I authored the chapter on Carbon Pricing in this new and most timely book on global tax competition: Winning the Tax Wars:
The book, resulting from a TaxCOOP Conference at the World Bank in Washington DC in 2016, covers how tax competition has evolved and its impact on developed and developing countries, the state of play when it comes to multinationals and transfer pricing / profit allocation between tax jurisdictions, the need for compliance, investigations and protecting whistleblowers, the need for a wealth tax in an increasingly unequal world, and, tobacco taxation.
A full chapter is devoted to promoting public goods and addressing climate change through carbon pricing along with recommendations to solve the growing crisis of tax competition represents my contribution to this important and authoritative work.
A research team at the IZA Economic Institute in Bonn (Germany) found that air pollution significantly impacts the performance of football players, even when measured pollution is below what the EU considers “safe level” thresholds. Above those concentrations, the measured decline in performance reached as much as 16%!
The World Health Organization reported that outdoor air pollution in cities for fine particles (called PM2.5 being smaller then 2.5 microns including dust, exhausts and coal combustion) was almost three times higher in Poland than in Portugal (28.7 vs. 10.8 ug/m3). Health effects include asthma and respiratory diseases such as lung cancer – children, the elderly and those with lung or heart disease are most at risk.
Outdoor air pollution causes 3.7 million premature deaths around the world according to Dr. Maria Neira, WHO Director for public health, environmental and social determinants of health.
In December 2015, the European Commission referred Poland to the EU Court of Justice for persistently high and dangerous levels of air pollution – mostly coming from household heating and road traffic. The Commission deemed that measures taken by the authorities were inadequate.
While we cannot attribute the victory of Portugal to pollution, it is clear that poor air quality affects more then just the quality of football games. Urgent action is needed!
149 years ago on this day, the people of Upper Canada and Lower Canada came together to create one great nation, Canada.
“From the outset, Canada was formed not in spite of differences, but because of them. Thanks to the hard work and understanding between many cultural and religious communities, Canada is the diverse, inclusive, and compassionate country that we are fortunate to call home today”, said Canadian Prime Minister Justin Trudeau this morning.
Those words were echoed this morning by Canadian Ambassador to Switzerland Jennifer MacIntyre in her talk to the members of the Canadian-Swiss Chamber of Commerce when she said that “Canada is strong precisely because of the diversity of its people. This is not only a source of pride but the reason of our prosperity and success as a nation.”
I can certainly relate to this message. My family escaped the tyranny of the communist regime in Poland in the early 1970’s and we received a wonderful welcome in Montreal (Quebec). That is where I grew up and where my parents and brother still live and celebrate the “vivre ensemble” (Living together).
Four decades later, Canada still is a beacon of hope for refugees escaping the atrocities of the middle-east crisis. The Trudeau administration committed to take in 25,000 Syrians only to increase this number by tens of thousands soon after.
So many Canadians are willing to sponsor them that the government can’t bring them quickly enough. “Where are the refugees that you promised us? When will they arrive? We are waiting for them! is what I hear from the constituents in my Toronto riding” said Minister of International Trade Chrystia Freeland during the Forum of the Americas in Montreal two weeks ago.
And this constructive and solutions-oriented approach extends well beyond the refugee crisis. When the Canadian delegation arrived at the Paris Climate Conference in December, the assembly was chanting: Welcome back Canada! Welcome back Canada! and that was even before the climate minister Catherine McKenna voiced Canada’s commitment to maintaining climate change well-below 2 degrees.
At a time when the dark forces are shaking the world by promoting hate, fear and isolationism, there is a new wind blowing from Canada. One that is supported and celebrated by all Canadians. It is a message of peace and tolerance, a celebration of multiculturalism and diversity and a reason for the whole world to celebrate!
Of the largest 150 economic entities in the world 59% are not countries but corporations. And when it comes to climate change, the private sector is largely responsible for the problem but also suffers its consequences – most importantly, business can play a central role in addressing the climate crisis by rapidly scaling up solutions for both mitigation and adaptation.
Over the last 18 months, “Solutions COP21”, led by the Comité 21, the Club France Développement Durable, Hopscotch Groupe and Alliantis communications, developed a platform to showcase business solutions to the public with existing products, services, processes and innovations (and more on the way) to fight climate change and its impacts.
