Carbon Taxation as a Green Fiscal Policy

Carbon Taxation as a Green Fiscal Policy

Burning fossil fuels, notably, stands out as the primary contributor to greenhouse gas emissions, including CO₂, SO, CO, CH₄, and others. These gases, by trapping heat for extended periods, are the primary underlying cause of global warming, rising sea levels, glacier melting, and various extreme weather events. The World Meteorological Organization reports that without measures to mitigate greenhouse gases, global temperatures have already risen by 1°C. Consequently, carbon taxation was introduced as a solution to curb carbon emissions and mitigate the effects of other greenhouse gases.

Carbon taxation plays a crucial role in fostering a sustainable environment on Earth's surface. As one of the green fiscal policies, it helps drive the world towards reduced greenhouse gas emissions and encourages the use of renewable energy sources. Carbon taxes are levied on fuel suppliers and producers, with rates depending on the carbon content of relevant fuel types such as coal, fuel production, and natural gas. This fiscal policy aims to discourage the use of all types of fuels for energy generation and directly contributes to improving environmental health and safeguarding ecosystems.

While the history of carbon taxation dates back to Sweden in the 1920s, it was formally enacted in 1991 to reduce energy consumption, improve energy efficiency, and promote renewable energy usage. Currently, Denmark leads in effectively implementing carbon taxation to reduce greenhouse gas emissions, especially as developed countries prioritize it to achieve sustainable development goals.

Carbon taxation, as a fiscal policy, brings numerous benefits to the Earth's environment and all species, including humans. Developed countries, having reached economic and technological peaks, are reevaluating environmental health and sustainable ecosystems. They are not only addressing carbon taxation but also other fiscal policies that affect various sectors such as commercial practices and food production patterns.

Furthermore, carbon taxation is a pressing issue in developing countries such as Thailand, Malaysia, and Brazil, as they undergo rapid industrial and technological development processes. These countries must address over 50% of global carbon emissions. Despite being a primary policy decision by states to combat climate change, carbon taxation remains a central focus globally.

Reference:

Parry, I. (2019). Back to Basics: What is Carbon Taxation? – IMF F&D. [online] IMF. Available at: https://www.imf.org/en/Publications/fandd/issues/2019/06/what-is-carbon-taxation-basics. [Assessed on 2 March 2024].

 

‌Regeringskansliet, R. och (2018). Sweden’s carbon tax. [online] Regeringskansliet. Available at: https://government.se/government-policy/swedens-carbon-tax/swedens-carbon-tax/#:~:text=Energy%20sources%20were%20first%20taxed%20in  [Accessed 3 Mar. 2024].