Note: this has been written as a submission for the "Grand Challenges and Systems Change" module that I've taken as part of the MPA programme at UCL IIPP. I am posting this now because  the G7 agreement to a global corporate income tax floor and Raghuram Rajan's latest op-ed on a Global Carbon Incentive reminded me of this idea of how global taxation, and especially a global carbon tax could evolve into a world government and the withering away of the nation state.

International governance is not something that I feel very comfortable in predicting, but there is a clear line of thought between solving this over-arching collective action problem and the need for stronger governance that can snowball into a full-fledged government-like structure.

If Carlota Perez’s theory of successive technological revolutions and socio-technical paradigms is accurate, we are overdue for the deployment phase of the fifth technological revolution, brought about by the advent of cheap microprocessors (Perez, 2013). Deployment periods tend to reduce the inequalities and ease the social tensions that appear during the explosive growth of the installation periods. But this all depends on governments ability to react to the new technologies that have ushered the revolution and the societal changes that have come about as a consequence.

I am going to make the case that the only way for governments to bring about a true golden age is to realize that the challenges inherited from the previous techno-social paradigm (the climate emergency) and from the installation period (rampant inequality, global-level tax dodging by the ultra-rich and multi-national corporations, and new business models that current taxing models are unable to cope with) are simultaneously too global and too local for any one national government to handle. Further, I suggest that governments should tackle these challenges doing what they do best: tax, reinvent and consolidate themselves. The most important thing that national governments will be able to do is to cede sovereignty in favour of supranational organisations that will have the ability to police countries into complying with the necessary steps needed to tackle inequality and the climate emergency and to cede power internally through devolution to local governments. I will then offer some alternative ideas on how to tackle the climate emergency from a global governance point of view and draw some conclusions.

Tackling climate change

Before a rebranding effort by Republicans in the US (Luce, 2020), climate change used to be more widely discussed as global warming. The previous terminology had the very clear implication that it is a worldwide problem. Governments and supra-national organisations like the EU seem to be coming round to this realisation. The European Parliament has declared a Climate Emergency (European Parliament resolution of 28 November 2019 on the climate and environment emergency (2019/2930(RSP)), 2019), the Green New Deal in the U.S. calls for a complete decarbonisation of the world economy by 2050 (Ocasio-Cortez, 2019). Ursula von der Leyen’s programme for her new European Commission commits to a European Green Deal as well (von der Leyen, 2019).

However, one of the main political critiques that appear whenever an ambitious unilateral proposal like the aforementioned ones is brought forward is the limited impact on the global “carbon bottom line”, and the disproportionate economic burden on the shoulders of the country or economic bloc those measures would have. In essence, we are confronted with an intractable collective action problem when it comes to climate change mitigation (Ostrom, 2009), with people put off by the free-rider effect. What can be done to mitigate this? How can a first player commit to greening its economy while making sure that others follow suite?

One answer is given by Europe’s incoming Commission, who has floated the idea of a “Carbon Border Tax” (von der Leyen, 2019) as a way of making sure that cheap imports won’t flood the Single Market in the transition period towards a green economy, decimating internal industry. This would only work because, as a bloc, the European Union is the world’s largest economy and the main trading partner of over more than 60 countries other than it’s own member states. This is a great example of climate action that is only possible as common action and it is one of the first carbon tax proposals that would deal with the problem of “leakage” - the idea that enforcing more stringent climate regulations in one area will move the offending industries to areas with more lax regulations, thus allowing the carbon to leak back in¹.

Whilst this is a promising beginning, and will, if implemented, no doubt have a positive impact reducing global GHG emissions, latest estimates show that emissions are not decreasing, but actually they have continued to increase, directing us towards a catastrophic increase in global temperatures (Emissions Gap Report 2019, 2019). Hardly the ecological premise of a new golden age. Thus, more drastic and comprehensive measures are necessary.

Global Taxes

What I propose is a global tax on fossil fuels, the main cause of GHG emissions, at the point of extraction. This isn’t a new idea, it’s been floated around in books (Berners-Lee, 2019), IMF reports (“Fiscal Monitor,” 2019), press articles (Rogoff, 2020). An advantage this has over other solutions, like the aforementioned carbon border tax for instance is that once you add the tax at the point of extraction, the price hike is embedded in whichever utilisation you find for the fossil fuel, whether it is car petrol, flying or making plastics. The tax needs to be high enough to make fossil fuels economically unpalatable. Estimates on the necessary price on carbon necessary to stave off an increase over 2℃ range from 75$ per tonne of CO₂ (“Fiscal Monitor,” 2019) to 1000$ per tonne by 2050 (Berners-Lee, 2019). The price itself is not especially relevant², the most relevant aspect is that in order to have a meaningful impact, it must be a global tax.