During the COP, the Grand Palais in Paris became the showroom for leading corporations, entrepreneurs and local authorities to put on display their solutions. It also became a center for discussion and exchange on the role of private enterprise can play and how collaboration with other sectors can be improved.
Climate policy and enterprise risk management
That global warming is real and having serious impacts is no longer debated. Increasingly, responding to this reality is becoming part public policy according to Anne Ged, Director General of the Agence Parisienne du Climat, adding that Paris has been working on its adaptation strategy since 2012. It is also increasingly part of the risk management processes at all levels. The French ministry of sustainable development assessed that a one-meter sea level rise would flood over 15,000 km of local roads across the Republic. Similarly in the private sector, Stefano Bonelli, senior consultant at the Environmental Resources Management consultancy (ERM), says that climate related risk management for corporations is one of their fastest growing business segments.
The urgent realities of climate change
For SNCF’s Director of sustainable Development, Christian Dubost, climate change is already impacting its activities with extreme temperatures during heat waves deforming rails and igniting bushfires that result in delays and extra costs. He warns that by 2050, the 2003 heatwave will be the norm – a reality the SNCF is already preparing for now. Facing this future requires a better understanding of the challenges and improved cooperation between sectors. This is part of EPE’s (Entreprise pour L’Environnement) mandate, explains its Delegate General, Claire Tutenuit. We need platforms to share knowledge, experience and foster cross-sector cooperation, she adds. Such partnerships have allowed Veolia to recycle up to 98% of the water for industries in Durban, South Africa, benefiting industry and the environment explained Hélène Lebedeff, Director of Sustainable Development.
Partnering with nature
Leveraging ecosystem services by working collaboratively with nature can provide important co-benefits according to Philippe Thiévent, Director of CDC Biodiversité, explaining that we are only beginning to discover the value of wetlands as hotspots of biodiversity and their benefits in terms of water filtration, aquifer recharge and exceptional flood mitigation capacity. Harnessing such co-benefits can play an important role in mitigation and adaptation strategies and be very interesting from a social, environmental but also from a business perspective.
Clearly an important consideration for business to become a force for good when it comes to climate action.
This article is based on the conference “Comment les entreprises s’adaptent aux dérèglements climatiques” organized on December 4, 2015, as part of SolutionsCOP21 at Le Grand Palais, Paris – Espace de conférence, by EPE (Entreprise pour L’Environnement). http://www.epe-asso.org
Participants: Agence Parisienne du Climat, Anne Ged, directrice générale, CDC Biodiversité, Philippe Thiévent, Directeur de CDC Biodiversité, ERM, Stefano Bonelli, consultant senior, Green Cross International, Adam Koniuszewski, Executive Director, SNCF, Christian Dubost, Directeur de l’environnement et du développement durable, Veolia, Hélène Lebedeff, Directrice adjointe du développement durable. The event was moderated by Claire Tutenuit, Entreprise pour l’Environnement.
The memory of the media will keep this joyful scene at Le Bourget when the announcement of the agreement at the COP21 was made. Since then, objections, criticism and analysis of its shortcomings abound. They were inevitable and many are warranted.
But the most important when it comes to the future of humanity could not be rational. The collective emotion, even fleeting, gave the world images of what has inspired us to come together. In this digital era, we will see these images again and again, so as no to forget that what unites us is ultimately more powerful then what divides us.
To meet this challenge, a snap of fingers will not be sufficient. It will take decades of effort by activists, governments, scientists, associations, artists and others. But most of all, it will be for each new generation to discover the world in which it lives.
This moment of unanimity gave existence to humanity, beyond nations, beliefs or interests. We felt for a few minutes how this little flame, nascent, fragile, still wavering, was for us and our children so infinitely precious.
The emotion of this final between negotiators exhausted and radiant is already listed heritage.
After over 20 years of climate talks, 195 countries reached a “universal, fair, dynamic and binding agreement” to “save the planet” by keeping global average temperature rise well below 2 degrees. The mood was euphoric and some delegates were in tears after the three sleepless nights that concluded ParisClimat2015. Having followed the preparations of this global forum, I was impressed by the efforts of the city of Paris, the French authorities and particularly by the personal engagement of the French President for an ambitious and historic outcome.
1.5 degrees target
1.5 degrees target
I am proud that Canada, after a decade of obstruction and denial under the Harper administration, has come out in favor of a 1.5 degree objective under the leadership of newly-elected Justin Trudeau. Staying “well below 2 degrees” is now the stated target of the world community and Canada is back as a constructive force on the world scene. This leadership will be needed to if we are to turn this lofty objective into something meaningful in terms of climate action.
