A global CO2 tax for sustainable development?

Abstract

The Rio+20 conference in 2012 called for goals of promoting green industries and improving the quality of institutions worldwide. Is a global CO2 tax the best global solution for achieving this twin goal? As most countries in the world are highly corrupt, an adequate regulatory instrument should be able to work in a simple way that does not rely on strong formal institutions for enforcement. We argue that this is the case for a global CO2 tax. A uniform CO2 tax can be introduced as a "painted" energy tax that provides the needed incentive to switch from brown to green industries and minimizes the risk of carbon leakage. The achievement of the specific 2-degree target level is discussed as an example implying huge tax revenues that may be invested in better institutions. In perspective, the idea of having one instrument solving one problem will probably ease forthcoming political discussions and sustainability conferences substantially since the focus is on one issue rather than many.