THE CLIMATE ISSUE: FUNDING A JUST TRANSITION JUSTICE FOCUS VOLUME 11, NUMBER 2

EDITORIAL The newsletter of the tax justice network Financing Climate Justice 1 James Henry

FEATURES FUNDING A JUST TRANSITION Fossil Fuel Subsidies and Taxation: 3 Two Sides of the Same Coin Laura Merrill

Still a Burning Question: Fossil Fuel 6 Subsidies in Australia Rod Campbell FINANCING CLIMATE JUSTICE Carbon Dividends as Tax Justice 8 James K. Boyce editorial by “We have made changes. Yes, sire, we have made changes. But Who Are the Real Extremists Here? 11 James Henry we have made them at the right time. And the right time is, An Interview with Gail Bradbrook when there is no other choice.” What’s Your SCORE? The Case for 13 As the climate crisis comes into ever Sustainable Cost Reporting sharper focus the question of how we Conservative advisor to King Edward VII, 1900s Richard Murphy pay for a just transition takes on an NEWS IN BRIEF 15 ever greater urgency. Plenty of voices common problems and solutions, and help TIME’S UP! can be heard telling us that the costs each other to succeed. This impending crisis is partly reflected are just too high, or, more soothingly, in scientific metrics. It is also reflected Up to now, for the most part these that the market will provide. But we in dire warnings from leading scientists, movements have each developed separately. cannot afford despair or complacency. In the last two decades they have all gained environmental NGOs, activists, and the It is now time to make plans, and act momentum and achieved quite a few world’s top climate policy-making bodies. But important victories on their own. But so have by far the most persuasive evidence is not on them. summit declarations or data-laden graphs. It our opponents – many of whom have turned Guest Editor: James Henry out to be our common enemies. is the outcry from nature itself. It has only Managing Editor: Dan Hind his collection of essays is the first recently become loud and clear. The impact Contributing Editors: John Christensen & Nick Shaxson in a series of TJN initiatives that are By now, especially in the case of the global of climate change is no longer elsewhere: Design and layout: www.tabd.co.uk intended to bring the global struggles climate crisis, the stakes could not possibly be all at once, in every corner of the world, Email: info(at)taxjustice.net T Published by the Tax Justice Network Ltd. for tax justice, financial transparency, and any higher. We are simply running out of time we have recently had record forest fires, air © Tax Justice Network 2020 climate justice closer together, explore to solve it. pollution, storms, floods, melting glaciers and For free circulation, ISSN 1746-7691 FIRST QUARTER 2020, VOLUME 11 ISSUE 2 TAX JUSTICE FOCUS

“By far the most persuasive evidence is not summit declarations or data-laden graphs. It is the outcry “From a distance all looks well.” from nature itself.”

permafrost, coral bleaching, desertification, is destroying the conditions of civilized life and the accelerated loss of precious species on earth. She describes how governments like bees and butterflies. are successfully moving away from this ruinous practice and freeing up funds to As we have seen, despite some progress combat climate change while improving the – especially the converging scientific and lives of people in the here and now. Rod popular consensus on the existence of a Campbell of the Australia Institute unpicks global emergency, and the mobilization of the bankruptcy of the fossil fuel lobby’s activism among some NGOs and investors rhetoric in a country that has only recently – it is clear that the approaches relied on experienced terrible bushfires. up to now have run into serious limitations, where they belong - onto balance sheets, so banks, pension funds, hedge funds, corporate relative to the task at hand. The brilliant economist Professor James K. investors can take a reasoned view of the investors, law firms, and accounting firms Boyce, argues that we ought to deploy a long-term profitability of companies whose that stand behind them. But the kind of policy analysis and brand new form of the as soon activities are incompatible with human life And of course all our efforts to achieve solutions that tax justice and transparency as possible. His ingenious version has a at scale. Finally, in an interview with the Tax worthy objectives like tax justice and advocates have to offer is precisely what chance, not only of reducing CO emissions, Justice Network, Gail Bradbrook, one of the 2 financial transparency and reform of the the environmental doctors should have long but of being politically popular. Money founders of the Extinction Rebellion, reflects mythological ‘free-market system’ will be since ordered – had they not spent so much raised through the sale of carbon permits is on the efforts of campaigners to increase pointless unless we can count on having a time under the influence of free-market redistributed as a kind of universal dividend. the pressure on policymakers to act before habitable planet to come home to. ideology. With respect, there is just no Those who use less carbon will receive a it is too late, and describes how activism will substitute for the kinds of fiscal, regulatory, net income from the scheme. Eventually proceed in the months and years ahead. So, as Martin Luther King, Jr. once said, if you and transparency policies that can be only the carbon dividends will go away, as the can’t fly then run, if you can’t run then walk, Getting these solutions adopted in a deployed by governments. system achieves its purpose of incentivising a if you can’t walk then crawl, but whatever timeframe equal to the urgency of the conversion to green energy. But in principle you do you have to keep moving forward. In this, the first of a two-part special this kind of ‘universal property rights’ might climate crisis will require us to figure edition of Tax Justice Focus, we have brought be used to reward ordinary people much out how to tackle and defeat the shared James S. Henry is a Senior Advisor to Tax Justice together some key policy proposals more fairly for their just share of mineral enemies of both the environmental and Network, Global Justice Fellow at Yale University that are intended to make what is now rights, broadcasting rights, R&D patents, and tax justice movements: the world’s largest, and Senior Fellow at the Columbia University’s urgently necessary possible. Laura Merrill, other forms of commonwealth. most influential public and private fossil Institute for Sustainable Investment. a renowned expert on fossil fuel subsidies fuels producers, public utilities, oil and LNG sets out the sheer scale of the ongoing Richard Murphy’s proposals that would shift shipping companies, pipeline companies, and public sector support for an industry that the risks being created by large corporations agri-businesses, as well as the myriad of giant

