The Helsinki Principle 3 (HP3) workstream hosted a discussion with Tatiana Falcão around her proposal for a Multilateral Carbon Tax Treaty (MCTT), which is open to input from countries and other interested parties. This legally binding environmental agreement uses a carbon tax to assist countries in achieving their mitigation objectives as outlined in their Nationally Determined Contributions, while contributing towards resource mobilization at the national level.

The MCTT establishes an obligation on contracting states to tax carbon contained in fossil fuel ore or one of its byproducts (with a minimum tax but no ceiling), in priority at the level of extraction or, in the absence of such taxation, at the level of refining/processing or of consumption. It provides for different tax rate schedules depending on the country’s level of development, following the principle of common but differentiated responsibilities, and allows for the application of border carbon adjustment measures towards countries that are not members of the MCTT, to avoid carbon leakage. Finally, it foresees the creation of a fund for the development and dissemination of low or no carbon technologies between countries that are members of the treaty.

Participants discussed the coverage, structure, and phase-in of the proposed mechanism, as well as its interaction with existing legal frameworks and agreements such as carbon taxes and border carbon adjustment mechanisms. 

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