Make trade work for Climate

TOPICS Topics covered from the syllabus: •GS-3: Conservation, environmental pollution and degradation, environmental impact assessment.

Context: European Union (EU) has proposed a Carbon Tax to incentivize the other countries to move towards a low carbon economy. However, the move has been criticized by many countries who consider such a tax as discriminatory towards the developing countries.

Carbon Border Tax

•        Meaning: It is a tax imposed on the imports of goods and services from the countries having lesser stringent environmental restrictions to incentivize them towards environment-friendly policies.

•        European Union has proposed the tax to be imposed on the goods imported within its territory. UN’s Conference on Trade and Development (UNCTAD) estimates that at US$ 44 per tonne, the income of EU from the carbon border tax (called as Carbon Border Adjustment Mechanism) would be almost $ 2.5 billion.

Rationale of Carbon Border Tax

•        Global Commons: Green House Gas (GHG) emissions affect everyone irrespective of the origin. Therefore, EU’s initiative of the Carbon Border Tax is an effort in the right direction to create an incentive to decrease emissions and reduce environmental degradation.

•        Revenue Neutral Approach: Carbon Border Tax is imposed on the countries with higher emissions. Therefore, it makes sense to rather invest the equivalent amount of funds in the reduction of emissions, rather than paying them in taxes. Therefore, a country investing in more efficient energy generation saves the export duties.

•        Incentive for Environmentally sensitive countries: Despite their historical disadvantage, many countries have invested in lower emissions. There is a need to recognize their efforts and create an incentive for others for similar efforts, lest the environmental degradation becomes irreversible.

Arguments against Carbon Border Tax

•        Discriminatory in Nature: Carbon border tax divides the countries into global north with better technologies and lower emissions, on the one hand, and the global south, with higher emissions. It also creates the transition from global south to global north more difficult by taxing the laggard countries on the route to economic growth.

•        Support to the Developing Countries: By its very definition, the tax is imposed on the countries which have lagged behind in the development race like African, Asian or South American countries. They are on the verge of a higher growth trajectory. However, they need support from the world community. Taxes like carbon border tax inhibit the growth of such countries by taxing their exports at a higher rate.

•        Historical Responsibility: The present position of global warming and environmental degradation is attributed to the higher emissions of the industrial revolution. Initially, the benefits of industrial revolution accrued majorly to the countries of the Northern hemisphere, commonly called today as the developed north. Now, this development has eaten up the space for emissions of the developing countries. This has been recognized as the principle of Common But Differentiated Responsibility (CBDR) in the UNFCCC climate summits. Carbon border tax goes against the principle of CBDR.

•        Better avenues of restricting emissions: Experts have contended that rather than coercing the developing countries into lesser emissions through penal measures like carbon border tax, it is better to support them towards a lower carbon future. This requires transfer of efficient technologies requiring lesser fuel consumption with reference to the per unit energy output, as well as funds to install more efficient energy generation equipment.

•        COVID-19 crisis: Though the principle behind the carbon border tax seems bonafide, the timing of its implementation does not seem right. The global economy is already battered with the COVID crisis and the economic slowdown. Also, the pandemic has affected developing countries disproportionately. Therefore, carbon border tax would only add to their woes.

•        Distributed Setups: In the search of cheaper labour, real estate and other inputs, developed countries have either set their production bases or outsourced their productions to the developing world. That means that the production happening in the developing countries cannot be completely attributed to their domestic requirements, rather they were merely fulfilling the demands of the developed countries. This is referred to as the ‘embedded emissions’.

•        Per Capita Emissions: It is true that the developing countries emit more GHGs in absolute numbers. For e.g., China emitted almost 10.35 Giga tons (Gt) of carbon dioxide in 2020, which was more than double of USA’s emissions of 5 Gts. However, the emissions of developing countries are still below global average as far as the per capita emissions are concerned.

 

GOVERNANCE OR BIOPOLITICS?

 

TOPICS •    GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. •    GS-2: Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

Context: India’s population explosion is in the news with a renewed focus on the stabilization of population. Uttar Pradesh has released a new population policy and brought a bill to control population.

Uttar Pradesh Population (Control, Stabilization and Welfare) Bill, 2021

•        The draft of the bill was released by the Law Commission of Uttar Pradesh.

•        Objective: The objective of the bill is to decrease the fertility rate of the state from the current 2.7 to 2.1 by 2026 and 1.9 by 2030.

•        Measures: The bill uses a combination of ‘carrot and stick’ approach to achieve its goals. For e.g. it incentivizes the couples serving under the state government by providing for out of turn promotions, two extra increments, paternity leave for 12 months with full salary and 3 per cent increase in the employer’s contribution under the National Pension Scheme. Other citizens will get rebate on taxes like house tax and water tax and rebate on home loans.

•        Other Measures: Apart from the above mentioned measures, the bill seeks to increase access to contraceptive measures under the family planning programme. It provides for better system of safer abortions in the state. It also seeks to provide better health services to all, including putting special focus on maternal health as well as
new born, infants, sick and severely malnourished children. It also provides for a population control fund in the state.

Issues with the Bill

•        Population Momentum: The bill assumes that the population in the state would start decreasing as soon as the fertility rate of the population falls below 2. However, the experts have pointed out that this might not be the ground reality because of the presence of high number of couples in the state. This is called ‘Population Momentum’. It might take some time for the population to stabilize.

•        Paradox: Experts have advocated adequate spacing between the two children for proper care of the children as well as the mother. However, in order to secure the benefits associated with the bill, the couples would have to undergo sterilization, thereby, decreasing the spacing between the two children. This is not conducive to the health of children as well as the mother.

•        Problems of the Minority: Media reports have pointed to the possibility of the bill being politically motivated as an electoral sop to the majority for the upcoming state elections. However, the prime factors for the population explosion in the minority population is poverty, illiteracy and poor access to health services. It is important to increase access to these factors for improving the status of minority population in the state.

•        Resource Crisis: It is true that policy measures are required in the state to address the issue of population explosion in the state. At the same time, it cannot be based on the approach that decreasing the population would increase access to resources for the remaining population. This is a flawed approach as the bill targets the poor having higher fertility rate than the rich. On the contrary, it is the rich who consume a larger proportion of the resources.

Conclusion

•        Carbon Border Tax (or CBAM) is an important idea which is actually required to pursue the global target of keeping the temperature rise below 1.5 degrees C. However, in the present form, it reeks of protectionism and the intention behind its imposition seem mala fide. The need of the hour is to have such a tax but keeping the interests of developing countries in mind.

•        Population explosion is an important issue in the country, specially the state of Uttar Pradesh, which would have been the fifth most populous country in the world, had it been a separate country. The bill is an effort in the right direction by the state government.

•        However, it is important to understand that time and again, it has been proven that the coercive measures do not work in population control. The better approach is to create awareness among the people of the state and increase access to health services in the state.

1.      Enumerate the major provisions of the Uttar Pradesh Population (Control, Stabilization and Welfare) Bill, 2021. What are the challenges associated with the bill?

2.      Do you think that the Carbon border tax is discriminatory in nature. Discuss the pros and cons of the tax, giving suggestions to improve the structure of tax.

1.      ‘Climate Change’ is a global problem. How India will be affected by climate change? How Himalayan and coastal states of India will be affected by climate change?                                                                                                                           (GS-3: 2017)

2.      While we found India’s demographic dividend, we ignore the dropping rates of employability. What are we missing while doing so? Where will the jobs that India desperately needs come from? Explain.                                                   (GS-3: 2014)