2 FIRST QUARTER 2020, VOLUME 11 ISSUE 2 TAX JUSTICE FOCUS FOSSIL FUEL SUBSIDIES AND

TAXATION: TWO SIDES OF THE feature SAME CARBON COIN Laura Merrill

Generous government subsidies around the world are, even now, enabling the extraction and burning of fossil fuels that would otherwise remain in the ground. A global technocratic elite that claims to value market forces is blithely ignoring them in a way that could hardly be more ruinous. As renewables continue to fall in price Laura Merrill calls on us to pay attention to this grotesque farce, and to stop using taxpayers’ money to destroy the conditions of life.

overnments spent around US$400 combined totalled around US$125 billion billion in 2018 subsidising the price between 2014 and 2016, or US$61 billion Gof petrol, diesel, gas, electricity per year. This development approach, in and coal in order to keep consumer prices which energy systems are built around the below international levels. Governments use of fossil fuels, has led to prosperity for spend another US$100 billion annually on some. But we are all paying a high price in subsidies upstream to producers of oil, terms of climate change and human health. gas and coal. These subsidies include tax breaks, infrastructure investment (ports, Fossil fuel subsidies in an age of climate pipelines and railtracks in particular), write change drive us in the wrong direction. With offs and the like. For the G20 alone such lower prices to consumers and lower costs Macron provided an object lesson on how not to implement environmentally friendly tax measures. exploration and producer subsidies are to producers, consumers consume more, The Gilets Jaunes won overwhelming public support for their protests estimated to be around US$70 billion, yet producers produce more. This increases upstream producer subsidy figures are far the use of fossil fuels and the levels of more opaque and difficult to quantify at the pollution in our cities and of carbon in the “Global revenue gains from the removal of subsidies and national level (sometimes for good reason). atmosphere. One piece of research suggests These are the producer subsidies. In the that these subsidies drove 36 per cent of the efficient taxation of fossil fuels could be around US$2.8 EU consumption and production subsidies global carbon emissions between 1980 and trillion to governments or equivalent to 3.8 percent of GDP.”

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“The Philippines managed to smooth the transition away they cause lost revenues to governments to compensate for subsidy reforms. The and further entrench vested interests. Such country used a basket of social protection from fossil fuel subsidies by using targeted cash transfers to subsidies also no longer achieve their policy policies covering education, health help build a national safety net alongside lifeline tariffs to objectives and are an extremely inefficient insurance, food subsidies, cash transfers and protect the poor in the process of reforms.” way of targeting the poor – GDP is lower infrastructure programmes. and the benefits of the subsidies are captured mostly by the wealthiest sections Ghana’s reform of subsidies to gas and 2010. An IMF working paper includes the East and North Africa region (around 50% of society with the richest fifth capturing diesel was accompanied by a livelihoods broader costs to society of fossil fuels (such by total value) followed by Emerging and six times more in fuel subsidies than the programme to support families. Morocco as traffic accidents and pollution, as well Developing Asia, and Central and Eastern poorest. expanded a national conditional cash as the social costs of climate change) and Europe. transfer as well as education and health finds the true cost of fossil fuels amounted Many countries have taken advantage of insurance schemes at the same time as to an eye-popping US$5.2 trillion in 2017, Because of the scale of the subsidies, lower oil prices to attempt to remove reforming. International organisations and or US$10 million a minute. opportunities for rent-seeking and consumer subsidies without high pass- initiatives such as the World Bank and suggest that such is the scale of these corruption abound. Unsurprisingly, fossil fuel through costs to consumers. Around Global Subsidies Initiative consistently subsidies that their removal could lead to a subsidies (particularly for oil) and countries 50 countries underwent some form of recommend an orderly approach to decrease in global green house gas (GHG) with weak institutions tend to go hand in reform between 2015 and 2018. Notable governments for quitting subsidies: get the emissions of between 6 and 8 per cent by hand. Indeed, research finds that there is a efforts have included the liberalisation of prices right, build support for reform and 2050, compared to business as usual. link between the ratio of subsidies to GDP transport fuels in India, Mexico, Thailand and mitigate negative impacts, crucially ensuring and measures of ‘government effectiveness, Tunisia; introduction of automatic pricing improvements in social protection systems Country research that modelled the removal rule of law, regulatory quality and freedom mechanisms in China, Indonesia, Malaysia, for successful reform. The bigger ask is of fossil fuel subsidies from across 26 from corruption.’ There are also strong Jordan, Cote d’Ivoire and Oman; and for countries to then reinvest and redirect countries, coupled with a modest investment links between countries that have energy reforms linked to regulated prices in the savings from subsidy reform into changing into renewables and energy efficiency using resources and the presence of subsidies, Middle East and North Africa. At the same the energy mix towards more sustainable savings from reforms and followed by 10 per and the view (sometimes enshrined within time the governments of Mexico, France and energy, such as renewables, energy efficiency cent tax on fossil fuels, found simple average constitutions) that national fossil fuel Ecuador ran into serious difficulties between and transport for all i.e. a fossil fuel subsidy national GHG emission reductions of 13 per resources should be available cheaply to the 2017 and 2019. ‘swap’. With the removal of fossil fuel cent, and 30 per cent in some country cases. population. Such subsidies were set up for subsidies countries like Morocco have There is no doubting that such subsidies development and support to the poor but Still, many countries have successfully turned towards the sun with ambitious (even using more restrictive definitions it is now argued that they are maintained implemented fossil fuel reforms successfully renewables investment and targets. such as those of the WTO) are significant, in part because some governments lack the by employing effective compensation more than double government support to capacity to pursue policy goals by other packages. The Philippines managed to Others like Ghana and the Philippines have renewables, and private investment in energy means. Industrial interests also play a big smooth the transition away from fossil fuel dismantled subsidies but are now attracted efficiency (IEA, 2019). In some Southeast part in retaining fossil fuel subsidies. subsidies by using targeted cash transfers by the current low market price of coal to Asian countries they have accounted for to help build a national safety net alongside drive development. The world coal price is between 5 and 30 per cent of government Fuel between countries, theft and lifeline tariffs to protect the poor in the far below the true cost of power, and G20 expenditure, sometimes far more than levels the adulteration of fuels to exploit subsidies process of reforms. Indonesia’s first large- governments alone continue to support the spent on health or education. In general are huge problems in countries such as Iran, scale unconditional cash transfer system production and consumption of coal to the most subsidies are found in the Middle Mexico, Nigeria, Philippines and Venezuela; was created in only six months in order tune of almost US$64 billion annually.