The 1.5 degree goal reflects calls of small island states, climate scientists and civil society but the new ambitions do not yet translate into commensurate actions that would even have a remote chance of meeting the original so-called “safe” target of 2 degrees, let alone 1.5 – which would require much faster reductions in green-house-gases and methods of taking back some of the carbon that has already been emitted.
Growing science and reality gap
Scientists have been warning that there is a time lag between the moment when carbon is released and the resulting temperature increase. This means that on top of the 0.9 degrees of warming that we are already experiencing, there is an extra 0.6 degrees that is already pre-programmed for the future – Dr. Thomas Frölicher, researcher at the Swiss Federal Institute of Technology has produced some interesting work in this area. For these reasons, in time we will reach the 1.5 degree target and beyond as we continue to burn carbon.
On track for 3 degrees and more
Commitments by member states for COP21 put us on the 3 degree or more path. Well above the 1.5 degree goal. It is therefore urgent to transform this new target into meaningful policy, to change business models and make sure that we all change our behaviors – something that is far from achieved and which implies much deeper emission cuts then was is currently planned.
Timing is critical
Delegates and politicians still think that climate change is a slow, gradual and linear process. This is not supported by science. In fact, the process is not-linear and there is now a real risk of hitting tipping points that could accelerate climate disruptions with catastrophic consequences. This is why the 2020 entry into force and the 5-year reviews that would start in 2025 are disappointing.
Common but differentiated responsibilities
All countries will have to participate in the carbon reductions but rich countries must help to finance this transition in the developing world by contributing a minimum of $100 billion per year starting in 2020 – a figure that will be revised upwards in 2025. The good news is that new powerhouses like China and South Korea will contribute to this effort. It is also encouraging that countries like India will adopt a low-carbon path for their development, something that was far from achieved just a few days ago.
Wind Energy Tree at COP21 in Paris
The end of the fossil fuel era
One message from the COP is that the good days of the fossil fuel era are behind us. Fossil fuel subsidies should be phased-out and we will move towards a price on carbon to speed up the transition to a clean energy economy.
Just the beginning
As Chinese President Xi Jinping said at the opening of COP21 on November 30th, this agreement is just the beginning of a process, echoing warnings from British Climate Ambassador, Sir David King, that carbon reduction targets must be reviewed regularly to accelerate the transition to a low-carbon future. From where we stand today and despite decades of work, it sure seems that we are still at ground zero.
When Dr. Somthai started his waste recycling business in 1974, with 1,000 Thai Baht (30 US Dollars) and an old pickup truck, no one took him seriously. He literally became the laughingstock of Phitsanulok, a city of 800,000 located 400km north of Bangkok. But look who is laughing now. Over the last four decades, Dr. Somthai built his recycling business into a global empire with over 700 branches in Thailand and around the world, including Laos, Cambodia, Malaysia, Japan and even the United States. Not only has his Wongpanit Group become a major global player, his vision and charismatic personality have made him a leading international figure in terms of environmental stewardship, as a social entrepreneur, and, as a savvy, uncompromising and innovative business leader.
Waste is Gold
Waste management is a growing challenge in Thailand. A problem that only becomes more daunting as population grows and becomes more affluent. When waste was only organic it was easy to manage. But today, plastics, metals and toxics accumulate in landfills, overwhelm expensive and polluting incinerators, and threaten to contaminate water resources. Dr. Somthai offers a solution that diverts waste from landfills, incinerators and the environment, creates local employment and provides valuable commodities to industry at prices that help improve their competitiveness. By turning waste into resource, he transforms a problem into an opportunity for the environment and for society.
Gold & platinum rings from recycled electronics
“There is no waste on this planet, only misplaced resources”, he says. “When looking at landfills most people see trash. I see valuable assets waiting to be mined! Recovering metals, plastics and other assets from landfills is much more efficient then mining the Earth for ores or oil. Reusing aluminum from scrap saves 95% of the energy needed to mine aluminum in the first place. The leverage is extraordinary!”
In his flagship ISO 14001 certified (since 2001) Phitsanulok plant, Dr. Somthai employs 250 people and can process 500 tons of trash every day. He buys waste from industry, landfills and individuals through 50 collection points scattered across the city. The waste is weighed, the purchase price determined based on the going rates and the payment is made immediately in cash.
