A Proposition for a Multilateral Carbon Tax Treaty
Posted: 9 Jun 2021
Date Written: January 1, 2018
Abstract
The paper provides for a template for the negotiation of a Multilateral Carbon Tax Treaty, and is extracted from the final chapter of the book 'A Proposition for a Multilateral Carbon Tax Treaty', published by IBFD in 2018, available at: https://www.ibfd.org/IBFD-Products/Proposition-Multilateral-Carbon-Tax-Treaty
This book proposes an interdisciplinary study on a variety of topics within the fields of law, economics and environmental regulation. The main topics covered are international taxation, environmental taxation, carbon taxation, environmental law and trade law.
The subject area of the book is the law of multilateral tax agreements as applied to environmental taxes. The objective is to propose a multilateral framework through which countries may tax energy mineral resources and capture the full pollution potential of those resources through the tax. The framework is designed so that the tax, a carbon tax, is only levied once in all of the mineral resources’ (oil, gas and coal) production chains. There is a compensation mechanism for non-combusted carbon by-products.
The book thus addresses the following issues:
What tax would be most appropriate to capture oil, gas and coal’s polluting ability?
What would be the best framework for which to propose a multilateral environmental tax?
What would be the best instrument to support an environmental tax applied under those terms?
Would the tax be consistent with international trade regulations?
Which would be the most suitable intergovernmental organization to administer the aforementioned tax?
Based on the research conducted, the author concludes that the most appropriate tax would be a carbon tax, applied on an upstream basis (at source) upon extraction of the mineral resources from the ground. The book reveals that scientists are capable of making mathematical correlations between the amount (measured in weight or volume) of mineral resource and the number of carbon atoms present in the mineral resource. The book further demonstrates that the most appropriate instrument to support one such tax applied on a global scale is a multilateral agreement. This multilateral agreement, the Multilateral Carbon Tax Treaty, would be consistent with international trade regulations of the World Trade Organization (WTO), provided that certain conditions are met.
Likewise, it is established that the WTO would be one of the intergovernmental organizations managing such a tax. Since the United Nations has, to date, been the intergovernmental organization with powers to propose internationally agreed environmental principles, laws and agreements, the author proposes for the treaty to be administered through a platform for joint cooperation between the United Nations and the WTO. As a result, the multilateral framework through which the carbon tax is to be administered would be compatible with the United Nations’ existing international environmental framework.
Keywords: multilateralism, carbon tax, multilateral carbon tax, CBAM
Suggested Citation: Suggested Citation