The inaugural African Climate Summit held in Nairobi, Kenya, concluded with a bold “African Leaders’ Nairobi Declaration on Climate Change and Call to Action” document that proposes a “global taxation regime including a carbon tax on fossil fuels, maritime transport, and aviation, to provide affordable and accessible finance for climate-positive investments at scale,” according to African Business.
In short, the declaration calls for urgent and ambitious action to reduce greenhouse gas emissions, adapt to the impacts of climate change, and mobilize the necessary financial resources by imposing taxation.
One of the key features of the Nairobi Declaration is its emphasis on African-led solutions. The declaration recognizes that Africa has a unique set of challenges and opportunities when it comes to climate change, and that African-led solutions are essential to achieving a sustainable future for the continent.
The Nairobi Declaration also calls for a just transition to a low-carbon economy. The declaration recognizes that the transition to a low-carbon economy must be fair and equitable, and that it must not leave anyone behind.
Some of these bold climate solutions outlined in the Nairobi Declaration include an acceleration of the transition to renewable; investment in climate-resilient infrastructure, mobilization of climate finance; and support of the just transition. Let us now dig into each of these proposed solutions.
First, on the acceleration of the transition to renewable energy, the Declaration calls for the acceleration of the deployment of renewable energy technologies in Africa, with a goal of increasing renewable energy generation from the current 56 GW to at least 300 GW by 2030.
Second, on investment in climate-resilient infrastructure, the Declaration calls for increased investment in climate-resilient infrastructure, such as water management systems, early warning systems, and drought-resistant crops.
Third, on mobilizing climate finance, the Declaration calls on developed countries to fulfill their commitments to provide $100 billion per year in climate finance to developing countries, and for the creation of new and innovative financing mechanisms to support climate action in Africa.
Fourth, on the support of a just transition, the Declaration calls for support for a just transition to a low-carbon economy, including by providing training and support for workers in the fossil fuel industry and by investing in social safety nets.
While these solutions are indeed bold and very promising, the problem is that using taxation to address climate challenges, especially imposing a tax on fossil fuel will create adversarial consequences that this Declaration did not intend.
First, imposing a tax on fossil fuels will engineer regressivity. A tax on fossil fuels would tend to be regressive, meaning that it would have a greater impact on low-income households than on high-income households. This is because low-income households spend a larger share of their income on energy than high-income households.
Second, a tax on fossil fuels will have a serious negative impact on African economies because it will raise the cost for businesses and consumers. This could lead to job losses and higher prices for goods and services.
Third, that tax could lead to carbon leakage. If a country taxes fossil fuels but other countries do not, businesses may move their operations to countries where they do not have to pay the tax. This could lead to an increase in global carbon emissions.
While the Nairobi Declaration is perceived as a significant step forward for climate action in Africa because it represents a united front by African leaders, and it outlines a clear path for the continent to transition to a sustainable and low-carbon future; reduction of greenhouse emission and fossil fuels could be done by proposing market-oriented policies rather than government intervention. Promoting innovation, economic growth by cutting taxes, and increasing deregulation to create job growth are some market-oriented policies that African leaders could use to implement their “bold solutions.”