbon:



The adoption of the Glasgow Climate Pact[5] at the end of COP26 will see bilateral agreements take place in a market supervised by the UN. The EU also plans to expand the bloc's trading system to more sectors, as well as launch its ambitious carbon border adjustment mechanism[6], a tax on carbon emissions attributed to imported goods that have not been taxed. on carbon at source.


The increase in carbon emission permits also reflects the rise in natural gas prices, which has recently made coal more competitive again. For countries to "phase down" coal - as agreed in the Glasgow Climate Pact - carbon permits would make burning coal more expensive and less attractive to long-term investors.

"Although the outcome [of the COP] was perhaps not as strong as expected, it is still a clear signal that policy makers must take carbon pricing seriously if we want emissions to decrease," said Mark Lewis. , of the investment fund Andurand Capital.

"There is a general feeling that carbon markets come out stronger from the COP process," Lewis continues, "as what has become clear is that there is now an acceptance among policy makers that the limited space left for carbon in the atmosphere is the scarcest resource of all."[7]

The promises of COP 26
 Following the COP26 climate summit in Glasgow, we wonder when decisions to reduce greenhouse gas emissions will have an impact on our climate.

Among the most prominent decisions from this year's UN climate summit are:

-The promise of more than 100 countries to stop deforestation by 2030.

-A plan of more than 100 countries to reduce 30% of current methane emissions by 2030

-The abandonment of coal by 40 countries (including countries that depend heavily on coal).

-New cooperation between the United States and China on methane emissions, the transition to clean energy and decarbonization

Hundreds of financial organizations have also decided to support clean technologies in an attempt to move away from fossil fuels.

 

International taxation and climate sustainability

According to the MDPI Institute, the two main international concerns currently being studied by international tax organizations are the following (1) tax avoidance, mostly by multinationals in relation to corporate tax; and (2) environmental taxation, which is considered key to curbing climate change. For this reason, organizations are trying to develop guidelines for action that can serve as a guide for different countries.[8]
 The prospects for a carbon border adjustment system increase the relationship between these two aspects, since the avoidance of the environmental impact of products exported may be linked to forms of tax avoidance.

 

 


[1] S&P Global, November 17, 2021: “https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/111521-eu-carbon-prices-hit-record-eur66mt-amid -cold-snap-cop26-aftermath

 

[5] The Glasgow Climate Pact is the first global agreement to explicitly include parties committing to reduce the use of fossil fuels, specifically to "accelerate efforts to phase out unretained coal energy and inefficient subsidies to fossil fuels". Unabated coal power refers to power plants that do not use carbon capture technology, although the term "inefficient subsidies" for fossil fuels was not clearly defined in the final text.

[6] Importers of emissions-intensive goods pay a fee linked to what they would have had to pay had they been covered by European carbon reduction laws in the first place. The price of carbon in the program is at 43.44 euros, the highest point it has reached. It will be limited to a few sectors, with the most likely candidates being energy, cement, steel, aluminum and fertilizers. It will be designed to allow gradual expansion to other industries in the coming years. The mechanism will have to be approved by the European Parliament and by the Member States, a process that could take up to two years. This means that, realistically, the mechanism will not take effect until 2023.

[7]

[8] See https://www.mdpi.com/journal/sustainability/special_issues/Taxation_Sustainability

 


Posted by at No comments:
Subscribe to: Posts (Atom)