He even has a catalog with 220 categories of items with prices for many categories of trash to encourage recycling.
A Global Market for Commodities
The prices of metals, plastics and all other commodities depend on global markets that Dr. Somthai monitors continuously. He prominently displays the daily prices for key commodities at the entrance of the center.
His four decades in the trade have helped hone his instinct for where the prices are heading. Akin to a professional commodities trader in London or Geneva, he takes positions, stocking up when he expects prices to go up or liquidating his stocks when prices are heading south. The recent drop in the price of oil had a negative impact on most products. This is why diversification is so important. His ability to recycle various kinds of waste helps spread his risk across a wide range of commodities. By adjusting his purchase price when markets are down he can always offer competitive prices to his customers while maintaining sustainable margins, whatever the market conditions.
Highly Skilled Labor
This labor-intensive trade is particularly well suited for developing countries with high unemployment and low wages. In Thailand it represents a significant source of income for the poorest of the poor. It is estimated that in the urban areas of Asia and Latin America up to 2% of the population depends on waste picking for their livelihood.
It would be a mistake however to think that this labor force is unskilled. Waste pickers are highly competent at identifying wastes with potential for recovery. The added value comes from sorting, cleaning, processing and organizing the transport of the waste in volumes that will make them commercially attractive for the domestic or international markets.
Take plastic for example. There are hundreds of plastic types. Each category must be identified, segregated by kind and color. Any impurities must be removed before processing (sorting, cleaning and chopping into flakes) so that the end product can have value. Any label on bottles of caps of a different plastic must be removed. Plastics must also be sorted according to their density (high HD or low LD) and their color. Each worker specializes in a particular type of material. Any turnover is problematic because training takes a long time and is expensive. Clearly, this is no project for amateurs.
Manufacturers of packaging also cause significant problems when they fail to properly design their products. Many fast moving consumer goods have labels that are glued – this makes them difficult (sometimes impossible) to remove. But responsible companies are taking notice. Pepsi-Cola in Thailand has partnered with Wongpanit and agreed to pay an extra Baht for each kilo of recycled plastic but also to design its bottles to make them easy to recycle. Many manufacturers, despite their eco-labels and thick CSR reports fail to do this, which hampers recycling efforts and leads to overflowing landfills and incinerators. Dr. Somthai encourages these companies to follow the lead of Pepsi-Cola and the authorities to establish standards.
A Social Enterprise that is Part of the Community
In addition to providing local jobs and protecting the environment, Dr. Somthai values the importance of being a constructive force in the local community. Believing that the current generation is largely lost, he concentrates his time on young people, the leaders of tomorrow. He provides training in schools and once a week buys waste from the students, providing them with an income while teaching them the economic value that can be found in waste. Similarly, he works with local monasteries that donate waste that he processes and donates money to fund scholarships for young people to be able to attend University.
A Global Perspective
Delegations from around the world constantly visit Wongpanit. On the morning of our Swiss delegation visit there was also group from Japan, where Wangpanit already has two franchises. They wanted to meet the visionary man who started this business two decades before the first Rio conference, at a time when few people took environmental matters seriously. But today still, many believe that environmental stewardship is expensive and uncompetitive. Dr. Somthai has been disproving this myth for the last 40 years. Showing that the linear consumption model of extract-consume-dispose is outdated and that more circular models of consumption are needed. By turning waste into gold, Dr. Somthai provides the economic and social rationale for the creation of zero-waste economy. A message that has come of age.
The Geneva delegation for the Swiss visit to Wongpanit was organized by the Honorary Consul to Thailand, Mr. Armand Jost, founder and president of S3Bi, a Geneva-based enterprise focused on assisting professionals in their career transition and its directors, Mark Giannelli, who is writing a thesis on “Waste Management in Developing Countries” at the Universities of St-Gall and Business School Lausanne (BSL). His Excellency, Ambassador Chalermpol Thanchitt from the Royal Thai Embassy in Bern (Switzerland) accompanied the delegation, as well as Dr. Gilles Bernard, Founder and CEO of Charity Consulting in Jumpol, Thailand, who is planning to develop such a project to create employment in the North of the country. My heartfelt thanks to Armand Jost and S3Bi for making my participation possible and to our hosts, Dr. Somthai Wongcharoen, Wimonrat Santadvatana and the entire team at Wongpanit for welcoming us so generously.