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The Case for Historical Responsibility: Border Adjustment Tax - Barış Sanlı

Climate change is an existential threat. Period. But we didn't come to this point because China became richer. The CO2 levels in the atmosphere were below 250 ppm in the pre-industrial age. Until 1990 it reached 350 ppm. It is now around 420 ppm. The level of CO2 is essential for our planet's health, but the world didn't get invented in 1990.

There are numerous net-zero targets across the world. Net-zero targets are essential, and all countries have to submit a net-zero pathway. But how will this impact their wealth? A new investment wave should push "green incentives." While in the global south, these projects' interest rates are much higher than the developed north.

Think this way, a sub 1% interest rate for a specific green project costs 10-12% more than the original cost. But a solar project finding credit at 7% has to pay double the price in ten years. Since most developing countries' risk premium is higher, all these countries have to pay at least 1.5 times what the developed countries pay. Lower construction and labor costs can be an advantage. But overall, developing countries can not achieve these green developments with the savings they do not have. They need cheaper credit than developed nations.

So how should they finance their renewable and green projects cheaply? The best way is to find them cheaper access to capital. I think we are in a dark tunnel where globalization will not be the way it used to be. The borders will be more important as well as the industrial production amid the automation and digitalization wave. Employment and regular salaries have weaker prospects.

The developed countries are developed based on carbon, not Facebook. The 150 years of the so-called industrial revolution are fuelled by carbon and machines that use carbon. Why? Carbon-based fuels were concentrated sunlight that has much higher energy densities than traditional fuels. It created a pseudo workforce with the help of machines. And this development has accumulated 70 ppm of CO2 in the atmosphere until 1990.

To provide climate justice and the right for the rest of the countries to develop cleanly, we have to bring everyone to the same level. It will not happen by consuming more coal or using more ICE than electric cars. It has to be done by providing cheaper equity to the developing countries' green incentives. This will at least reduce the risk premium of rates for developing economies.

Therefore a "Historic Responsibility Border Adjustment Tax"(HR-BAT) will help developing economies prosper in greenways. This will increase the prices in these countries, but at the end of the day, more red meat, more air travel more consumption will never help. All of us have to reduce our consumption. This HR-BAT will foster the energy transitions in the developing countries and compensate for the pre-1990s emissions from the developed countries. An existential threat can never be solved with arbitrary starting points or with climate injustice. Everyone should have the same playing ground for green growth.


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