CARBON TAX (Syllabus: GS Paper 3 – Env & Eco)

Context: Recently, Kenya's president declared, at the first Africa Climate Summit, that climate change is "relentlessly eroding" Africa's economic progress and emphasized the need for a global discussion on implementing a carbon tax on polluters.

• The rapidly growing African continent of more than 1.3 billion people is losing 5% to 15% of its gross domestic product growth every year due to the widespread impacts of climate change.

The African continent has 60% of the world’s renewable energy assets and more than 30% of the minerals key to renewable and low-carbon technologies.

Carbon Border Tax

• This is a tax imposed on imports, determined by the level of carbon emissions generated during the production of the imported product.
• Emission Reduction Incentive: It serves as a mechanism to discourage carbon emissions by adding a cost factor to carbon-intensive products.
• Impact on Trade: This tax has direct implications for production and exports, making it a significant trade-related policy.
• European Green Deal: It forms a part of the European Commission's broader initiative, the European Green Deal, aimed at achieving climate neutrality in Europe by 2050.
• Enhancement Over National Carbon Tax: A carbon border tax is seen as an improvement over a national carbon tax, which is typically imposed on domestic companies burning fossil fuels.
• National Carbon Tax: This is a fee imposed by a government on companies within its borders that use fossil fuels, with the goal of curbing carbon emissions.