Selva Ozelli

Selva Ozelli Esq, CPA is a legal and finance executive with diversified experience dealing with highly complex issues in the field of international taxation and related matters within the banking, securities, Fintech, alternative and traditional investment funds (investing in equity, debt, real estate, derivatives, credit instruments, mortgage backed securities) and aerospace industries.  Her first of its kind legal analyses involving tax laws, Foreign Corrupt Practices Act (FCPA), blockchain technology have been published in journals, books and by the OECD. Her writings have been translated in to 15 languages. 

Selva is also interested in environmental issues and has published some article related to mutual relationships between taxes and environment topics. She believes financial policies and taxes can impact greatly on environmental problem and can help solving them. Here we have an interview with her to ask about her experiences and works she has done and how they can solve nature problems and make our world a better place…

  • Could you please explain your experiences related to environmental issues?

I attended elementary school in the Turkish capital of Ankara – which has served as an urban center in the fragile steppes of Turkey’s central Anatolian region since the Hattic civilization 2000–1700 BC (bronze age) for over the past 4,000 years.   During the 1970’s, Ankara’s air pollution was especially acute, where the combustion of coal heating fuels -- with the pollutants trapped by the city’s arid, hilly topography-- increased particulate density during the  winter.  

Turkey’s energy policy has heavily subsidized coal with long term plans of increasing coal-powered electricity capacity.  Energy production is the most important source of air pollution coming from human activity.  When coal is burnt its carbon is converted to carbon dioxide (CO2) and other compounds of carbon.  CO2 is a heat-trapping greenhouse gas which causes global warming, acid rain, severe hurricanes, wild fires which cause deforestation, which damages the environment and human health.  

Ankara’s smoggy pollutants which were worsened by abundant public smoking was a silent killer, indifferent to political agendas or contained by city or national borders.   The winter months -- pushing emissions higher than World Health Organization limits --were particularly difficult for me to endure as a developing child from ages five to ten.  My young lungs and eyes would burn every time I breathed -- while my face, hair, hands, clothes, even the walls inside our apartment would be rimed in ash grey soot from exposure to the coal air pollutants at the end of each day.   

Thankfully, to prevent further desertification and to reduce the CO2 emissions, the city of Ankara – which kept growing due to urbanization -- undertook major environmental initiatives while I was still a student.

Ankara established  green zones and undertook re-forestation and landscaping programs by planting  pine trees in large sections of the steppe city for their ability to photosynthesize the sun's energy to produce oxygen in air one-and-a-half times richer in CO2 starting in 1968.  I personally watched an evergreen pine tree forest grow next door to our apartment building from saplings to maturity during my lifetime.  

In 1986, Ankara implemented the Ankara Natural Gas Conversion Project where buildings fueled by coal were replaced with natural gas.  

In 2008, in a landmark move, Turkey also banned public smoking, four years after Bhutan became the first country in the world to ban smoking in public places following New York City Mayor Mike Bloomberg’s public smoking ban in 2003, since air pollution emitted by cigarettes was 10 times greater than diesel car exhaust.  Turkey’s first smoking ban in 1997 was limited to public buildings, airplanes and public buses only. 

These green zone/clean energy/public smoking ban initiatives, not only improved the air quality of Ankara, but also shaped my environmentalist views since Turkey hosts more than three thousand endemic plant species, has remarkable diversity of wildlife, and is almost entirely covered by three of the world's thirty-five biodiversity hotspots due to its unique position between three continents and three seas.

After graduating from the New York Institute of Technology in New York in 1985, with a bachelor’s of science degree in accounting and computer science and becoming a certified public accountant, in 1990 I decided to attend the University Of Colorado School Of Law in Boulder, Colorado which ranks top ten in its environmental law program in the U.S.  The public university’s Laboratory for Atmospheric and Space Physics (LASP) is the number one recipient of the National Aeronautics and Space Administration (NASA) aeronautics and aerospace awards for research on sun, climate, space weather and solar modeling.  

While I was a second year law student, the first international environmental treaty, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted and signed by 154 countries at the Earth Summit in Rio de Janeiro from 3 to 14 June 1992 which set non-binding limits on greenhouse gas emissions for individual countries.  As an offshoot of UNFCCC, 197 countries also signed the United Nations Convention to Combat Desertification (UNCCD), the only global convention to combat desertification in 1994.   

