Climate Change | Will a carbon passport be required?

Several observers repeat it, taking the pulse of where we are in the fight against climate change in relation to the targets set leads us to a single and unfortunate conclusion: we are well below the passing mark.

Francois Delorme
Professor in the Department of Economics, University of Sherbrooke

Global CO emissions₂ increased by 5% in 2021. Over a longer period, emissions were 36% higher in 2021 than in 1990.

In a recent column^⁠1, Francis Vailles draws our attention, like many other observers, to the fact that there is a strong correlation between level of income and greenhouse gas (GHG) emissions.

He then asks the fundamental question: “Why should the rich have the right to emit more GHGs and therefore put our planet at risk?” »

Vailles quotes implacable figures from the Laboratory of Global Inequalities (LIM). Annual GHG emissions per Canadian are estimated in 2021 at:

– 10 tons for the bottom 50% (i.e. those earning up to $50,300 after tax in 2019);

– 21 tons for the next 40% (earning between $50,301 and $93,700 in 2019);

– 60 tons for the top 10% (earning more than $93,701 in 2019);

– 190 tons for the richest 1% (earning more than $198,200 in 2019).

A brief retrospective of the main milestones

Since I have been involved in the fight against climate change, my capital of hope has been diluted. I first welcomed the awareness campaigns capitalizing on the empowerment and self-regulation of individuals and companies. I then believed in the seriousness of our governments to set up a significant price on pollution, which would generate changes in behavior, as well as regulations and public investments resolutely focused on an ecological transition.

I will be told that all that is in place is that you just have to be patient. Consumers are recycling and driving on electric, businesses are going green, financial institutions are withdrawing their investments from fossil assets and governments are setting targets.

I take note of this, but 1) all these measures lack coherence, 2) they would not be sufficient anyway and 3) the countdown suggests a deadline around 2035 to bend the curve of GHG emissions. We therefore need other, obviously more radical approaches.

A progressive carbon tax

One option would be to transform the current carbon tax into a “progressive” carbon tax, that is to say the rate of which increases with the level of emissions. It is indeed not normal that people emitting 5 to 10 tonnes of CO₂ per year (low incomes) pay the same rate as those who emit 150 tonnes of CO₂ (the most rich). Thus, one could imagine the following structure where the rate increases in concert with the emissions:

– between 0 and 5 tons eq. CO₂ : a tax of 0% to 5%;

– between 5 and 15 tons eq. CO₂ : from 15% to 20% (100 $/ton, for example);

– between 15 and 50 tons eq. CO₂ : from 25% to 40% (500 $/ton, for example);

– maximum threshold: 60 tonnes eq. CO₂ beyond which there would be a dissuasive sanction (fine or surcharge on income or assets) ($1,000/tonne, for example).

Such taxes must obviously include several elements of social justice, and in particular, compensate the most affected households. One might also think that companies should be subject to such progressive taxation.

Despite everything, however, we can think that such a tax would be insufficient to reach our targets. Indeed, people with high incomes, who are heavily responsible for global warming, have nothing to do with carbon taxes, provided they have the means.

A “carbon passport”

This general observation leads me to conclude that we need economic policies that go through quantities rather than our market prices. This is also what the column by Francis Vailles evokes on the principle of an individualized carbon budget.

The concept of a carbon budget has been around for years, but only recently has it received serious attention. This revival is probably attributable to the relative inefficiency of carbon taxes as vectors of change. Too far ahead of its time?

But, for demonstration purposes, a carbon passport could work as follows.

Each Canadian would be allocated a certain annual amount of CO credits₂. For Canada, one could initially consider an annual limit per person of 15 tonnes (i.e. the average emissions of 90% of the Canadian population, therefore of those who earned up to $93,700 in 2019), with a gradual reduction in the ceiling of 1 tonne/year to arrive at a minimum standard of 5 tonnes/year.

The individual carbon passport is an idea that deserves further exploration in light of our inability to meet the targets that the various governments have set themselves.

In the example above, the carbon constraint becomes more and more restrictive, year after year. Such a passport would therefore support the measures already in place.

In short, to achieve the targets set in order to comply with the Paris agreement, we need an instrument that directly limits our emissions. The burden of taxation on pollution is necessary but insufficient: the planned increases in the carbon tax will not be large enough to discipline the richest and will prove too large for the ability of the poorest to pay.

Even if it involves issues in terms of individual freedom, the carbon passport is certainly a GHG reduction mechanism to consider if we are collectively resolved to face the urgency imposed on us by the challenge of combating climate change. climatic.