We need to green the tax system, and fast. Here is why.
We are in a double nature-based crisis: climate change and biodiversity loss. Both are very problematic, especially the later, but solutions can also be found in these interrelated issues.
Indeed, nature-based solutions have the ability to tackle the climate crisis, land degradation and biodiversity loss while playing a major role in addressing a broad range of societal challenges, from managing water scarcity and reducing disaster risks, to poverty alleviation. And ultimately, societies living in harmony with, and giving more space to, nature.
Problematic is however that nature-based solutions are also chronically underfunded. This is reflected in the biodiversity finance gap (USD 700 billion per year till 2030), which is even bigger than the climate one (Paulson Institute, 2024).
In the meantime, the EU developed the Green Deal, Corporate Sustainable Reporting Directive (CSRD) and with that, Environmental, Social, Governance (ESG) Reporting on the risks and impacts businesses or financial institutes have on the environment and our societies. Furthermore, the CO2 market is in effect and the Carbon Border Adjustment Mechanism (CBAM) will be implemented by 2026 (European Commission, 2024).
‘The EU’s Carbon Border Adjustment Mechanism (CBAM) is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries’ (European Commission, 2024).
There are more of such regulations and laws, including the (recent) EU nature restoration law (2024) and in the future, the regulation on deforestation-free products.
We can debate extensively on the effectiveness of these mechanisms, however, by reporting on the footprint (negative impact) and handprint (positive impact) of companies, we gain access to information regarding how much impact one has.
Still, all these incentives are not fast and/or efficient enough to save our planet from the twin based nature crisis she is facing.
As such, we need to green our tax systems: from tax increase for negative activities, to tax deductive systems for positive ones. This tax system could play out on the EU level, and/or on national ones, and can be based on the nature-climate data companies and institutions report on. In the hope that it contains a ‘Brussels’ effect, meaning, it spreads to other areas of the globe.
From a tax system solely focused on finances, to a nature based one.
Because ultimately, nature cannot give it all for free. It has a price, now and in the future. It can be lower today, but extremely costly tomorrow if we do not act now.
So let us be wise and pay our green taxes.
Sources
European Commission. (2024). On: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
Paulson Institute. (2024). On: https://www.paulsoninstitute.org/conservation/financing-nature-report/