Unless governments in industrialised countries send a very strong signal by giving energy a real price, it will be very difficult to actually move toward a low carbon economy. The European Trading System already gave momentum to industry transformation, engaging the highest emitting sectors to internalise the cost of carbon into their business model. However, the limited scope of this system and its persistent weaknesses carry intrinsic limitations. This is just not enough!
The success of this mechanism depends on various factors. Finding the right basis for the tax is key, as it must combine sufficient leverage and social acceptance. Likewise the level of the tax resulting in higher energy prices should be set to force industry transformation while taking into account each sector’s adaptation capacities. Finally, as energy prices will have different impacts on different industrial sectors, governments should agree on different carbon prices (i.e. different tax levels) according to specific business sensitivity, which depends on three main factors: energy intensity, international competition and the pace of possible transformation in the sector.
We advocate for a tax based on energy consumption versus a purely carbon tax, only targeting fossil fuels. An energy tax should take into account impacts beyond greenhouse gas emissions considering, for example, potential consequences of nuclear industry on public health and the environment. On the contrary, renewable energy solutions, not bringing any irreversible impacts, must be exempted from any tax.
Finally, as industrialised economies are currently experiencing a difficult economic crisis it is essential that governments divert a portion of the benefit of the tax to support the most vulnerable groups that will be significantly impacted by the rising price of energy.
This combination of social measures with such sophisticated energy taxation will, for sure, require a broad political agreement, going far beyond traditional political oppositions. This is the price government should pay to seriously promote a low carbon economy.
Bruno Rebelle is general manager of SYNERGENCE- Strategy, engineering and communication for sustainable development, and former director of Greenpeace France