I have been doing research on the topic of environmental taxation for almost a decade, and have produced numerous publications calling for further regulation within the realm of international taxation. In my doctoral thesis, I propose a Multilateral Carbon Tax Treaty that would tax carbon on an extractive basis, and account for the in natura consumption of carbon rich by-products by taxing carbon at the earliest possible moment. In the fossil fuel production chain, for example, that would be at the upstream level.
This is an under-regulated and under-researched topic that is, nevertheless, of strategic importance for the implementation of the objectives of the United Nations Paris Agreement. The proposal for a multilateral carbon tax treaty (MCTT) is novel, in that it draws a proposed carbon tax rate and tax base from existing country practice, and derives a system for multilateral taxation from the existing environmental agreements, such as the United Nations Framework Agreement on Climate Change and the Paris Agreement. The thesis demonstrates how the MCTT would fit into the existing environmental legal framework, as well as in the international trade framework (through the WTO). The thesis delves on all the potential legal problems that might arise from the administration of a multilateral excise tax, and makes design recommendations, that are indispensable for the tax to be admitted from the environmental, fiscal and trade perspectives.
Several agencies have attempted to define environmental taxes without building a coherent normative conceptual framework which would differentiate between environmental policies that are driven by an environmental purpose and pursue an environmental effect, and policies that are mere revenue raisers, and are ineffective at promoting a behavioural change.
The failure to distinguish policies for what they are has made it difficult both to monitor countries’ environmental tax policies, and to provide clear guidance to new entrants in the environmental tax world, as to the best policies to pursue according to the envisaged goal. In past papers, and under the auspices of the UN Subcommittee on Environmental Taxation, I have proposed to make a conceptual distinction between environmental taxes and environmentally related taxes, according to whether the tax has an environmental purpose and effect. Setting environmental taxes apart from environmentally related taxes is important in order assess how effective countries are in administering policies that are effective in reducing carbon-based emissions, and other forms of polluting emissions. I have therefore come up with a unique “environmental tax” definition which is initially applicable only to carbon taxes, but that could be extended to other types of taxes containing the key characteristics to fulfill the objectives of the Paris Agreement:
“an environmental tax is a tax imposed for environmental reasons, whose tax base is a physical unit that has a proven specific negative impact on the environment. The term “environmental tax” is to be exclusively employed towards an excise capable of conferring a reduction in corresponding carbon-based emissions into the atmosphere. It is thus regarded to have environmental purpose and effect.”
This is the definition adopted by the Multilateral Carbon Tax Treaty, the text of which is contained at the end of the thesis, and made publicly available in this website for consultation. I am awaiting publication of my dissertation in book form in the IBFD doctoral series (expected in January 2019). Currently, my thesis can be consulted at the library of the Vienna University of Economics and Business.
Very little research has been conducted using developing country data and taking into account the economic constraints faced by these countries. The proposed MCTT builds on legislative proposals coming out of those countries, and explores how one might go about in setting a price for carbon that is compatible with the country’s level of economic development, while taking into account other political considerations. This is, in a nutshell, the object of my current research.