To Heads of State: Financing Climate Initiatives & Development Post-2015
Establishing public finance and tax systems based on resource rent and land value taxation can mitigate climate change. Climate finance and sustainable development finance are strongly interrelated and both can be best addressed with this approach while lowering or entirely eliminating taxes on work and production.
The state of the earth now requires that the costs of industrial production and human commercial activity no longer be externalized onto the local to global commons. The policy of charging fees for use of land sites (aka land value taxation) can be extended to include other natural resources in the form of “green” taxes. To mitigate emissions into air, water and soil, fees can be imposed according to intensity of use.
Ecological economics research and data indicate that true cost pricing of natural resource use and capturing that cost via ecotaxes and resource rental charges would be sufficient to eliminate taxes on labour and productive, sustainable capital. Thus full incentives are harnessed to address climate change (tax “bads”) and encourage green technology (untax “goods”).
Taxing carbon while untaxing renewable energy technology can be a major driver in the mitigation of climate change. Socializing commons rent while untaxing production best enables affordable housing for all, capacity to finance infrastructure, poverty eradication and infill development for compact, walkable and energy efficient, breathable and livable cities. This public finance approach mobilizes both public and private sector resources by properly harnessing the incentives of taxation policy.
There are several ways that this public finance approach can mitigate climate change:
Tax pollution - Governments should directly levy carbon and other pollution charges and use these funds to develop renewable energy systems and to launch campaigns to “buy and invest in clean and green” technologies and products. We support Jeffrey Sachs call for a global carbon tax. See: www.devex.com/news/for-jeffrey-sachs-100b-climate-finance-target-has-2-major-problems-86658
Decrease or eliminate wage taxes - Because energy taxes can be regressive, combine them with tax decreases on wage incomes or ideally, eliminate wage taxes altogether.
Reduce or ideally eliminate taxes on buildings - This along with full land value capture will encourage infill development and more compact cities that make energy efficient use of public transportation and infrastructure while discouraging wasteful sprawl development patterns.
Curb profiteering and speculation in land and natural resources – When investment of funds in these non-productive activities is discouraged via land value capture more funds are available for investing in new “green energy” technologies and environmentally sensitive design and production.
Encourage more labor intensive, organic agriculture, rather than oil intensive agribusiness - Land value capture will help keep land affordable for small farm agriculture and better reward farmers for their labor when their tax burden is decreased or eliminated. This form of agriculture also encourages healthy communities and decentralized, local based economies, decreasing the necessity for people to drive long distances to work or for food to be transported long distances to markets.
Land value taxation combined with removal of taxes on labor and production harnesses incentives for intensive organic agriculture by:
1. Discouraging speculation in land
2. Reducing the price of land to equate with its value for production
3. Enabling new entrants to more easily obtain land
4. Limiting farm sizes to those of the most productive units
5. Enabling the reduction of taxation on earnings and capital
6. Reducing interest paynents as land became more affordable
7. Preventing rural depopulation
8. Discouraging urban sprawl onto farm land
9. Encouraging owner-occupation rather than absentee ownership
10. Promoting more responsible use of land.