Making Carbon Taxation Work In Sub-Saharan Africa: How Can CSR and Certifications Help ?
The earth’s climate is changing and not in a good way, for most people. The years 2014 and 2015 witnessed some of the hottest years on record. The change in climate has severe implications for the economy of the world and the lives of earth’s inhabitants. The effects of climate change cut across continents and travel far and wide. Africa cannot fold its hands, and must join efforts of other countries to curtail global warming and climate change.
The economic candidates to addressing carbon emissions are a carbon tax and tradable carbon emission permits (cap and trade system). In a cap and trade system, the government sets emission limits for emission entities, who must abide by the set limits. Emission entities that exceed their emission limits may buy from those under-utilizing their emission quotas. Some experts, like Vaclav Klaus, have argued that environmental issues are best dealt through the instrumentality of the market (Callon: 2009). I disagree with this view for these reasons: agreeing on the nature of markets that should be set up and their forms of socio-technical organization (Callon:); ensuring effective functioning of the market; challenges present in the identification of buyers and sellers; rivalry among existing firms and the threat of new entry; manipulation of the market and pricing; potential effect of rewarding polluters; and creating market out of an issue that threatens the existence and survival of the planet earth and of human beings. Carbon tax presents a more viable approach.
Simply put, carbon tax is tax paid on the emission of carbon (CO2) into the atmosphere. Countries use carbon taxes to address a wide range of issues including waste disposal, water pollution and air emissions. The advantages of environmental effectiveness, economic efficiency, public revenue and carbon emissions reductions, attributable to carbon tax, attract the use of carbon tax to countries. Carbon tax offers “double dividend”- revenue generation and behavioral change, which ultimately reduces carbon emissions and addresses climate change. How do African governments ensure payment of carbon tax by big emitters, given tax apathy among taxpayers in Africa and the inefficient administration and incapacity of tax authorities? I argue here that, corporate social responsibility (CSR) and certification provide compelling tools for ensuring compliance.
A raging global debate has been whether CSR should be mandatory for corporations, especially those operating in developing countries. Moon and Vogel present two views of this debate: “One is the dichotomous view that posits that CSR and government are, by definition, mutually exclusive; accordingly, the scope of CSR is defined by the absence of regulation and public policy. The second posits that CSR is the relationship between actors and governments.” They further admit that global climate change is an “important example that illustrates the interdependency of CSR and public policy.” In African countries, where development is far behind the developed world, and infrastructural facilities are inadequate, CSRs by corporations represent more than discretionary gifts, but also alternatives or complements to government actions. For large carbon emitters (which most corporations in the resource industries will come under), CSRs cannot be left solely to the discretion of the managers or shareholders. A broader stakeholder perspective must be taken by managers, in place of the often-limited view of profit maximization for the corporations. Corporations must be “responsible citizens” and managers must see the protection of the environment as an important stakeholder in the business model.
One way to be a responsible citizen and broaden the stakeholder primacy of business model is through the payment of carbon tax. Beyond possible government enforcement of payment of carbon tax, companies must ensure and pronounce that a major part of their CSR actions is the payment of carbon tax. Government has a role to play in ensuring this is achieved, through explicit public policy, in this regard. Moon and Vogel claim, “For all the increasing importance of CSR, public policy remains the most important vehicle by which private business purposes and broader social objectives can be reconciled.” While the debate on regulation of CSR continues and may never be resolved, governments, can through public policies, give direction to corporations on expectations and best practices. Certification provides linkages between payment of carbon tax and CSR actions of corporations.
Certification presents a persuasive tool of ostracization, which can be used effectively to guaranteee tax compliance. While certification is largely in the realm of transnational private regulation, government bodies are equally empowered to grant certification. My focus here is on certification, which emanates from private regulation. Bartley identifies “the role that market actors play in constructing institutions of industry governance” through industry certification; and a second view, which he describes as the “political construction of market institutions.” Under the “political construction of market institutions”, Bartley sees “conflicts among states, NGOs, social movements, and firms about the legitimacy of various ways of regulation of global capitalism.” However, instead of leaving the certification to be designed by market actors, I argue that for effective certification in the sphere of carbon taxation, such certification must be designed and awarded by civil society organisations. This ensures that the people take responsibility for securing their environment and future, while punishing erring corporations through ostracization.
Certification has always presented a potent tool for enforcing compliance with set standards among corporations. In his paper, Bartley identifies the use of certification in the regulation of labour and environmental conditions in the apparel and deforestation industries. My claim is simple. Carbon taxation should be imposed by African governments on big carbon emitters. To ensure compliance with the carbon tax, certification should be granted to companies who comply, and labeled on their products and/or services. The certification process should be designed, managed and implemented by nonmarket actors, and companies who fail to comply, be named, shamed and ostracized.
This post first appeared on Business My Way Africa.