How we respond to the climate emergency
One of the great challenges that humanity has to urgently address is how we respond to the climate emergency. It is a global challenge, which concerns to all of us, at both the individual and community level, and that no longer admits any kind of hesitation. That is why it is essential that all countries make headway with their environmental commitments and achieve as soon as possible a common strategy that allows us to build a more environmentally friendly, sustainable and inclusive world.
When it comes to modifying harmful practices for the environment and, especially, to correcting negative externalities generated by certain goods, services and activities, there are numerous studies that support the role and usefulness of the so-called green taxation. There are also numerous debates on the redistributive capacity of environmental taxes or on their real impact on the economy and public accounts. It is true that there is still room for improvement of the collection from environmental taxes, but it should be remembered that these kinds of taxes do not pursue revenues, but try to provide sufficient incentives for consumers and producers to modify their practices towards a more efficient and respectful use of natural resources.
However, the urgency of addressing the climate crisis is not only a matter of public ethics. Correctly targeted, it is also an opportunity for research and innovation to become the basis upon which to implement structural changes in the economic, productive and energy models, in order to transform our growth model and to guarantee a more prosperous future. We have already abundant normative provisions and objectives assumed at European or international level in this matter, but now we have to go one step further and to adapt our old fiscal policies to this new scenario of shared responsibilities. We have to ensure that taxation contributes to the necessary decarbonization of the economy, acting as a lever for change in the ecological transition, discouraging harmful practices in homes and factories and ensuring greater social and intergenerational justice.
If we want this process of change to evolve towards a climate-neutral development model, it needs as well to be socially beneficial and inclusive. The Government of Spain has a firm commitment in the fight against climate change. In fact, we have turned this problem into a state policy, and in recent months, we have worked on an ambitious package of measures for a fair ecological transition. An opportunity that can help us to mobilize 236 billion Euros in public investment and to generate between 250,000 and 364,000 new quality jobs between 2021 and 2030. Taxation is also part of this strategy, with different proposals aimed at decarbonizing the economy and promoting sustainable mobility. Among them, the equalization of the taxation on hydrocarbons, starting with a gradual equalization of the taxation on diesel and gasoline fuels, while maintaining the tax benefits for “professional diesel” and that consumed in agriculture and livestock activities.
We believe that environmental taxation can be a good domain for the European Union to set aside the unanimity rule in taxation and to apply the ordinary legislative procedure based on co-decision and on the qualified majority of the Council. Regarding the existing debate on the taxation of imported products based on their CO2 emissions, the “Border Carbon Tax” (BCAs) proposal is a Spanish contribution to the 2019-2024 Strategic Agenda, in order to protect the competitiveness of the European industry from unfair environmental practices.
In short, it would be a carbon tax applied on the border on imported products, depending on the CO2 emissions released in their production, all within the framework of a tax scheme in line with the requirements set by the WTO. It is worth remembering that in order for Member States to meet their commitments to reduce greenhouse gas emissions, assumed pursuant to the ratification of the Kyoto Protocol, it was approved the Directive establishing a system for greenhouse gas emission allowance trading within the EU. This regime draws on one of the market instruments provided for in the Kyoto Protocol, the emissions trading, which, together with those based on clean technology investment projects in third countries, constitute the so-called “flexibility mechanisms”.
The “Border Carbon Tax” could be considered a European Union own resource. It would be easy to manage by the customs authorities since the products would be classified according to their code in the Combined Nomenclature and the amount of the tax could be calculated taking as a reference the tax paid by the industries established within the European Union according to the product concerned.
With this measure, in addition to providing financial resources to the European Union budget, the negative externalities derived from CO2 emissions in the manufacture of these products would be internalized and the competitiveness of European industries would be protected, which would lead to a lower risk of relocation. In short, we would be updating the tax framework to the new realities of the 21st century and thereby building a stronger economy for a more prosperous future.