The Role of Fiscal Policy in Climate Change Mitigation Via Environmental Management and Sustenance in Nigeria
The Role of Fiscal Policy in Climate Change Mitigation Via Environmental Management and Sustenance in Nigeria
Author: Ayuba Yahaya Karatu
Usmanu Danfodiyo University Sokoto, November 2019
This is an essay of the writing workshop "Rising Issues in Economics — Nigeria's Perspective", published 20 January 2020.
Climate change has been described as a statistical variation that persists for an extended period, typically for a decade or longer. It includes a shift in the frequency and magnitude of sporadic weather events as well as the slow but continuous rise in global average surface temperature (IPCC, 2001), which alters the environment.
The environment includes all flora and fauna, aquatic ecosystems, energy and material resources, and the atmosphere (Hanley et al 2007). Environmental challenges increase the pressure on governments to find ways to end environmental damage while minimising harm to economic growth. Some of the tools at government’s disposal in reducing environmental damage include; regulations, information programmes, innovation policies, environmental subsidies and environmental taxes. Taxes and innovation programmes, in particular, are a key part of this toolkit (OECD, 2011).
Government is saddled with the burden of implementing policies to curb the various forms of environmental pollution that distorts the ecosystem resulting in global warming which is the root of climate change.
2. CURRENT ENVIRONMENTAL PROBLEMS ENDORSING CLIMATE CHANGE
Environmental disasters have become a common phenomenon in the world as analysts (Uwuigbe, 2009; Aderogba, 2012) have argued that the environment was only responding to the abuses heaped on it by man’s activities. These abuses include poor environmental planning policies, poor management of wastes, inadequate drains for the built-up areas and others.
Here are some key issues threatening environmental integrity, they include:
2.1 Gas Flaring
One of the issues to be discussed here is that of gas being flared in the Niger Delta, the south-south part of Nigeria and also in Kaduna, Northcentral. It is the process of burning associated gas which comes with crude oil during oil extraction (Okafor, 2011). In petroleum-producing countries where there is no sufficient investment made in infrastructure to make use of natural gas, gas flaring is used to dispose of the associated gas (Justice In Nigeria Now,2010). It is however sad to note that Nigeria as a huge gas province and is also ranked the second world gas flamer (Elvidge et al,2009).
2.2 Oil Spillage and Water Contamination
The continuous occurrence of oil spillage and the contamination of water has become a common issue in the south-south of Nigeria. Oil spillage impacts negatively on the ecosystem by damaging about 5-10% of Nigeria’s mangroves which are very sensitive and reactive to oil (Okafor, 2011).
Offshore spills which usually are greater in size pollute the coastal environments and lead to a decline in local fishing production which is the main occupation of the inhabitants and constitute 80% of protein food in the local communities (Ibaba, 2010).
2.3 Desertification and Deforestation in Nigeria
Desertification is one of the key environmental predicaments in the far North of Nigeria. It is a form of environmental degradation in a sub-humid area which occurs from different factors including climate change and human activities (Akpodiagaga and Odjugo 2010).
The pace of desertification in the Northern part of the country is quite alarming and a well-known and documented issue. It is estimated that the desert areas keep increasing at a rate of more than half a kilometre every year (Bassey, 2008).
2.4 Waste and Industrial Pollution
Waste can be seen as any substance, liquid, solid or gaseous which remains as residue or by-product as a result of the processing of substances. These waste, either solid, liquid or gaseous tend to circulate causing offensive odour in the atmosphere, it damages the aesthetic beauty of the environment, breading insects and mosquitoes, the smoke from the burning substances releases harmful toxic chemicals, ashes which have risk potentials to human health and the environment (Soyombo,2008; Akande,2008 and Ohakwe et al, 2011).
2.5 Flood and Erosion
Environmental degradation caused by erosion and flood in Nigeria occurs at an increasing pace. The 853 km coastline in Nigeria is vulnerable to coastal erosion; this pricks the heart of Nigerians as an estimated population of about 25 million live by the coastal zone and carries out commercial activities such as fishing, agriculture, oil and gas exploitation and other industrial activities around these areas (Nail, 2010). This unpleasant situation does not only raise concern over the loss of lands and farmlands and produce, sometimes; human lives and properties. Also the adverse impact of climate change and soil system changes due to global warming, hence it should be swiftly handled.
3. FISCAL POLICY AIMED AT ENVIRONMENTAL SAFEKEEPING
Fiscal Policy refers to the use of government taxation, expenditure and debt policies to influence the level of economic activities (Abdullahi, 2007). The instruments with which the government achieves these objectives include budget, taxation, public expenditure, public works, public debt.
Fiscal policy also referred to as government policy, the means through which government manage and protect the environment as it is demanded of them in Section 20 of the Constitution of the Federal Republic of Nigeria 1999 states that “the State shall protect and improve the environment and safeguard the water, air and land, forest and wildlife of Nigeria”.
3.1 Environmental Taxation
Environmental tax refers to the collection of taxes from impersonal entities or individuals which are engaged in developing, defending or utilizing environmental resources, according to the degrees of the exploitation, pollution or protection of the environmental resources (Wang, Ge, Gao & Zhao, 2005). According to the traditional Pigouvian framework, environmental taxes should equal marginal damages and be levied directly on the source of emissions (Alcalde, Corchon & Moreno, 1998).
The main theory of environmental tax is that “The polluters should pay” since the source of the pollution is where the tax is imposed.
As forwarded by Uwalomwa, Olubukunola and Francis (2015), the need for Environmental Tax include:
- Bringing ‘Externalities’ into Prices: The main economic reason for using taxes in environmental policy is to bring the costs of pollution and other costs of using the environment called externalities- into the prices of the goods and services produced by economic activity. Internalising external environmental costs is the main reason why it’s used.