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“Because of the scale of the subsidies, opportunities FUNDING A JUST TRANSITION for rent-seeking and corruption abound.”

On the other hand, the recent lower oil However, the good news is that once price also leads producers and state-owned governments remove fossil fuel consumption companies - often within more developed subsidies the potential for revenue This special Climate Edition of Tax Justice Focus is the first in a series of countries - to seek further public subsidies collection via the imposition of VAT or outputs Tax Justice Network is developing as part of a new workstream to support operations. breaks GST (Goods and Service Tax) on transport focused on the linkages between tax justice and climate crisis issues. and other benefits from wealthy states are fuels greatly increases. Global revenue gains more alarming. Research finds that ‘globally, a from the removal of subsidies and the Over the months ahead TJN, in collaboration with our allies in the third of oil reserves, half of gas reserves and efficient taxation of fossil fuels could be tax justice, sustainable development, and environmental over 80 per cent of current coal reserves around US$2.8 trillion to governments or spheres, will deliver new research and complementary audiovisual should remain unused from 2010 to 2050 in equivalent to 3.8 percent of GDP. There is outputs bridging the divide that still exists between these two intimately order to meet the target of 2°C. considerable scope to increase the tax take from fossil fuels in Emerging and Developing enmeshed struggles. Fossil fuel subsidies to production and Asia, the Commonwealth of Independent exploration play a role in ensuring States, the Middle East, North Africa, To be kept informed about our work on climate continued access to, and exploration of Afghanistan and Pakistan. For example, the and tax justice, please sign up for updates at such resources. Production subsidies from Philippines removed subsidies and now the US government, push almost half of fuel at 12% VAT to pay for the national new oil investments into profitability; In social safety net and provide incentives to https://www.subscribepage.com/climateandtax Canada more than US$700 million of renewables. federal subsidies were directed mostly at the production of oil and gas between 2016–18. Taxation and higher prices that reflect the true cost of fossil fuels can encourage In Arctic Russia, projects depend on tax greater energy efficiency and the more breaks to generate profits. Indeed, on careful use of fossil fuels. They can also be average in 2013-14, G20 governments used to fund safety nets and accelerate sloshed out a heady annual cocktail of anchoring renewable and sustainable sources subsidies and support measures to ensure of power at the centre of the energy sector. the continued addiction to fossil fuel production through US$70 billion of direct This article is an updated version of Laura spending and tax breaks, US$286 billion in Merrill’s chapter for The Greatest Invention: Tax investments in state-owned enterprises, and and the Campaign for a Just Society (Margate, US$88 billion in public backed finance. 2015). A fully referenced version can be found at https://www.taxjustice.net/category/blog/

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STILL A BURNING QUESTION: feature FOSSIL FUEL SUBSIDIES IN AUSTRALIA Rod Campbell

After a long campaign of denial Australia’s fossil fuel lobby and its allies in the state have dropped the pretence. Of course the sector benefits from multi- billion dollar subsidies and always has. Today public money still pours in, even as bushfires burn with unprecedented ferocity.

