A new KPMG study said the global reach of carbon pricing and taxes would likely expand in the upcoming years, bringing a complex tax landscape that may prove challenging to navigate for some businesses. The findings, reported by BusinessGreen, were presented in a study titled “Business consequences of tax driving net zero ambitions” and prepared by KPMG’s Responsible Tax Projects.
The researchers at the consultancy giant argue that while carbon taxes can help speed up the net-zero transition, they may also create a complex tax landscape that varies based on location and different approaches. The report’s authors go on to say that carbon prices will possibly continue to rise despite global geopolitical and economic instability.
Carbon prices are at a record high in many jurisdictions, the study notes, and the price allowances in the EU are currently at €66 a tonne, after reaching nearly €100 in the summer. According to the report, this is a strong indicator that businesses should invest in clean tech and energy efficiency.
With only 4% of all emissions priced at a level sufficient to meet 2030 emission goals, the KPMG report says prices may increase. New carbon markets in China and emerging markets, as well as the EU’s proposal for new carbon border adjustment mechanisms (CBAM) further support this prediction.
The new CBAM proposal may introduce tariffs on imports from countries that lack strong carbon pricing regimes, potentially driving more countries to adopt their own policies on CO2 pricing.
Some diplomats have alternatively proposed a “carbon club” that brings together countries with ambitious climate targets to advance decarbonization without the risk of a trade war.
The KPMG study says that businesses should be aware that the carbon tax landscape will likely become more complex and varied.
“Whatever approaches are decided, businesses in both developed and developing jurisdictions will be looking for certainty and measures which do not disrupt trade,” said Chris Morgan, head of the Global Responsible Tax Project at KPMG International. “Navigating this complex tax terrain is about negotiated settlements between different perspectives, attitudes, and interests.”