News

“Carbon Taxes – A Tool for Managing Climate Change or a Threat to the World’s Poor?”

Financing_or_dev_2

17 June 2008: The UN Financing for Development Office, UN-DESA and the Friedrich Ebert

Foundation organized an event on “Carbon Taxes - A Tool for Managing Climate Change or a Threat to the

World's Poor?” on 17 June, 2008, at UN

Headquarters in New York.

Participants discussed the feasibility of carbon

taxes to control climate externalities and the potential they might have in

generating revenues for development purposes, as well as the potential negative

impacts of such instruments and political acceptability. Speakers included Tariq Banuri, Stockholm

Environment Institute, Michael Keen, International Monetary Fund, and Gilbert E. Metcalf, Tufts University. The speakers acknowledged that carbon taxes are a feasible instrument,

but cautioned on the difficulty of establishing a correct price that achieves

desired changes in consumer behavior, as well as on the need to ensure other

‘climate-friendly' energy sources are available. It was further acknowledged

that carbon pricing will affect the level and distribution of households' real

incomes, directly through their own use of fossil fuels and indirectly through

the prices of other commodities. The actual distributional impact will depend

on the extentto which the

burden is borne by the consumer rather than the supplier of the commodity, but

it is widely acknowledged, at least in the short run, that the consumer will

carry the burden. Therefore, any carbon price will disproportionably impact the

poorest citizens, as their energy consumption requires a larger share of their household budget

compared to other income groups. The workshop also considered a globally funded

public investment programme for the deployment of renewable energy technologies

in developing countries. In this respect, several participants noted that

additional funding mechanisms need to be discussed by the Follow-up

International Conference on Financing for Development to Review the

Implementation of the Monterrey Consensus to be held in Doha, Qatar, from 29

November to 2 December 2008. [Event Website]