Digital tax deal can inspire global deal on carbon pricing – POLITICO


Policymakers should take heart from the recent success in agreeing to a global digital tax and developing a common approach to pricing carbon, the head of the Organization for Economic Cooperation and Development told POLITICO.

Mathias Cormann outlined his hopes for international cooperation to tackle climate change just days after he pitched the idea to EU finance ministers on Saturday during finance ministers’ informal talks in Slovenia.

“We can harness the experience from international taxation to build an inclusive framework for carbon pricing,” the secretary-general wrote, referring to a recent political deal among 134 nations to tax the world’s 100 biggest multinational companies — including tech giants — and set a global minimum corporate tax rate of 15 percent. “Without a sufficiently ambitious multilateral commitment, we will not get to global net zero.”

The call comes as EU legislators work on a carbon border tax that targets foreign imports of carbon-heavy products, such as cement, steel, fertilizer, aluminum and electricity. The initiative is part of an EU policy toolbox to fight climate change and slash the bloc’s greenhouse gas emissions by 55 percent over the next nine years — with an eye to achieve climate neutrality by 2050. Other EU tools to help price carbon include an enhanced Emissions Trading System and an update of the bloc’s tax on energy use.

The European Commission’s economy chief, Paolo Gentiloni, told Cormann over the weekend that he and his department were happy to work with the OECD and share notes.

The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to prevent firms from circumventing the bloc’s high green standards by setting up shop outside its borders and then shipping goods back in. The planned levy has attracted criticism from the U.S. administration, which has said the CBAM should be a measure of last resort — a position that Cormann also voiced in the recent past.

That stance left some attending Saturday’s talks in Slovenia skeptical of Cormann’s calls. While no one challenged his pitch on the day, treasury officials who spoke on the condition of anonymity said elevating the carbon price talks to OECD level would be a good way for Washington to stall the process. European Commission officials said Brussels would in any case push on with its plans to introduce the CBAM.

But Cormann dismissed the concerns, stressing that an international process wouldn’t replace regional or national initiatives.

“All I’m suggesting is that we should do both,” he said, showcasing “a global multilateral process that has proven successful on tax at the same time.”

Imperfect pitch

The OECD’s success in reforming corporate tax rules — the fine print of which still needs to be agreed — isn’t the perfect example to demonstrate consensus building on the international stage.

Treasury and Commission officials are well aware that the negotiations took years and almost collapsed when the former U.S. administration threatened to abandon the deal unless the tax was optional for American companies. It took Donald Trump’s replacement by Joe Biden and a new approach to deliver a deal. Time is a luxury that the world can ill-afford in its fight against climate change.

“Yes, it took time,” said Cormann, who helped get the tax deal over the line after he won the race for the prestigious OECD post in March. “Complex issues do.”

But the experience gathered along the way could prove vital to reaching a global deal on pricing carbon, which the OECD already has a wealth of knowledge to draw on as a global standard-setter and think tank.

“Yes, multilateralism is hard, but what is honestly the alternative? Unless we can get the countries of the world genuinely aligned with all making a proportionate and verifiable contribution to get to global net zero, we won’t succeed,” he said. “And we have to succeed.”

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