Starting my legal career as an international tax attorney, around  the same time world’s first  environmental treaties became effective, motivated to me to write and publish first of its kind legal analyses to address transnational environmental issues attributable to multinational companies as further detailed in section 3 below.

Mutual Connection Between Taxes and Environmental Problems
  • What is the relationship between the environment and taxes?  

Environmental tax is used as an economic instrument to address environmental problems by taxing activities that burden the environment (direct carbon tax), or by providing incentives to lessen environmental burden and preserve the environment activities (tax credit, subsidy).  It is used as part of a market-based climate policy which was pioneered in the U.S. that also includes cap-and-trade energy emission allowance trading programs which attempt to limit emissions by putting a cap and price on them.  

Environmental taxes are designed to internalize environmental costs and provide economic incentives for people and businesses to promote ecologically sustainable activities, to reduce CO2 emissions, to promote green growth and to fight climate change via innovation.  Some governments make use of them to integrate climate and environmental costs into prices to reduce excessive emissions, while raising revenue to fund vital government services.  

Carbon Tax:  Under a carbon tax regime, the government sets a price that emitters must pay for each ton of greenhouse gas emissions they emit so that businesses and consumers will take necessary steps, such as switching fuels or adopting new technologies, to reduce their emissions to avoid paying the tax since taxes have distortionary effects, affecting free-market decisions.  They are favored, because administratively assigning a fee to CO2 pollution is relatively simple compared to addressing climate change by setting, monitoring, and enforcing caps on greenhouse gas emissions and regulating emissions of the energy-generation sector.  The tax revenues from these taxes address the failure of free-markets to consider environmental impacts.  Four subsets of environmental taxes are distinguished: energy taxes, transport taxes, pollution taxes and resources taxes.  

According to the Organization for Economic Co-operation and Development (OECD) greater reliance on environmental taxation is needed to strengthen global efforts to tackle the principal source of both greenhouse gas emissions and air pollution.  Because outside of road transport, 81% of CO2 emissions are untaxed and tax rates are below the low-end estimate of climate costs for 97% of emissions.  Coal, characterized by high levels of harmful emissions and accounting for almost half of carbon emissions from energy use in the 42 countries, is taxed at the lowest rates or fully untaxed.  Only 40 governments out of 197 that have signed on to the first legally binding, climate change Paris Agreement have  adopted some sort of price on hydrocarbon, either through direct taxes on fossil fuels or through cap-and-trade programs.  

Carbon taxes have been implemented in twenty‐nine jurisdictions out of 197 that have signed on to UNFCCC’s Paris Agreement.  A Scandinavian wave starting in the early 1990s saw carbon taxes legislated in Denmark, Finland, Norway, and Sweden among other countries. A second wave in the mid‐2000's saw carbon taxes put in place in Switzerland, Iceland, Ireland, Japan, Mexico, Portugal and the UK.  This year Canada, Argentina, South Africa and Singapore implemented a carbon tax. These carbon tax rates range from $1- $139 per ton.  

A carbon price/tax of between $50-$100 per ton would be needed to be implemented by  signatories to deliver on Paris Agreement commitments by 2030 according to a  report titled “High-Level Commission on Carbon Prices”, written by Nobel Laureate Economist Joseph Stiglitz and Nicholas Stern.
 
Tax Credits:  Through tax credits, subsidies and other business incentives, governments can encourage companies to engage in behaviors and develop technologies that can reduce CO2 emissions.  Just as tax credits for fossil fuel energy sources has enabled growth and development, the renewable energy tax credits are incentives for development and deployment of renewable energy technologies. 

According to the IMF as well as the International Energy Agency (IEA), the elimination of fossil fuel subsidies worldwide would be one of the most effective ways of reducing greenhouse gases and battling global warming.  In 2009, G20 countries pledged to phase out “inefficient fossil fuel subsidies” by 2025.   While Paris Agreement commits its signatories to hold global warming to well below two degrees Celsius through significant greenhouse emission cuts.  

Energy subsidies of signatories might require coordination by the OECD and integrated implementation, because of regulation at the World Trade Organization in light of globalization and increased interconnectedness of energy and environmental policies via the Paris Agreement.

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