here was a time, not so very long ago, ‘subsidy’ on the basis that much of its diesel when debate on fossil fuel subsidies use is not on publicly-funded roads, so they Tin Australia focused on whether such shouldn’t have to pay that tax. Negating this subsidies existed. argument is the fact that road funding has not been linked to for decades. Back then, Australia’s business and political class had to at least pretend to follow the Another example; between 2008 and 2013 central tenets of market liberalism, including Australian state governments spent $17.6 the idea that subsidies are bad. These people billion on measures to support the mining nodded along as assistance was wound back and fossil fuel sector. Almost $8 billion was to Australia’s textile and car manufacturing spent on coal transport infrastructure. Bushfires rage in Gregory, Queensland industries, which subsequently went offshore. The coal industry complained that this dropped all pretence of not wanting spending is not technically a subsidy because to Adani, the Indian energy conglomerate So when the Australia Institute published user charges and royalties are later paid. to subsidise the industries it favours, trying to build the largest new coal mine research on the subsidies that Australia’s However, the Treasury department in the particularly the coal industry. in the world. Far from being shy about mining and fossil fuel industry receives, there major coal state of Queensland makes government assistance to the coal industry was a lot of pushback from the industry it clear that ‘Government spending on Most famously, the Federal Government in the age of climate crisis, the mining about whether or not it was fair to call mining related infrastructure means less tried to funnel a $1 billion subsidised loan minister emphasised that ‘every coal basin these deals ‘subsidies’. infrastructure spending in other areas, including social infrastructure such as For example, the biggest part of the mining hospitals and schools.’ “Government spending on mining related infrastructure industry’s $4.5 billion per year in federal tax breaks is a rebate on its use of diesel. But those were the good old days. Since means less infrastructure spending in other areas, including ... The mining industry rejected the term then, the Australian Government has hospitals and schools.”

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“Every coal basin in Australia has been opened up through federal and state government investment.”

in Australia has been opened up through Of course, none of this touches on the huge Rod Campbell is the Research Director at the federal and state government investment.’ subsidy provided to fossil fuel producers Australia Institute. He is an economist who and consumers by not making them pay has focused on the Australian coal industry for The proposed Adani loan led to a huge public for climate crisis.This may be shifting. The most of the last decade. He can be followed at backlash that resulted in the Queensland unprecedented bushfire crisis in Australia @R_o_d_C on Twitter. state government vetoing it prior to an over the summer has increased public election. Post election, the Queensland calls for climate policy and for polluters government has itself tried to subsidise Adani to bear some of the costs currently borne with a deal to defer royalty payments. by governments and the community. The Australia Institute has put forward a detailed Despite controversy around support for proposal for a levy on fossil fuel producers, Adani, Australia’s conservative government with funds directed into a National Climate snatched a surprise victory in the 2019 federal election. Since then subsidising fossil Disaster Fund that would contribute to fuel development is the openly stated policy disaster recovery and climate adaptation. of the government. Unfortunately, the Australian Government The federal government has just given $4 has ruled out a levy on its friends in the million to support a feasibility study for a gas and coal industries. This is hardly a new coal fired power plant. With no bank or surprise given that Australia was the first, other commercial investor interested in the and probably only, country to have a carbon project, it will be up to the government to pricing system and then abolish it. We also build it, a prospect welcomed by members allow many mines to be abandoned or of the government who are sick of ‘sending barely rehabilitated, another multi-billion all our fantastic coal overseas.’ benefit to an industry that used to claim not to be subsidised. This follows various government efforts to underwrite coal power station upgrades and extensions and to subsidise new gas-fired Yes, ‘used to’. The debate about whether power. A deal for federal funding of energy Australia has fossil fuel subsidies is long infrastructure in New South Wales came gone. Now that these industries have it so with the catch that new gasfields needed to good, they barely bother to contest the be opened, or import terminals developed. ‘subsidy’ tag.

7 FIRST QUARTER 2020, VOLUME 11 ISSUE 2 TAX JUSTICE FOCUS CARBON DIVIDENDS feature AS TAX JUSTICE James K. Boyce

The urgent need to respond to the climate emergency is forcing rapid change on many different aspects of human life, from the generation of power to the design of transport systems and the organization of the built environment. Here James K. Boyce shows that the very way we think about property will have to change, and change rapidly, if we are stave off catastrophic rises in temperature.

carbon price can advance tax justice that we progress rapidly to the clean energy in two key ways. First, charging economy of the future. Second, it must be Apolluters for use of the biosphere’s equitable: the policy must improve the lives limited capacity to recycle carbon, rather of working families rather than adding to than letting it continue to be used and their burdens. abused free-of-charge, would help end the greatest environmental theft in human Effectiveness: The climate policy history. Second, returning the money to the litmus test people would give concrete expression to The litmus test for effective climate policy the ethical principle that the gifts of nature is whether it will keep enough fossil fuel in In the Astronomica the Roman poet Manilius wrote of ’the commonwealth of the sky.’ It is time to belong to all in common and equal measure. the ground to prevent global temperatures take the idea seriously; the atmosphere is a common possession. Picture by Lelyan Abu Snenah, released under a Creative Commons CC BY-SA 4.0 license. from rising more than 1.5–2°C above pre- To do this, any carbon pricing policy must industrial levels. Many policies can serve meet two key tests. First, it must be effective: this goal, but there is only one way to be the price must be robust enough to ensure certain that we achieve it: put a hard ceiling by 85% in 30 years, for example, this means on the amount of fossil carbon we allow to cutting the number of permits by 6% each enter the economy and then ratchet it down year. At every tanker port, pipeline terminal, “The litmus test for effective climate policy is whether it steadily over time. and coal mine head, fossil fuel corporations will keep enough fossil fuel in the ground to prevent global would be required to surrender one The most straightforward way to do so is to permit for each ton of carbon they bring temperatures from rising more than 1.5–2°C above issue carbon permits up to the level set by into the economy. When these permits pre-industrial levels.” the ceiling. If the target is to cut emissions are auctioned, the firms will bid what they

