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A strategy to halt global warming

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National economies should be reoriented towards the "polluter pays" principle to get the world on a path to sustainability, says the Worldwatch Institute in a special millennial edition of its "State of the World" report. Since we use less of what is taxed, and since global warming and other environmental issues are looming so large, green taxes should become the foundation of a sustainable economy, says the non-profit group, an American think tank based in Washington DC, that focuses on environmental and resource issues.

Although discussion of eco-taxes is on many a government agenda in Europe, the concept is a radical one to suggest in the US. Worldwatch strongly presents its case. "In a globally interconnected economy, rapid deforestation, falling water tables, and accelerating climate change could undermine economies around the world in the decades ahead," say Lester Brown and Chris Flavin, lead authors of the report. Flavin is environmental adviser to the American Wind Energy Association.

The 250-page book notes world use of energy and raw materials has grown by more than ten-fold in the last century while its population grew three-fold. Furthermore, energy needs are projected to double over the next decades as climate change leads to record high temperatures. An environmentally sustainable economy has become more of a necessity than ever, says the book, published annually since 1984. And the foundation of that sustainability must be renewable energy and recycling.

One key to reversing environmental degradation, says the report, is to tax the activities that cause it so that the market can be harnessed to spur progress. Because of the complexity and magnitude of the changes needed, governments can only combat climate change by sending the right signals in language that is understood in the market place, by making polluters pay. An eco-tax was also the focus of a proposal issued by Friends of the Earth in the US last June entitled "Citizens' Guide to Environmental Shifting."

A number of countries-notably Belgium, France, Spain, Japan and the UK-have already radically reduced their subsidies to the coal industry, says Worldwatch. But according to State of the World there are still an estimated $650 billion in environmentally harmful subsidies worldwide, mostly in the developed world. If those were eliminated, it would pay for an effective 8% tax cut globally. In the US, Germany and Japan, the cut would amount to $2000 for a family of four.

tax shifting

Several of the countries that have reduced subsidies to coal are already taxing polluting emissions-and the German government is intending to pass legislation in a month's time to raise energy taxes by 2.6%, reducing tax on wages by the same amount. According to Worldwatch, it was Sweden that first took up tax shifting. In 1991, it used $2.4 billion raised from new taxes on carbon and sulphur dioxide emissions-equal to 1.9% of all tax revenues-to cut income tax. And by the middle of this decade, Denmark, Finland, the Netherlands, Spain and the UK were also "tax shifting." Some countries have just taxed undesirable emissions. In 1991 Norway started taxing carbon dioxide, a decision that has helped reduce emissions by 3-4%. If carbon taxes were phased in worldwide over 50 years, reaching $250 a ton in 2050, various models suggest that global emissions might also plateau in a half century. And if the tax kept rising, emissions might almost halt by 2100 and the amount of carbon dioxide might stabilise at some 65% above the pre-industrial level, which the authors contend is about as low as can be reasonably expected. It is currently 30% up on pre-industrial levels. The revenues raised by such taxes would pay for cuts of as much as 15% on other taxes.

Worldwatch says all must be involved in fashioning the sustainable society. New entrepreneurs are already emerging, including what the report dubs the "energy Microsofts." Included among the five examples of these is one wind company, Vestas A/S of Denmark.

The report notes that the wind industry employs 20,000 people in the European Union, up from almost zero in the 1970s. "No challenge is greater, or more satisfying, than building an environmentally sustainable global economy, one where economic and social progress can continue," the authors conclude.

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