Coronavirus, returning to normal can be a lost opportunity: you need a universal carbon tax


Much has been written and told about the possible link between Covid-19 and thepollution: there has been a rush to publication, but the evidence provided so far seems slender when not inexistent. To understand this, it is sufficient to compare the excesses of mortality of the first months of the year in the various provinces of Lombardy and Veneto to understand how other factors were relevant. Provinces with identical pollution levels have excesses ranging from 1 to 10 and vice versa other areas with levels of fine powders several have a substantially homogeneous picture.

The Covid-19, on the other hand, has common characteristics with the problem of climate changes: are planetary phenomena that postulate planetary responses. Furthermore, the virus has generated very peculiar economic and environmental phenomena: the contemporary collapse of both emissions, as has never occurred since the second post-war period to date (a drop of 5.5%, estimate the scientists of the Global Carbon Project) compared to 2019, and the prices of fossil energies, dropped to around $ 30 a barrel of reference oil.

A “business as usual” recovery can make one lose positive opportunity of global intervention, and turn it into its opposite: the low price of fossils can expel many from the market renewables despite the great progress made by these (in particular solar and wind) in recent years, so much that for energy production costs they are very close to those of pre-Covid fossil sources.

In perfect coincidence, the need for public resources will increase dramatically all over the world. And you hear from many authoritative sources (Von Der Leyen in Europe, and the consultant of our prime minister, Prof. Mazzuccato, in Italy) about a “Green new deal”. But the best “green new deal” can actually be an intervention that also responds to the overburdened financial problem, rather than aggravating it: a “Carbon Tax”As universal as possible.

It would be primarily socially acceptable as never before, because, as has been said, it would add to exceptionally low prices of fossil sources, therefore with effects of shock reduced for now. Final energy prices are expected to rise slowly with the recovery of world production. An “double dividend”Hardly repeatable.

The annual values ​​at stake for revenues are conservatively estimated by theEconomist (May 23, 2020) in the order of1% of world GDP, that is in the order of 800 billion dollars per year (World Bank estimates). And this with a level of taxation very modest, of about $ 20 per tonne of CO2 emitted (in 2019 we are in the order of 400 million tons total issued).

Twenty dollars, mind you, is a value far from that of 35 dollars proposed as efficient by the famous IMF study “Getting the prices right“Of 2016, and very far from the 100 euro per tonne proposed as a reference value by the European Commission.

Useful to remember the reasons technicians for which taxation of climate-changing gas emissions (CO2 in the first place) would be a “first best” compared to standards, vouchers (“polluting permits”) and subsidies. The standards by definition disregard abatement costs, which can be extremely differentiated between countries, production sectors and individual companies. And the excellent social (maximization of the surplus) is obtained only by minimizing the sum of environmental and abatement costs.

Do not dissimilar the problems of voucher, which postulate local markets of these very difficult to manage and easy political manipulation by particular interests. Even more obvious is the problem of acting through subsidies: with the heavy need for public resources that awaits us, increasing spending on the environment does not seem a viable way, also since financial returns tend not to be created by making production “greener”.

And what would this approach entail for the sector? transport? Worldwide, its relative weight on emissions greenhouse is growing, due to two concomitant phenomena: the rapid increase in motorization in large developing countries, and the insufficient taxation of fuels both in the same countries and in United States (in some countries like Egypt and Venezuela oil products are even subsidized). Then i fossil fuels in the aviation and naval sector, in fact, they are not taxed today, thus slowing down, due to the lack of adequate incentives, technical progress towards less polluting engines.

Europe (and Japan) instead present a scenario opposite to: their weight in total polluting emissions in land transport is already low, thanks to the combined action of standards and taxation, and is expected to decline further. With the advent of a carbon tax, on the one hand, the high level of “internalisation” already in place by taxation will emerge, much higher than in other polluting sectors (see Oecd and the aforementioned IMF study), some of which even subsidized, like theagriculture.

But also an extraordinary opportunity to accelerate the development of less polluting means of transport, having as their primary objective exports in an international market that will generate a much higher demand for these means, especially obviously those able to be fully paid for by users, compared to those that need additional public resources.

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