The cost of fossil fuel and travel could rise should an ambitious new carbon tax proposal fronted by President William Ruto at the COP28 summit in Dubai, United Arab Emirates, sail through.
The proposal, which seeks to compel fossil fuel companies and industries that emit greenhouse gases to pay for the damage that their operations cause to the planet, first came to light during the Africa Climate Summit in Nairobi in September this year, and President Ruto has now taken it to the global stage at the Dubai summit, insisting in speeches and press briefings that time has come now to have the “difficult” conversation about paying for polluting.
“Finally, everybody is on the table regarding carbon pricing and carbon tax,” Mr Ruto told the Nation in an interview on Saturday on the sidelines of the COP28 summit. “It was a difficult conversation before, but I think everyone now realises we need new sources of revenue to backstop climate financing, and it has to be new channels of resources, where everybody contributes, not the traditional contributors.”
To emphasise his point, the President said travellers could have the new tax imposed on their “tickets”, perhaps referencing air tickets, and that the funds collected from these levies would go towards mitigating the effects of climate change.
The new tax would also be imposed on fossil fuel companies, which could in turn load the cost on consumers and hence raise the cost of fuel. It is not clear yet by what margin the costs would rise as this conversation is still in the early stages, but economists agree that a new carbon tax would raise consumer fuel costs and, in return, discourage fossil fuel use.
Mr Ian Parry, the principal environmental fiscal policy expert in the IMF’s Fiscal Affairs Department, commenting on the case for carbon credits, noted that the principal rationale of carbon taxes is that “they are generally an effective tool for meeting domestic emission mitigation commitments”, which means they could generate funds while at the same time discouraging pollutant use.
“Because these taxes increase the prices of fossil fuels, electricity, and general consumer products and lower prices for fuel producers, they promote switching to lower-carbon fuels in power generation, conserving on energy use, and shifting to cleaner vehicles, among other things,” he said, adding that such taxes also provide incentives for governments and industry for redirecting energy investment toward low-carbon technologies like renewable power plants.
While aviation accounts for around 2.5 per cent of global carbon dioxide emissions, its overall contribution to climate change is higher, at about 3.5 per cent, according to researchers. On the other hand, fossil fuels, which include coal, oil and gas, are by far the largest contributors to global climate change, accounting for over 75 per cent of all greenhouse gas emissions and nearly 90 per cent of all carbon dioxide emissions. These gases act as some form of a blanket high up in the earth’s atmosphere that traps the sun’s heat and leads to rises in temperatures, which, over a period of time, causes average global temperatures to rise, hence the term “global warming”.
President Ruto’s push for this new form of tax at the Dubai talks is a continuation of his petition to African leaders during the Africa Climate Summit two months ago, and whose Nairobi Declaration pivoted him as the foremost thought leader on the continent on climate action. Since then, the President has used the momentum from the Nairobi talks to push for a rethink of how the world fights the climate crisis, insisting on the overhauling of the global financial architecture to reflect the changing times, and a more concerted and sincere mobilisation of resources to fund mitigation and adaptation measures.
This new tax, he said, would be an effective way to mobilise those resources.
“We need to have a conversation about carbon tax. We believe it is among the ways that we can raise additional and adequate resources for us to finance our development,” he said in Nairobi two months ago, and repeated these implorations in Dubai this weekend.
While more than 20 countries, among them global leader Uruguay followed by Liechtenstein, Sweden, Switzerland and Norway, already impose various percentages of taxes on carbon, the push for a global regime has all but failed. Activists have been urging regimes to impose these levies on the fossil industry and use the funds to finance environmental conservation efforts, but, without universal adoption, the proposals have not yet translated into law or treaty.
While President Ruto is pushing for this new levy, he is also advocating for a more robust and open global carbon credits market.
Already a worldwide movement, carbon trading has not yet caught on in Kenya because of regulatory vacuums and poor understanding of its framework by citizens.
The concept refers to trading systems in which credits are sold and bought by companies or individuals to compensate for their greenhouse gas emissions.
Thus, big polluters can purchase carbon credits from entities that remove or reduce greenhouse gas emissions, which, in the Kenyan experience, includes farmers who have forested farmlands.
Through various initiatives, farmers in some parts of the country, including in Taita and the Central highlands, are already being paid by companies in the West that are seeking to offset their emissions, even though critics have called such initiatives deceptive as they allow the big polluters to continue fouling the environment so long as they can afford to buy credits from, especially, the global south to keep doing so.
Agreeing that the market needs tighter regulation and a robust framework, President Ruto told the Nation that the government is refining new laws “because we want to bring integrity into the whole carbon space, which includes carbon pricing, carbon markets and carbon trading… so that no community or country is taken advantage of by this whole new sphere of trade.”