- Minimising Pollution Control Costs: A regulation on pollution control usually expects all polluters to reduce their pollution irrespective of the costs of doing so. An environmental tax allows each polluter to decide whether it is cheaper to pay tax or to reduce pollution.
- Encouraging Innovation: If the prices of fossil fuel, cost of improper disposal of waste are increased through environmental taxes then this can encourage new ways of meeting needs.
- Raising Revenue: Given that producers and consumers will probably not cease the activities entirely even if taxed; the taxes and charges will raise revenues. These may be used to address environmental problems directly; or they may be used to subsidize producers or consumers to shift to more environmentally friendly activities, providing a second incentive for environmental improvement. They may also be applied to other government purposes with the objective of increasing employment and overall economic welfare.
3.2 National Adaptation Strategy and Plan of Action on Climate Change for Nigeria (NASPA-CCN)
Nigeria’s climate is already changing. To prepare for and respond effectively to the impacts of climate change, adaptation is crucial. Adaptation should be comprehensive and articulated in a way that recognizes the varying needs and vulnerabilities of all sections of society.
3.2.1 Climate-Smart Agriculture
It is critical that Nigeria begin to adopt climate-smart agriculture practices that will allow smallholders, and big producers, to adapt to climate change whilst reducing emissions. Development of a national Agricultural resilience framework which sets out a wide range of policies to promote adaptation, mitigation and improved food security include; Initiation of climate-smart input pilots, bringing drought-resistant seeds and new varieties suited to changing climate to the country, large-scale investments into irrigation schemes to manage water resources more effectively and strategic policy commitments to food security, with the incoming administration aiming to become self-sufficient in rice and wheat within three years, thus reducing household vulnerability.
3.2.2 Coordination and Climate Finance in Nigeria
The cost of responding to climate change in Nigeria is enormous. The World Bank estimates that measures to adapt to climate change already built into the climate system could be $0.7bn to $1.2bn per year over the next 40 years (summing to almost $50 bn). For example, in the case of gas emission, the cost will be much higher again without a substantial scale-up of global efforts to reduce emissions. Furthermore, many of the mitigation options suitable for the country, especially in the oil and gas, power and transport sectors will require significant finance.
3.2.3 Reduction of Gas-flaring in Nigeria
Nigeria is among the top 10 globally in terms of the wealth of oil and gas resources, and the products derived from this sector comprise around 90% of exports. However, this sector is one of the main sources of greenhouse gas emissions in Nigeria producing around 90 MtCO2 per annum. This is particularly wasteful given that this gas resource if recovered, could on its own address Nigeria’s need for increased power generation, and generate billions of dollars of income.
3.2.4 Green and Resilient Cities
With cities accounting for about 75% of greenhouse gas emissions globally, and 53% highly vulnerable to serious and near-term climate change effects, Nigeria’s cities will be a vital hub for mitigation and adaptation initiatives because the country is yet to build major infrastructures in its urban areas, it has the opportunity to leapfrog developed nations by adopting clean technologies and economic strategies early.
4.0 VIABLE KEYS FOR ENVIRONMENTAL SUSTAINABILITY
Environmental taxes can be extremely effective when they are properly designed, levied close to the environmentally damaging pollutant or activity and are also set at an adequate rate (OECD, 2011).
Nigeria cities should adopt Renewable Energy (RE) as the major source of energy and being a developing country, the government should shift her focus from burning fossil fuel which pollutes the environment and invest more in RE through policies that make the use of fossil fuel exorbitant and providing grants for investors in RE. This will have a positive effect on both the environment and the economy.
As one of the way forward, the Federal Inland Revenue Service (FIRS) should embark on massive public enlightenment programme in order to educate and sensitize the populace about environmental taxation (Uwalomwa, Olubukunola & Francis 2015).
Furthermore, they acknowledged that a proper public enlightenment scheme is necessary to inform and sensitize the populace on proper waste disposal. It is important to note that the disposal method of the popularly patronised cart pushers, in the long run, can amplify flood.
Uwalomwa et al (2015) proposed that a change in the packaging system in Nigeria from nylon to biodegradable bags is inevitable.
Global warming influence on environmental posterity is alarming but any condition that had come with it can be innovatively reformed through the adequate implementation of Climate Change Adaptation Policy in ways most efficient to reinstate the environment and prevent subsequent occurrence.
According to a report given at the Society for Environmental Toxicology and Pollution Mitigation (SETPOM) International Conference and Fellows Award Conferment in Lagos 2019, Ogundipe, Otitoloju, Lawal, and Doherty were all in congruent views that adaptation measures must be planned in advance or put in place spontaneously in response to local pressure.
Adaptation measures which need to be put in place are large scale infrastructural changes like building defences to protect against sea-level rise or flood and raising the levels of seawalls as well as behavioural shifts such as using less water, adopting renewal energy, good waste disposal practice. Other measures are the use of scarce water resources more efficiently, developing drought-tolerant crops, farmers planting different crops and choosing tree species and forestry practices less vulnerable to storms. Also stressed that climate change adaptation will help individuals, communities, organisations and natural systems to deal with those consequences of climate change that cannot be avoided (Nwannekanma, 2019).
The adverse effect of climate change is overwhelming, not just in Nigeria but globally. Global warming is the result of hostile human activities that have impacted the environment negatively. This is the principal variable the government should tackle through practical innovations such as the acceptable implementation of Adaptation Policies and also through the adequate implementation of environmental tax. These will enhance pro-environmental behaviour which is fit for socio-political and economic activities for sustainability.
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