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  • 12 September, 2019

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A case for differential global carbon tax.

GS-III: A case for a differential global carbon tax.


Climate change is a global problem and a global problem needs a global solution. The most recent IPCC report suggests that we as humankind might have just over a decade left o limit global warming.

What is a carbon tax?

A carbon tax is a fee for making users of fossil fuels pay for climate damage their fuel use imposes by releasing carbon dioxide into the atmosphere, and for motivating switches to clean energy

India introduced a nationwide carbon tax in 2010, which is currently Rs.400/tonne.

Carbon as non-regressive:

Skewed consumption pattern: India's carbon emissions in 2014 were more than three times its level in 1990. While the emissions have increased sharply, their distribution across income groups is extremely skewed. The poor in India who contribute the least to climate change face the maximum brunt. Thus implementation of the carbon tax and utilizing the proceeds for pollution control and augmenting the health budget is a rational way forward.

Reducing demand: By taxing carbon revenue thus generated can be used for a systematic overhaul of the energy mix in the economy, carbon taxes address the demand side of carbon-based energy resources i.e. reducing it ( by increasing prices of carbon-intensive products).

Health cost of pollution: By reducing carbon emissions through taxing there are immense health benefits. A significant part of more than 3 % cent of India’s GDP currently spent on pollution-induced diseases will inevitably come down and this cost is heavily borne by the poor.

Climate finance: When it comes to mitigation of climate change the global North has to shoulder a higher burden of adjustment both because of their past and current contributions as well as their greater access to funds. Carbon tax in these nations can help to fund climate financing thus ensuring climate justice and equity.

Subsidizing renewable energy sources through cross-subsidization from a carbon tax can help in dealing with climate change by promoting solar energy, wind energy, cleaner biofuels etc.


Thus, the Carbon tax apparently gives the impression of being a regressive tax; however, by implementing it in conjunction with broader health and energy policy, it can help in redistribution and help the poor to ward off the negative impact of climate change.

At the same time, the Carbon tax will help in the achievement of goals under the Paris Agreement to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels.

Source: The Hindu

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