Considering the impact this would have on economies which depend on exporting fossil fuels (Venezuela, Saudi Arabia, Australia to name a few), and the fact that not all of them could benefit equally from transitioning to renewable energy sources (due to geographic and ecological considerations), the gains that this global carbon tax would bring should not just act as a disincentive to emit carbon, but also to assure a just transition to these economies and developing economies in general.

But this would not be the only type of global taxation that would need to be added to bring about the new golden age. To curb short-term financial speculation and algorithmic trading, which have played a great role in the financial instability of the past decades (Jacobs and Mazzucato, 2016, p. 69), a global financial transaction tax would need to be instated. Likewise, to tackle inequality, I would propose a global capital gains tax and a global floor on corporate tax.

One question that arises is why would these taxes need to be global. A simple answer is that in the hyper-globalised environment of today and the near future, and in which financial assets and capital are highly mobile, preventing a taxation race to the bottom is necessary to be efficient. Talking about regulating the financial sector, Perez aptly frames it as “Regulation limited to the national level is like trying to tame a wild horse in the middle of the street, with the cowboys inside the houses throwing the ropes through the windows. “ (Perez, 2013).

In addition to this, more comprehensive taxation of multi-national digital platform companies whose business model depends on aggregating and selling users data is needed.

An ambitious approach to new ideas about taxation doesn’t mean that we should only add taxes. On the contrary, the new golden age requires a rethinking of most taxation, which implies doing away with outdated modes of taxation. We might discover that automatization will lead to intractable unemployment (a report by PwC estimates 44% of workers with low skills “at risk of automation by mid-2030s” (PricewaterhouseCoopers, n.d.), in which human labour would be more expensive than machine labour for all but the most complex tasks or creation of bespoke items of art, jewellery, craftsmanship, fashion, etc. In that world, taxing human labour rather than machine labour would just not make sense. Taxing machine labour and using the proceeds to fund either a universal basic income or a redesigned unemployment scheme would be more adequate. While greening the world economy, we might come to the realisation that green growth is impossible (Hickel, 2018). This might lead future accountants to finally do away with the imperfect measure of GDP, based only on “value added” as determined by market price (Mazzucato, 2018, p. 100) and consequently replacing VAT with some other form of taxation that takes into account what we would today call externalities.

In essence, we would be creating a world-wide redistributive government. This would be an unprecedent measure, which requires unprecedented global cooperation – new institutions and international treaties need to be drawn up. The World Bank will need to be assisted in setting developing economies on a sustainable path through a World Carbon Bank (Rogoff, 2019) – a global investment bank whose only purpose would be to finance innovation in sustainable development and renewable energy and green infrastructure projects in developing countries or under-developed areas of the global north.

Spill-overs and contagion

If we can countenance the idea of global taxes, a discussion is needed on what other institutions this would entail. For one, would each country pay their global taxes in their local currency? What would stop them from devaluing their currency to avoid paying their “fair share”? Would we then need a single currency to act as a global transfer currency? Would it be fair or advisable to continue to rely on the US Dollar to fill that role, or perhaps the Euro or Renminbi? If we follow that logic, we would then need to think about a global central bank to emit a global currency.

Taxing and redistributing the income from those taxes would need some semblance of democratic oversight and input. Thus, we will need something akin to a planetary parliament, which goes beyond the U.N. Assembly General, with representatives of national governments. The challenges of a global democracy will require a complete rethink of the functioning of democracy as we understand it today.

There is a very distinct possibility that this new form of representativity could not be described as a liberal democracy. In the ensuing negotiations over these new institutions, the North-Atlantic model of liberal democracies will have to contend with the Chinese system of a one-party state-capitalist model, the theocratic models of the Middle East and the strongman politics that today represent Hungary, Poland, Brazil and Russia – such ambitious reforms will not be unilaterally imposed upon the world as the Bretton-Woods institutions were 76 years ago.

There are also plenty academic and popular arguments against the claim that a liberal democracy is the form of government most adequate for guiding humanity through the climate crisis (Eckersley, 2004; Luce, 2020; Wainwright and Mann, 2013).

Taxing and redistribution also require administrative capacity. This leads to the creation of a planetary civil service and executive branch, a global bureaucracy that dwarfs in size the current staff of the Bretton-Woods institutions and other international bodies like the U.N.

Mapping out all the necessary institutions, the interactions between them, the cooperation, oversight and the relations that will be required, i.e. the mix between consensus and coercion that will be necessary to make all (or the large majority of) nation states “fall in line” leads to the concept of the “climate leviathan”, defined as “the dream of a planetary sovereign, […] a regulatory authority armed with popular legitimacy, a panopticon-like capacity to monitor and discipline carbon production, consumption, and exchange, and binding technical authority on scientific issues.” (Wainwright and Mann, 2013)

Think (and Act) Globally, (but also) Act (Hyper-)Locally

Macro-level institutions and social transfers aside, the real day to day transformations in economic activity and lifestyle necessary to actually induce the new golden age will happen at the micro level. That requires a shift in moral values, consumer preferences, habits and norms, especially in the global North, where the average carbon footprint is exceedingly high compared to one in the South.

