Carbon Taxing in Pakistan by ( Muhammad Ahmad)

 How a plan could be formulated to impose a Carbon tax in Pakistan?

At the beginning of the year 2022, the Intergovernmental Panel on Climate Change published its report on Impacts, Adaptation, and Vulnerability. As food and gasoline prices rose and former leader Imran Khan was removed from power this year, economic and political issues in the South Asian country of Pakistan than 230 million people coincided. It is currently experiencing the worst floods in recent memory. The severe monsoon rains struck Pakistan at a time when it was already in trouble.

After receiving the worst rains on record with little relief since mid-June, large portions of Pakistan are currently underwater. Rainfall during the monsoon season has been five times more than usual in certain regions. 33 million people are affected, and there have been over 1,100 fatalities. 

Despite producing less than 1% of the world's greenhouse gas emissions, Pakistan is the ninth most susceptible country to the climate problem, according to data from the European Union. It is paying a heavy price in terms of lost lives as well as ruined houses, schools, and bridges. In COP 27, Pakistan being the primary discussion subject has urged world leaders to agreed-upon climate financing to countries like Pakistan, however, Pakistan shouldn’t rely completely upon climate financing to tackle climate change but also explore self-reliant options to deal with it. One of the options is carbon taxing. 

What is Carbon Taxing?

For every ton of greenhouse gas emissions, emitters are required to pay a certain amount, which is determined by the government. To avoid paying the tax, companies, and consumers will take actions to minimize their emissions, such as switching to alternative fuels or implementing new technology.

“A carbon tax is a sort of punishment levied on enterprises that emit too much greenhouse gases. Typically, the tax is assessed per ton of greenhouse gas emissions.”

In contrast to cap-and-trade programs, a carbon tax offers more cost certainty, but no assurance over the amount of emission reduction to be accomplished. So far, 35 nations have put in place carbon pricing. Despite several carbon tax ideas being sent to the U.S. Congress, the United States has not yet implemented one.

Understanding of Carbon Taxing

A carbon tax is a kind of Pigouvian tax that aims to reduce or eliminate the negative externalities associated with carbon emissions.

Every type of hydrocarbon fuel, such as coal, petroleum, and natural gas, contains carbon, which when burned releases the toxic gas carbon dioxide (CO2). One of the main contributors to global warming is CO2, which is mostly to blame for the "greenhouse" effect, which traps heat within the Earth's atmosphere.

When there is a carbon tax in place, the carbon that is present in produced goods is often not taxed until it is discharged into the atmosphere, such as when it is burned. Any CO2 that is permanently cut off from production and does not enter the atmosphere follows the same rules. However, the tax is imposed upstream, or when the fuel or gas is taken from the Earth. The tax can subsequently be as fully passed on to the market by the producers. Customers then have the opportunity to lower their own carbon footprints as a result of this.

There are several nations in the world that have enacted carbon taxes. They come in a variety of shapes, but the majority of them equate to a simple rate of taxation per ton of utilized hydrocarbon fuel. Finland was the first nation to enact a carbon price in 1990. That tax was $73.02 per ton of carbon as of April 2021. Other Nordic nations rapidly followed the Finns, introducing their own carbon taxes in 1991 in both Sweden and Norway. The Norwegian tax is one of the highest in the world, costing $69 per ton of CO2 used in gasoline.

Carbon Taxing in the Case of Pakistan

Taking advantage of the significant global stimulus to address the ongoing climate catastrophe and invest in a more sustainable future has been strongly advocated, and there is rising pressure for the COVID-19 recovery to be green. It is impossible to overstate the potential contribution of carbon pricing efforts to promoting green recovery and growth in Pakistan. Additionally, it promises to make it easier to move to a low-carbon economy and, in the long run, reach a net-zero goal in Pakistan. Through such initiatives, Pakistan might benevolently mobilize resources and offer crucial countercyclical help. The cost-effective attainment of the Paris Agreement's climate commitments can be facilitated by clear and predictable carbon pricing signals in domestic and global markets. Similar to how it can encourage investments in low-carbon advanced technologies that can be utilized, carbon pricing can also be helpful in increasing local revenues and mobilizing international carbon finance.

The time has come to investigate how carbon taxes and emissions trading systems (ETS) may promote green economic recovery in Pakistan and growth and to highlight chances to raise money by stepping up international cooperation under Article 6 of the Paris Agreement. The importance of carbon pricing efforts in promoting green recovery and growth as well as the shift to a low-carbon economy and achieving a net-zero aim over the long run must also be established. With such initiatives, Pakistan may quickly mobilize resources and offer crucial countercyclical support for a green recovery. In comparison to a conventional fiscal stimulus, a green recovery has some advantages, such as long-term economic multipliers of climate-friendly measures and a higher return on investment for government spending.

The All-Pakistan Brick Kiln Owners Association helped establish the zigzag technique, which the Pakistan Environmental Protection Agency (Pak-EPA) has compelled brick kiln owners to use (APBKOA). The zig-zag kiln technology was developed to reduce emissions, save energy, and improve fuel efficiency. The affidavits to install the environmentally favorable zig-zag technology have now been submitted by all owners of brick kilns that had not yet done so. Five brick kilns that weren't using zigzag technology were sealed by Pak-EPA. The carbon taxing will urge the Brick Kiln industry to adopt zig-zag technology rapidly.

The advantages that carbon pricing can provide for environmental sustainability in Pakistan should be taken advantage of by policymakers. To prevent its negative impacts on economic growth, it is essential to assess the specifics of the work done to prepare for carbon pricing and to deploy a tool in a way that initially yields a low carbon price. Instead, it must attempt a gradual price increase.

Conclusion

Carbon pricing should be investigated as a means of lowering emissions and promoting green investment, provided that any such plan is in line with governmental goals for increased economic growth, the eradication of poverty, broader access to sustainable energy sources, and other goals for sustainable development. The introduction of tools like carbon pricing can significantly aid emerging nations like Pakistan in developing in a more responsible and sustainable manner. Pricing emissions could encourage more investment in renewable energy and help the world's carbon footprint decrease.