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“Just setting a carbon price and hoping it will do the job is not to work come out well ahead: they pay Some revenue from carbon pricing could nothing and get their share of the revenue. enough: the price must be anchored to a hard trajectory for be devoted to public investment, too. Those who carpool to work more-or-less Government spending accounts for a non- reducing emissions.” break even. And those who commute daily trivial fraction of fossil fuel use, and recycling in a single-occupancy vehicle pay more into a comparable share of carbon revenue to the revenue pot than they get back. Carbon government would keep it whole. expect to recoup from higher prices paid know these will help, but we cannot know dividends apply the same logic to parking by consumers. The carbon price is the exactly how much. fossil carbon in the atmosphere. By earmarking a fair share of public inexorable result of a hard limit on supply. investment for communities that have Today the time has passed when just hoping Everyone gets the same dividend, regardless suffered disproportionate environmental How high the price will go cannot be known for the best is good enough. We need of their own carbon footprint, so everyone harm from the fossil-fueled economy – from in advance. It will depend, among other to make absolutely certain that we cut has an incentive to reduce their use of fossil polluted neighborhoods in urban areas to things, on how fast renewable energy costs emissions decisively in the coming years. And fuels. Those who fly often in airplanes, heat rural communities afflicted by the toxic continue to fall. Extrapolating from past we need to face up to the reality that comes and cool bigger homes, and so on, will pay legacies of fossil fuel extraction – this, too, experience, however, we would expect a with this objective: higher prices on fossil more in higher fuel prices than they receive would advance the goal of equity.3 6% per year reduction in the supply of fossil fuels. in dividends. But the majority of households fuels to translate into roughly a 10% per consume lower-than-average amounts of Climate policy: Beyond year increase in their price. If so, fossil fuel Equity: The carbon dividend fossil fuels, because the average is pulled up “eat your broccoli” prices would double in about seven years The carbon dividend – returning the by the outsized carbon footprints of the Too often, climate change has been framed and quadruple in fifteen. revenue to the people as equal payments to top one percent. As a result, they come out every woman, man, and child – provides a ahead in sheer pocketbook terms, without exclusively as a threat that requires the If other policies, like smart regulations way to mesh carbon pricing with the goal of even counting the environmental benefits of present generation to make sacrifices for and public investment, also help to reduce building an economy that is more equitable reducing emissions. the sake of future generations. The result is demand for fossil fuels, the price increase as well as more sustainable.1 to give climate policy an ’eat your broccoli’ will be smaller. Indeed, if these other policies A recent study that analyzed the net impact flavour: you ought to swallow it even if you are so successful that they achieve the The idea can be illustrated with an analogy. of carbon dividends in the United States don’t like it. targeted emissions reduction on their own, Imagine that 1,000 people work in an office with a price of $50 per ton of carbon the supply limit will be redundant and the building whose parking lot has only 300 dioxide found that average incomes in the Instead, the clean energy transition can permit price will fall to zero. In this case the spaces. If everyone could park for free, the poorest tenth of the population would go up and should be framed as something that carbon price, like fire insurance, would turn result would be chronic excess demand and by about 5%; in the richest tenth they would will benefit working people here and now, out to be unnecessary – but optimism is not congestion. To prevent this, a parking fee is go down by about 1%.2 Higher prices would too. It will create millions of new jobs here a good reason to forego insurance. charged that limits demand to fit the lot’s increase these impacts. Carbon dividends and now.4 It will bring about cleaner air, capacity. Every month the proceeds from Just setting a carbon price and hoping it will alone would not be enough to reverse the fee are distributed in equal payments 3 The Union of Concerned Scientists, The Hidden Costs do the job is not enough: the price must be extreme income inequality, but they would of Fossil Fuels, 30 August, 2016. to everyone who works in the building. anchored to a hard trajectory for reducing be a step in the right direction. Those who take public transport or bicycle 4 Robert Pollin, Job Opportunities for the Green Economy: emissions. Likewise, just investing in mass A State-by-State Picture of Occupations that Gain 2 Anders Fremstad and Mark Paul ‘The Impact of from Green Investments, Political Economy Research transit or enacting fuel economy standards 1 James Boyce, The Case for Carbon Dividends a Carbon Tax on Inequality’, Ecological Economics, Institute, University of Massachusetts, Amherst, June and hoping for the best is not enough. We (Cambridge, 2019). Volume 163, pp. 88–97, 2019. 2008.