My proposal is that these types of changes are best effected at a community level, which is why I proposed that states not only cede sovereignty to the emerging supra-national institutions (The Climate Leviathan), but also return some of their powers to their underlying regions and cities.

Cities in particular are already hotbeds of innovation in the circular economy and reducing emissions.(Bulkeley and Betsill, 2003; Ostrom, 2009) Entrusting them with more levers of policy innovation can only help.

Climate change mitigation and adaptation is not only about limiting GHG emissions, though. Particular care must be given to biodiversity and ecosystem preservation concerns. In these matters, given the varieties of ecosystems and the uniqueness of their feature, ceding more powers to regional authorities to experiment with the best course of action for their respective ecosystems would probably be advised in contrast with nation-wide or global “One-size-fits-all” approaches. The European Common Fisheries Policy is a great example of how these types of policies can fail (Ostrom, 2009).

I would also suggest allowing cities and regions to at least temporarily develop their own social security and education programmes. Given the changing nature of work and the high number of speculated possible solutions to counter the most perverse effects of automation and flexible working, hyper-parallelized testing and implementation of differing social security policies would speed up the coming golden age.

Political challenges

This is all incredibly hard to achieve. Enforcing a carbon tax will be extremely difficult. Even people in highly developed countries with a high source of environmental consciousness are extremely sensible to increases in fuel prices. A purported increase in tax on diesel, one of the most pollutant car fuels, triggered massive demonstrations in France in 2018 (“‘Shame’ on Paris protesters, says Macron,” 2018).

Convincing developing countries which would not be the most affected by climate change that they have to forego “the easy way” of development requires incredible diplomatic tact and great incentives. Convincing countries with fossil fuel reserves but no potential for renewable energy sources to sacrifice energetic sovereignty (and short-term economic growth) is also dependent on building degrees of international trust that the world has never seen. According to (Ostrom, 2009), trust building at this scale should not be insurmountable, in opposition with the rational choice theory and game theory that a lot of International Relations literature are based upon (see for example (Liebreich, 2007; Weiler, 2010)).

Decreasing national sovereignty has been one of the most touted complaints of right-wing populists in the global North in the last decade, though literature on populism would indicate this is just rhetoric to focus attention on an “external threat” to blame for the economic ails of  “the people” (Müller, 2016). Attempting to create supranational institutions that would also be a threat to their economic development would most likely stoke the flames of nationalism. Sometimes, these two sentiments might coexist and feed back from each other³.

Nations and states whither?

The current Information and Communication Technological Revolution has super-charged globalisation and has brought humanity closer together than at any point in history since perhaps the first homo sapiens walked the earth.

The internet and especially the availability of mobile internet connected smartphones means that we are living a shared experience. Memes and news travel around the world instantly. Tools like Google Translate bridge understanding gaps that previously allowed only elites that spoke multiple languages to interact. If the printing press (and print-as-commodity) enabled the development of nationalism (Anderson, 2016, p. 36-37), I posit that the advent of internet-as-commodity will allow its decline and the rise of an internationalism.

Crises like the Australian bushfires of 2019-20, the Amazonian rainforest fires of 2019 and other extreme weather phenomenon, coupled with the emerging climate consciousness - see groups like Extinction Rebellion in the UK or Greta Thunberg’s School Strikes for Climate, and the aforementioned historical connectivity will galvanise a global, pan-humanistic identity, which will ease the transition towards the envisioned global climate Leviathan.

This will slowly weaken the legitimacy of the nation states, but their ultimate loss of legitimacy will be given by the anachronism of sovereignty based on land borders. When the biggest companies are multi-national and have business models which are based on serving users and customers around the world, using servers spread around the world to reduce latency and with workers working from their homes on five continents to attract the best talent (and reduce carbon by stopping commutes), the sheer mis-match between the possibility of the company and that of the state they supposedly belong to is staggering.

I see the role of the nation-state in the future as an intermediary between the global government and the local governments (in the spirit of multilevel governance (Bulkeley and Betsill, 2003)); they will be in charge of mid-size infrastructure programmes – rails, airports, massive solar panel and wind farms. They will also continue to house and finance mission-driven innovation institutions, providing the new technologies necessary for greening the economy. But further into the future, perhaps by the time for the sixth technological revolution, I believe they will become as anachronistic as the empires of the pre-WW1 era seem to us now.

