What are the methods used in taxing carbon emissions, and what is the Global Carbon Tax?
Carbon pricing mechanisms are tools designed to assign a monetary cost to greenhouse gas (GHG) emissions, encouraging reductions and promoting cleaner technologies. The two main types are carbon taxes and emissions trading systems (ETS).
A carbon tax directly sets a fixed price per ton of carbon dioxide (CO2) emissions or on the carbon content of fossil fuels. Emitters pay this tax based on their emissions, creating a predictable cost for carbon.
Although it does not guarantee a specific reduction in emissions, the tax is simple to administer and often generates revenue for green projects, adaptation initiatives, or rebates.
An ETS creates a market where entities trade permits for emissions under an overall emissions limit. Emitters can purchase allowances if they exceed their limits or sell excess allowances if they reduce emissions.
On the other hand, the global carbon tax is a conceptual framework advocating for a harmonized, internationally adopted carbon pricing mechanism to address greenhouse gas (GHG) emissions on a global scale.
It aims to impose a uniform tax rate on carbon dioxide (CO2) emissions, ensuring that all emitters, regardless of location, contribute proportionately to the costs of climate change mitigation.
How can governments ensure that carbon tax revenue is used effectively, and what’s the status of the Philippines on implementing a carbon tax?
Other countries have found ways to use the revenue from carbon taxes. For example, Singapore uses its carbon tax revenue to support decarbonization efforts and facilitate the transition to a “green economy”. Similarly, Canada allocates their carbon tax revenue to support low-income households affected by rising energy costs.
The Philippines has yet to implement a carbon tax but it is currently tagged as “under consideration” by the World Bank Group’s State and Trends of Carbon Pricing Dashboard.
The Department of Finance (DOF) is actively evaluating the feasibility and potential impacts of introducing such a tax. Former Finance Secretary Benjamin Diokno had linked the proposal to broader fiscal reforms, including a levy on single-use plastics, with a possible implementation by 2025.
Meanwhile, Finance Secretary Ralph Recto advocates for a balanced and economically viable approach to carbon pricing. He highlights the importance of exploring both a carbon tax and an emissions trading system (ETS) to support the country’s transition to a low-carbon economy while ensuring sustainable growth.
To achieve these goals, robust stakeholder engagement, extensive research, and a focus on low-carbon technologies are the keys. – Rappler.com
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