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“A carbon price-and-dividend policy would transform the a new way to remedy widening , the other defining challenge of carbon-absorptive capacity of the atmosphere into a new kind our times. of property that is distinct from both private property and public property as conventionally understood.” James K. Boyce is a senior fellow at the Political Economy Research Institute at the University of Massachusetts Amherst. He is author of The Case for Carbon Dividends (Cambridge, saving lives here and now.5 And with carbon A carbon price-and-dividend policy 2019) and Petit Manuel de Justice Climatique dividends in the policy mix, it will lift net would transform the carbon-absorptive à l’Usage des Citoyens (Paris, 2020). incomes for the majority of households. capacity of the atmosphere into a new kind of property that is distinct from both These benefits can change the narrative on private property and public property as climate policy. Instead of a tradeoff between conventionally understood. Unlike private economic prosperity and environmental property, the right to receive dividends protection – a false choice all too often cannot be bought and sold, or owned by posed by proponents of climate action as corporations, or concentrated in a few well as its opponents – the two can go hands. Unlike public property, it does not hand-in-hand. And instead of awaiting an belong to the government: it belongs to the international agreement on how to curb people. Instead it could be termed universal emissions, the here-and-now benefits can be property, signifying rights that are individual, sufficiently compelling for countries to act perfectly egalitarian, and inalienable. regardless of what others do. In the first decade or two, carbon dividends Dividends: Beyond carbon are likely to grow larger, even as emissions The ethical underpinning of carbon are curtailed, for the simple reason that the dividends is the principle that the gifts of carbon price is likely to rise faster than the nature – in this case, the limited capacity of quantity declines (in the language of Econ the atmosphere to safely absorb emissions 101, demand for fossil fuels is price inelastic). – belong in common and equal measure to But eventually, as the clean energy transition all. This implies that we share not only the nears completion, the revenues and to safeguard natural assets for future dividends will dry up. An interesting question generations, but also the right to income to ask is whether the public may then want derived from charging for use of this scarce to apply the universal property model to resource (rather than, as at present, allowing other natural assets, such as minerals or the it be used and abused free of charge). electromagnetic spectrum, or to human- made infrastructure. Were this to occur, 5 American Public Health Association, The Public Health Impact of Energy Policy in the United States, apart from helping to solve the climate 13 November, 2018. crisis, carbon dividends could also illuminate

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“What we haven’t done WHO ARE THE REAL strongly enough yet is to hold interview out the vision that change is EXTREMISTS HERE? Gail Bradbrook possible.”

In November 2018 some six thousand people blocked the five main bridges NF – 2019 was a pivotal year for the disobedience for change; that you have to have those moments of confrontation, and over the Thames in London. The Extinction Rebellion had begun. Since then climate crisis movement. What worked well for XR and what didn’t? confrontation doesn’t mean violence. It can acts of mass civil disobedience have proliferated throughout the developed be done very peacefully and beautifully and world. In January of this year the Tax Justice Network’s podcast producer GB – So we launched in the autumn of respectfully, but it is a way of saying no. Naomi Fowler spoke with Dr Gail Bradbrook, co-founder of Extinction 2018 and we’ve been named the number one global influencer on the climate crisis, NF – Climate crisis deniers seem to have Rebellion, about the story so far, and the movement’s plans for the future. which is incredible. We’re into 72 countries, been pushed back, but do you think the with over 700 groups across the world. Our greatest thing to fear now is the lack of initial interim goal was to shift the Overton fear among the general public? Window, and I heard recently that Davos GB – Well the majority of the public was all about climate and ecological crisis, so now understand that there is a climate we’ve achieved that goal. What didn’t go so emergency. We’ve been using something well? Obviously we’ve made mistakes; we’ve called emergency mode messaging, telling been trying to figure out organising a social people there’s an emergency, asking them to movement while it’s growing under our feet at rapid scale. And there’s things that we get act according to their values. But what we wrong; some of the actions that happened haven’t done strongly enough yet is to hold were problematic. out the vision that change is possible. There’s a debate to be had on how much NF – Which movements have most is this about renewable energy, or carbon inspired XR’s direct actions? taxation, or carbon budgeting, or you GB – We stand on the shoulders of so know, going vegan or telling people not to many other movements and a history of fly… there’s a whole pile of things…we’ve resistance. Extinction Rebellion came out opened the space for those conversations. of a network called Rising Up. Actually you So whenever I meet people working in this can trace the origin back to a conversation – from my perspective at least – with John “This system’s finished, it’s Having won over public opinion on Climate Emergency, XR now needs to address the issue of Christensen at the Tax Justice Network… economic sustainability I think it’s really important that people going to kill itself off, and it’s understand the importance of civil killing us.”