Possible Critiques and Alternatives

Global Climate Governance has become a thriving academic field and a hot topic of discussion during the past few years, as the need for action has become scientific consensus and popular demand. It is beyond the purview of this essay to go through all proposed solutions, but I will present certain arguments that I have found compelling against my proposed solution and will perform a systems analysis to uncover weak points in my proposed solution.

“A Polycentric Approach For Coping With Climate Change", (Ostrom, 2009) argues that the need for a central world government to coordinate climate action is only predicated by the conventional collective action theory (based on rational choice theory) which she claims to have found no empirical support for. A telling quote from the paper is the following: “Many of the policy analyses recommending “solutions” at an international level to be implemented by national governments are based on a fear that unless global solutions are made for global problems, these problems will continue unabated.” (ibid). Whilst in the meantime the Paris Climate Agreement has been signed and ratified by most countries, it’s non-legally binding nature has made it a failure, as total emissions have continued to rise.

In “The green state: rethinking democracy and sovereignty”, (Eckersley, 2004) argues that even though current nation-states have been a contributing factor to climate degradation, the solution to our current crisis is not to abandon the nation state, but to move beyond the liberal democracy model to something termed “ecological democracy”, or the green state, which should provide representation for all beings potentially affected by climate devastation. The author’s solution is to emphasize multilateral treaties rather than dissolving nation states, given the powerful grip national feeling still has. I find her arguments fascinating, and the discussion of enfranchising all of nature and future generations as compelling. However, I believe it easier to imagine any polity being more open to extending itself to enclose all of humanity before accepting the need to represent other animals.

Using Meadow’s “Leverage Points: Places to Intervene in a System” (1997), and approaching the problem from a systems analysis perspective, we can see that there are plenty of ways in which a global government could fail. We can imagine that even in this highly connected world, gathering, aggregating and reporting information to the central government would be very slow (thus affecting both point 9 and 6). This might already imperil good governance, which is critical to obtain legitimacy as an emerging power structure. Further up the list of leverage points, if “The power to add, change, evolve, or self-organize system structure” is not taken into account properly – that is, if the new government becomes too rigidor if cities and regions do not gain those extra powers that are needed to evolve and iterate on policy design, the whole experiment might fail. Further up, the leverage point of “The mindset or paradigm out of which the system arises” is one which deserves more exploration. I have insisted that the new government will arise as a spill-over from imposing a global tax on fossil fuels, followed by other taxes – I am following here in a market-fixing tradition, applying a Pigouvian tax to shape behaviour (“Pigouvian taxes,” n.d.). Perhaps a different, market-shaping approach (Kattel et al., 2018) to bring in a world government and bring forth the golden age is more suitable. Perhaps we can ensure a paradigm shift happens in people’s minds (the first and most important leverage point) without resorting to the creation of a world government after all. Perhaps the ecological global consciousness and identity that I’ve mentioned above will emerge strong enough before the enactment of the treaties that would bring about the climate Leviathan.

Conclusion

I have shown that the threats the world is facing at this inflexion point between the installation period and the deployment period of the fifth technological revolution are impossible to solve by any one nation state, or even a limited group of them. The nature of today’s economy is so globalised, so interconnected, and the problem of climate change so pernicious that these global public bads require global, semi-coordinated action. A world government would not have been something I would have advocated five years ago – or three years ago, for that matter. But time is of the essence when it comes to the climate, upon which everything else depends. The evolution of institutions is path dependent (Pierson, 2004). “Europe will be forged in crises, and will be the sum of the solutions adopted for those crises.”, said Jean Monet, one of the founding fathers of the European Union, the most ambitious supranational organisation at the time of writing. So too, the climate Leviathan is the result of the biggest crisis the world has dealt with. It is the missteps and the inaction of current national governments – not just on climate, but rampant inequality, extreme poverty and sluggish investment in the necessities for “the good life” that have led to such a heavy-handed proposal. This approach must come with local flexibility, to allow for experimentation, trust building within communities and a more targeted approach to local problems.

Footnotes

1. Leakage is treated to some length in (Wiener, 2007)
2. It is, however, relevant to notice that the few carbon taxes that exist today are far below the conservative estimate of the IMF – Canada’s tax started off at 20$/tonne in 2019 and will be capped at 50$/tonne in 2022 (Nuccitelli, 2018). The government’s own estimates show that this would lead to a reduction of 80-90 MT of CO2, whereas to reach its targets set by the Paris Climate Accord needs to reduce emissions by approximately 220 MT by 2030 (Canada’s 2017 Nationally Determined Contribution Submission to the United Nations Framework Convention on Climate Change, n.d.)
3. The “Gilets Jaunes” movement in France had a nationalist and antisemitic element to it, even though it was not central (Williamson, 2019).

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