CoronaVirus Pandemic And Tax Regime Likely To Drive Conversations On Climate Change

Global study findings suggest a scale on subsidies aiming at their removal could lead to a decrease in global green house gas (GHG) emissions of between 6 and 8 per cent by 2050, compared to a business-as-usual approach.

A country research modelled on the removal of fossil fuel subsidies from across 26 countries, coupled with a modest investment into renewables and energy efficiency using savings from reforms and followed by 10 per cent tax on fossil fuels, found a simple average national GHG emission reductions of 13 per cent, and 30 per cent in some country cases.

During the coronavirus pandemic has witnessed an economic activity slow down, causing a reduction in carbon emissions but leaving many countries facing recession.

Despite vague commitments from G20 countries to phase out subsidies, national governments continue to subsidise their fossil fuel giants, even while mouthing the rhetoric of free-market economics.

Countries globally through the Paris Agreement, set out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C. The Agreement also aims to strengthen countries’ ability to deal with the impacts of climate change and support them in their efforts.

Governments spent around KSH 40 trillion (US$400 billion) in 2018 subsidizing the price of petrol, diesel, gas, electricity, and coal in order to keep consumer prices below international levels. Governments spend another $100 billion annually on subsidies upstream to producers of oil, gas, and coal. These subsidies include tax breaks, infrastructure investment (ports, pipelines and rail tracks in particular), write-offs, and the like.

Regionally, the Kenyan government has been urged to be wary of slowing down vital climate change mitigation efforts in the wake of the coronavirus crisis. Climate change experts warn that the urgent need to beat the virus may see most African countries lose track of the war on global warming.

In the wake of the pandemic, it is being argued this should be a wake-up call to African governments to ensure proper dissemination of the Green Climate Fund to help communities living near natural resources to conserve rather than destroy them.

In a Tax Justice Network Africa report published in June 2020 on Fossil Fuels and Taxation, it noted subsidies in an age of climate change could drive efforts in the wrong direction. With lower prices to consumers and lower costs to producers, consumers consume more, producers produce more. This increases the use of fossil fuels and the levels of pollution in our cities and of carbon in the atmosphere. It noted subsidies drove 36 percent of global carbon emissions between 1980 and 2010.

Notable efforts, however, have included the liberalization of transport fuels in countries such as India, Mexico, Thailand and Tunisia; introduction of automatic pricing mechanisms in China, Indonesia, Malaysia, Jordan, Cote d’Ivoire, and Oman; and reforms linked to regulated prices in the Middle East and North Africa. At the same time the governments Mexico, France, and Ecuador ran into serious difficulties between 2017 and 2019.