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“We know that people are more willing and able to tackle the climate and ecological crisis when there’s less inequality, there’s a direct correlation.” field in some way they say, ‘Goodness, it’s we pay for free public transport, how are we really changed. You guys have changed the going to pay farmers to transition to more discourse.’ So we don’t have to be all things agro-ecological solutions? to all people. So one of our main demands really is to have a citizens’ assembly focused And then there’s the whole issue of on the 2025 target to decarbonise and to corporations holding billions of profits halt biodiversity loss and reverse it. There offshore and not investing them in needs to be a deep focus on the role of the renewables . . . economy in this crisis and an understanding NF – For decades the debate has been of that and a rewiring of the system and… falsely framed as economy versus what I’m hoping we’ll bring forward this year Extinction Rebellion protesters in London on Friday 19th April, 2019. Picture by John Lubbock, ecology; what can be done to persuade released under a Creative Commons CC BY-SA 4.0 license. is a focus on debt refusal… we would be people that economic sustainability taking actions to banks and to the big four requires environmental sustainability? accounting firms and all that type of stuff. depending on which communities you’re Morrison, as criminals who pushed genocide, And… some people can do debt disputing, GB – That’s an utterly crucial issue, and we in… and I think that it’s moving into that because billions and billions of people are which is not illegal, but it’s a way of saying, is have to get this right this year. So let’s start space of, of public luxury, of universal basic likely to die as a result of climate crisis. this debt really legitimate? with a discussion about what the economy services. So yeah, I think that’s the kind of That’s where the extremism lies. is actually for. We are undoubtedly killing life thing that we need to be aiming for. But NF – In what ways do the tax justice and on earth; we’re in the sixth mass extinction obviously that requires governments to have Dr Gail Bradbrook is an evironmental activist climate crisis agendas intersect? event, so the debate needs to start with money to spend and deploy. And that means and campaigner. In 2018 she co-founded ‘what are we doing wrong’? The UN have GB – Tax is a key issue. For example, fossil we have to have a functional tax system, Extinction Rebellion, a global movement to talked about the collapse of civilisation. The fuels are subsidised by a horrendous amount, which we don’t have at the minute. challenge the current, catastrophic trajectory of I think the IMF said in 2017 it was over $5 committee on climate change has said we climate policy. trillion. That means fossil fuels are mispriced, won’t be able to adapt to four degrees of NF – How did you react when you heard This is an edited version of an interview which is anti-competitive, though I argue that warming, yet that’s the pathway we’re on. that the police had included XR on a list conducted by Naomi Fowler in January 2020. A renewables should be subsidised because we According to Professor Jen Bendel collapse of terrorist organisations? longer version will feature in edition 99 of the need to transition to greener energy. is inevitable. So this system’s finished, it’s going to kill itself off, and it’s killing us. So GB – Utterly unsurprised because that’s Taxcast – https://www.taxjustice.net/taxcast. Tax can also be used to redistribute wealth: what are we going to do instead? What I been happening to activists for years… A transcript of the full interview will also be we know that people are more willing and thought was a really great concept… was But who are the real extremists here? made available online. able to tackle the climate and ecological crisis essentially private restraint… and public Naturalist Chris Packham made a speech when there’s less inequality, there’s a direct luxury. So I don’t need a car if we’ve got free recently saying that in years to come correlation. Taxation is also needed to bring public transport and, you know, obviously maybe we’ll look at people like Bolsonaro, in revenue for tackling the crisis, so how will you have to have different transport forms and Trump, and Putin, and Australian PM

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WHAT’S YOUR SCORE? THE CASE FOR feature SUSTAINABLE COST REPORTING Richard Murphy

Accountancy was established to protect investors from fraudulent managers. tax bases and we need to understand what do not require businesses to account for As the activities of companies now exceed planetary limits, accountants must this might mean. However, we have almost the carbon emissions that the products they no reliable data from most businesses on create or sell give rise to when used by a think much more carefully about their public interest responsibilities. Here one their carbon emissions; nor do we know customer, which means that the downstream of the discipline’s most original and influential thinkers sets out the role new enough about the economic impacts of environmental externalities businesses reporting standards could play in aiding a swift and just transition away from any major policy proposals to be in a create in pursuit of their profits will go position to take decisions on such matters. unreported. Given that the climate crisis fossil fuel dependence. As significantly, when it comes to the has arisen because of businesses failing to base, we have almost no idea take responsibility for the externalities of about which businesses might survive the their activities, it is unacceptable for the The climate crisis is real: it is settled science companies may ultimately account for one transition to a net-zero carbon world, and TCFD standards to omit these downstream that we must take immediate action to third of greenhouse gas emissions,1 and just which might not. externalities. address its consequences. Across the world one hundred companies may account for seventy per cent of these emissions.2 there has been a response that few in That said, moves are underway to address For this reason the Corporate any activist community can ignore. There this issue. Former Governor of the Bank Accountability Network is developing What does this have to do with tax justice? have been demands for a Green New of England, Mark Carney, is promoting what it calls sustainable cost reporting In practice, quite a lot, since one of the Deal. Extinction Rebellion has led protests voluntary accounting standards created (SCORE), a new, mandatory accounting possible reactions to the climate crisis is that have revealed the power of civil by a Bank for International Settlements standard which will require businesses to to tax the use of carbon-based fuels and disobedience. Greta Thunberg has become a initiative called the Task Force on Climate- disclose their greenhouse gas emissions another is to provide tax incentives to global figurehead for creating school strike related Financial Disclosures (TCFD).3 (GHG) under four categories: business to change their behaviour. Both protests. Carney is to be commended for getting might have a significant impact on corporate this ball rolling, but what he proposes • Scope 1: The GHGs the reporting The demands have, however, been primarily is inadequate. The TCFD standards are entity creates itself; 1 Matthew Taylor and Jonathan Watts, ‘Revealed: the 20 aimed at governments, which is reasonable firms behind a third of all carbon emissions’, Guardian, voluntary and current rates of compliance given their responsibility for setting 9 October, 2019. https://www.theguardian.com/ are lamentably low.4 Worse, TCFD standards environmental policy. Governments will environment/2019/oct/09/revealed-20-firms-third- carbon-emissions also be responsible for delivering the new “We have almost no 2 Paul Griffin, ‘Carbon Majors Report’, CDP, 3 . Taskforce on Climate-related Financial Disclosures public infrastructure needed to support the July 2017. https://b8f65cb373b1b7b15feb- (TCFD) website – https://www.fsb-tcfd.org/ reliable data from most different types of economic activity that c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3. 4 ‘TCFD: 2019 Status Report’, June, 2019. https://www. rackcdn.com/cms/reports/documents/000/002/327/ fsb-tcfd.org/publications/tcfd-2019-status-report/ businesses on their we now require. But we should not ignore original/Carbon-Majors-Report-2017. the fact that as few as twenty oil and coal pdf?1499691240 carbon emissions.”

