Essay Example on To limit or reverse global environmental Damage

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To limit or reverse global environmental damage in the last few years the world has seen a dramatic growth in the proposals or responses extending from inaction would be the best policy Eckaus 1991 to immediate economic policy that may forsake growth Postel and Flavin 1991 But as the debate is relatively new empirical work relevant to developing countries is almost completely lacking Joergenson and Wilcoxen 1990 Pearce 1991 Goulder 1991 Poterba 1991 researched on the Carbon Tax for developed countries We can take it as the origin of the concept of carbon tax Churchill and Sanders 1991 suggested the shift to cleaner alternative fuels and technologies increase incentive for sustainable energy use and improve efficiency in energy production distribution and end use However the question remained for Carbon Tax about its implementation for a global tax structure might not be accepted by all the countries and even uniform tax rate on emissions can be easily disputed by subsidizing complementary fossil fuel intensive goods Summers 1991 first argues that corrective taxes taxes in carbon content fossil fuels can raise significant amount of revenues at a relatively small deadweight loss while furthering global and local environmental protection and discouraging bads and therefore represent what we pay to preserve civilization 



The debate on imposing these taxes often sees the developing countries arguing about how these taxes put a leash on them and restrain them from achieving their development goals in order to address the foolish past short term sans sustainability activities of developed countries Who should pay the price Some empirical validity can be given to this argument says Smith 1991 if one was to construct a global warming debt index LDCs being importers of energy intensive manufactures would end up with the burden of such emission generating activity curbing policies Equal reduction of GHG emissions in in all countries achieved as an initial global consensus will not result in equalization of marginal reduction costs and therefore the policy will not be efficient Hoel 1991 A general opinion on the regressivity of carbon taxes exists In LDCs lower income groups directly use fossil fuels for heating and cooking purposes Commercial use of fossil fuels in lower income groups can also be observed This direct usage of fossil fuels puts the burden of such energy taxes carbon tax directly on the LIC groups According to a World Bank report poor and middle income countries already account for just over half of total carbon emissions And this percentage will only rise as developing countries grow Achieving a global society in which all citizens earn a living wage and climate catastrophe is averted requires breaking the link between economic growth and increasing carbon emissions in developing countries In fact developing countries will only accelerate global warming as their economies grow because they cannot afford alternatives Corbett Grainger and Charles Kolstad in Who Pays a Price on Carbon show that the burden on the poorest households doubles when a price on carbon is targeted narrowly on energy consumption rather than broadly across all industries 



Under either cap and trade program or a carbon tax the poor face the hardest hit as they spend a greater share of their income on energy than high income families Grainger and Kolstad assuming a levy of 15 ton of CO 2 calculated that the one fifth of households at the bottom of the income distribution would spend an extra 325 a year Though this is in context of USA it is relevant also in the LDCs LDCs have per capita income lower than that of USA and income disparity much larger than USA National Carbon Taxes can raise significant amounts of revenue in a cost effective manner and in developing countries are not likely to have as regressive an impact as commonly perceived as such a tax also fares quite well in efficiency terms if introduced in a revenue neutral manner as a partial replacement for corporate income taxes and therefore blocking the pathway of tax evasion Shah and Larsen 1992 Gupta and Hall 1996 asks for the development of a model that is specific to the characteristics of a developing countries as there are structural dissimilarities between developing economies and the western hemisphere

A carbon tax can lead to a decrease in government deficit or can be invested in carbon abatement technology A study quoted by this paper states that a 68 reduction in carbon emissions by the year 2050 will lead to a 2 8 fall in global GDP The loss for industrialized countries is a 1 4 whereas it s a 4 8 for developing countries The costs incurred are higher for developing economies For India carbon tax will mean GDP loss but proper recycling of the government revenues like investment in cleaner energy will make the tax progressive Indonesia for example is one of the largest carbon emitters if we consider developing countries Indonesia also holds an important position in global climate policy change with respect to its ranking when we consider forest degradation and emissions from fossil fuels and other non renewable and polluting sources of energy Yusuf and Resosudarmo in their paper On the Distributional Impact of Carbon Tax in Developing Countries The Case of Indonesia analyses the distributional impacts of a carbon tax in developing economies such as Indonesia using a CGE Model They concluded that in contrast to most industrialised and developed nations the introduction of carbon tax is not regressive This is in accordance with the fact that the revenue generated from the carbon tax is recycled to middle and low level income groups In other words charging a carbon tax on heavy users and on the other hand uniform reduction of taxes on other commodities may reduce the adverse aggregate output effect In addition members of the above two income groups do not consume a high portion of the nation s carbon generated energy


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