PERI's Shouvik Chakraborty and co-author Rohit Azad contribute a chapter to the Handbook of Green Economics
Chapter Abstract
Climate change is a global problem, and a global problem needs a global solution. This study makes a case for a differential carbon tax across the globe to achieve a comprehensive green energy transition which requires, according to most estimates, 1.5% of each country's GDP. A just approach to achieve it would involve a global sharing of this solution among the advanced nations, which are also the major polluters, and the developing nations according to their respective shares in global emissions.
Unfortunately, a genuine consensus on the mitigation of climate change is missing between the North and the South. Our proposal, JET (a Just Energy Transition), requires countries contributing less than the average to mobilize a part of their resources through carbon taxes commensurate with their distance from the average and the deficit billed by countries with per capita emissions higher than the global average, who will consequentially have to mobilize more than their transition requirements.
Given that the level of global carbon emissions is currently at 36.1 billion metric tonnes of CO2, we calculate the global carbon tax rate at $46.1 per metric ton for the global energy transition. The total amount of ‘carbon compensation’ made by the ‘payer’ nations (polluting more than the average in per capita terms) comes to around USD 570 billion. In terms of ‘compensated’ countries, India comes at the top. We also calculate the effective carbon tax for each nation.
Climate change negotiations continue to deal with the sharing of the burden between the North and the South. Our proposal is not only a just way to balance the ongoing environmental and ecological damages, but it will also help the resource-poor countries to make the energy transition without having to worry about the finances unduly.
Currently, the increasing levels of emissions and the threat of climate change looming over humankind along with growing inequality across the globe, a differential global carbon tax based on each nations emission levels to finance the global energy transition project can be a viable solution to address global inequality and climate change simultaneously.
