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A Direct Tax On Fossil Fuel Is
What The World Needs Urgently

By Devinder Sharma

06 December, 2009
Devinder Sharma Blog

Too much is being said and written about the greenhouse gas emission cuts. Newspapers are full of reports of figures of emission cuts. Figures are being tossed around, and like the GDP figures about which people know nothing, the public tends to just believe in these emission cut figures simply because they don't want to give an impression of how ignorant they are.

I wonder how many of us really understand the difference between greenhouse gas emissions and carbon intensity reduction. But somehow we believe that the leaders who are likely to assemble at Copenhagen for the Climate Change conference will come up with a legally binding agreement that will slow down the global warming clock.

It is in this context that I was happy to read at least one distinguished scientist who had the courage to stand up and say that the climate talks in Copenhagen next week were based on flawed proposals. James Hansen is the director of NASA's Goddard Institute for Space Studies since 1981, and was quoted in the media as saying: "attempts to forge a global deal on cutting emissions after the Kyoto treaty expires were based on a 'fundamentally wrong' approach."

His point is that even if an agreement is arrived at, they'll spend years trying to determine exactly what that means and what is the commitment, what are the mechanisms. "the whole idea that you have goals which you are supposed to meet and that you have cuts, with offsets (sold through the carbon market), means you know its an attempt to continue business as usual."

How true?

The Guardian reports that Hansen, who made headlines worldwide in 1988 with his US Congress testimony that climate change was already well underway, compared the current approach to the Catholic Church's use of indulgences in the Middle Ages. Sinners paid the bishops to give them redemption, a system that was patently absurd but suitated both sides.

This is exactly what the world has done in the case of cuts in agricultural subsidies under the World Trade Organisation (WTO). Even after the trade treaty came in force in 1995, the developed countries forming the richest trading block -- Organisation for Economic Cooperation and Development (OECD) -- have in reality not even reduced one dollar in their support to agriculture despite all kinds of figures being traded.

The WTO agreement on agriculture befooled the world, and it suited the rich countries as well as the developing country negotiators and business houses. Climate Change agreement will merely repeat the WTO story. I have little doubt about it.

What Hansen suggest therefore is a direct tax on fossil fuels as the only realistic way to achieve the necessary cuts. Yes, he is absolutely right. And this is almost what I have been asking. If the climate change negotiators are willing to rise above the rhetoric of emission cuts what is need is to actually make annual cuts in international trade. After all, how can the world aim to bring down greenhouse gas emissions when on the other it aims to push for increased international trade.

Trade does not happen on bullock carts. It will need more burning of fossil fuels and thereby more greenhouse gas emissions. A direct tax on fossil fuel will reduce the indiscriminate manner in which agricultural goods are being traded. I don't see any justification in importing Washington apples from America, while the US imports Chinese apples. I don't see any economic justification in importing oranges to India all the way from Chile, while the Indian oranges go rotting.

Food miles is what is adding on to global warming, and this unnecessary trade needs to be curbed. All it does is to add on to GDP, and this is what the people don't understand. They think it is a sign of growth and development, whereas it leaves behind a trail of destruction to the environment and livelihoods.

This is happening because our economists and planners have managed to price the aircraft fuel in such a manner that it is actually cheaper than Coke. All economic benefits of trade that are projected are therefore fundamentally flawed. A correct price for fuel will therefore make a real difference. We need to make an immediate correction to bring some sense to international trade, which otherwise will acerbate global warming.

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