Carbon taxation as a tool for sustainable development in the MENA region

Abstract

Two of the most canvassed policy options for combating climate change and advancing sustainable development across the world are the use of carbon tax and tradable carbon emission permits (cap and trade systems). In a cap and trade system, the government sets emission limits for emission entities, who must abide by the set limits. Emission entities that exceed their emission limits may buy from those under-utilizing their emission quotas. On the other hand, carbon tax is tax paid on the emission of carbon (CO2) into the atmosphere. Countries use carbon taxes to address a wide range of issues, including waste disposal, water pollution, and carbon emissions. The advantages of increased public revenue and reduced carbon emissions, attributable to carbon tax, lead to environmental effectiveness and economic efficiency, and attract its use by countries. Carbon tax, therefore, offers a “double dividend”—revenue generation and behavioural change—which ultimately addresses climate change. Notwithstanding its potential benefits, several resource-based states, especially developing countries, are yet to introduce a carbon tax regime in their tax laws and practices. This chapter evaluates the utility, desirability, and potential of achieving sustainable development in resource-based states through carbon taxation. Following a discussion of the motivations for considering a carbon tax system, the chapter evaluates the potential impacts of a carbon tax system for Middle East and North African (MENA) economies, particularly on poor and vulnerable states who despite contributing less to greenhouse gas (GHG) emissions may bear the disproportionate burden of combating climate change. It then evaluates the potential legal and logistical barriers that a carbon taxation system might face and proposes legal frameworks for addressing these barriers.