Swap Carbon Tax For Fossil-Fuel Subsidies, World Leaders Urge

PARIS — The first day of the Paris Climate Conference began with 40 nations declaring war on fossil-fuel subsidies and ended with six nations, the World Bank and the International Monetary Fund calling for a global carbon tax.
France was in both camps.
"For how can we set a price on carbon,” asked French President Francoise Hollande, “and on the other hand carry on subsidising fossil fuels?”
Alongside France was Canada, a nation until recently considered a laggard in climate action. Newly elected Prime Minister Justin Trudeau pointed out that even under a hostile conservative government, Canadian provinces representing 86 percent of the economy embraced a price on carbon.
"Even our province of Alberta, which as many of you will know contains the largest part of Canada’s oil sands, has, with the change in government this spring, taken significant steps towards demonstrating that Canadians right across the country are committed to concrete actions on climate change, which includes a hard cap on emissions from oil sands development but also an ambitious carbon tax."
A jumble of policies have emerged in the last six years to impose a price on carbon. Quebec and Ontario joined California in a cap and trade program. British Columbia crafted a simple revenue-neutral graduated tax that has become the darling of carbon-price advocates.
President Enrique Peña Nieto described Mexico's tax on fuels dirtier than natural gas. President Michelle Bachelet described Chile's emissions and efficiency taxes on automobile sales. Chancellor Angela Merkel described in wonkish detail the lessons Germany learned steering a carbon tax through a recession.
India has a coal tax. China is piloting cap and trade programs in seven markets.
Variety, according to Hollande, is the spice of carbon pricing, but not everyone agrees:
"The idea is not to impose on everybody a way of setting a price on carbon," the French president said. "It’s not one-size-fits-all, and we’re not going to set a single price on carbon all over the world."
Instead, Hollande called for mechanisms that modify economic behaviors to discourage fossil fuel emissions and encourage investment in green technologies. Those might include tax policies or carbon markets.
But Angel Gurría, Secretary-General of the Organization for Economic Cooperation and Development (OECD), suggested emissions-trading systems are convenient to politicians.
"I would say we already know, generally, taxes seem to work better than ETS systems," Gurría said. " Why does everyone prefer to talk about ETS? because politically people don’t like to talk about taxes."
"It sounds a little trivial as a reason because effectively if it works better and we know it works better, we know it bites and it changes conduct, then perhaps it should be the choice."
Political problems can become opportunities, he said. In British Columbia, every dollar collected for the carbon tax is used to reduce other taxes British Columbians have to pay.
But the leaders agree a carbon tax makes little sense when the world's governments are spending $500 billion in public funds each year to keep domestic prices for oil, gas and coal low.
Prime Minister John Key of New Zealand spoke for the 40 nations, allied with hundreds of businesses and non-governmental organizations, that formed a coalition to purge the world of fossil-fuel subsidies.
"As with any subsidy reform, change will take courage and strong political will," Key said, "but with oil prices at record lows and the global focus on a low carbon future, the timing for this reform has never been better.”
Climate Action Network quickly awarded Key a Fossil of the Day Award, the climate conference equivalent of a Raspberry Award:
"Prime Minister John Key showed a degree of hypocrisy by claiming, at a Friends of Fossil Fuel Subsidy Reform event, that New Zealand is a leader on fossil fuel subsidy abolition – despite the country’s fossil fuel production subsidies increasing seven-fold since his election in 2008."

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