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• Scope 2: The GHGs produced when “Counting the right carbon usage: it covers the cost of removing designed to encourage companies with a generating the electricity the reporting it, making it far more robust than any good SCORE. And if carbon tax is to be entity consumes – the upstream thing, in the right way, alternative approach. SCORE also enables used, then its impact – and how to manage externalities; at the right time is now appraisal of each reporting entity on its own the risks within it – will also be capable of terms. appraisal using better data than any we have • Scope 3: The GHGs arising from the key to social, economic, currently available. manufacture and use of products and Second, the cost must be based on known services over which the reporting entity tax and environmental technology: a precautionary principle Accounting may have the reputation of being has some contractual control e.g. within justice.” must be applied, meaning that unproven boring. However, counting the right thing, in outsourced manufacturing processes technology cannot be assumed to deliver the right way, at the right time is now key (incorporating both upstream and net-zero carbon, although investment in to social, economic, tax and environmental downstream externalities); managed. Crucially, SCORE requires that such technology to reduce the cost justice. SCORE is designed to help achieve this plan be published and the cost to the provision required (and so, in effect, declare this goal. • Scope 4: The GHGs arising from the reporting entity of its achievement must be a carbon cost reduction profit) manufacture and use of products and estimated. is encouraged. Richard Murphy FCA is the Director of the services which the reporting entity Corporate Accountability Network and Professor buys in for resale essentially in the The most radical requirement of SCORE Third, the provision for costs will need to of Practice in International Political Economy, state in which they acquired them (also is that this cost has then to be included in be reappraised annually and reported upon City University, London. His books include The incorporating upstream and downstream the accounts of the reporting entity - in as a key accounting issue, thus enabling Joy of Tax and The Courageous State. externalities). full - at the time of adoption of the SCORE stakeholders to appraise companies’ standard. The logic is simple: SCORE commitment to their plans, and whether or As is apparent, remoteness from control recognises that the cost to the business of not those commitments are being delivered increases as the Scope number rises, but in tackling climate change increases if action is on within the cost target. This will allow each case the reporting entity facilitates the deferred, therefore recognition of this cost investors to identify companies that are best emission. In Scopes 3 and 4 the disclosure in the accounts will encourage early action able to eliminate GHG emissions. has to be split between upstream supply and to minimise the final cost to the business downstream customer chains so that these of eliminating carbon emissions from its Crucially, SCORE will reveal that some can be fully understood. All disclosure will production and consumption chains. That companies might not be able to make this be on a country-by-country reporting basis this reverses the traditional accounting transition. They are carbon insolvent because to both reveal the geographic spread of the approach of discounting future costs is they either cannot adapt their processes impact and to curtail carbon dumping. beside the point: nothing is normal about or will not be able to raise sufficient climate change and its impact. capital to do so. SCORE will allow for early Once this information has been disclosed, identification of these entities, providing the reporting entity has to prepare a plan Some important issues should be noted. The more time for them to be wound up in an to become net carbon zero, as is necessary first is that SCORE does not put a cost on orderly fashion. if the impact of climate change is to be “Carney is to be commended for getting this ball All of this feeds into tax justice. The wise use of subsidies, tax allowances and reliefs rolling, but what he proposes is inadequate.” can be appraised. Indeed, they can be

14 FIRST QUARTER 2020, VOLUME 11 ISSUE 2 TAX JUSTICE FOCUS news in brief…

Always Something New A Green New Deal (And Bad) from Britain for Europe

February of this year In December of last saw the publication year the second edition of ‘The UK North of ‘The Green New Sea as a Global Deal for Europe’ was Experiment in published. Neoliberal Resource Extraction’ by Described by Ann Juan Carlos Boué. Pettifor as ‘a blueprint This exceptionally for bringing about an important report urgent, system-wide reorganisation within from Platform London and the Public and a short time period,’ the report is one of Commercial Services Union explores the the most comprehensive attempts yet to UKs management of its North Sea oil describe a path away from climate disaster. reserves from the 1970s onwards. The full text is available online at https:// report.gndforeurope.com In a story that combines elements of the Resource Curse and the Finance Curse, successive governments in Westminster acted to protect the private sector at the expense of public revenues. In an eerie echo of free , Boué exlains how ‘the global spread of the UK governance model destabilised many key petroleum producers, whose governments found themselves starved of fiscal income. As a result ultra-liberal British-inspired policies turned out to be an authentic lose-lose proposition for all concerned. The full text is available online at https://scote3. Extinction Rebellion event, Cardiff, 13th July 2019. Picture by Hywel72, released under a Creative files.wordpress.com/2020/02/northsea_ Common CC BY-SA 4.0 license. neoliberal_experiment_final.pdf

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