Carbon emissions are a growing liability for the world's ecosystems. AP
Carbon emissions are a growing liability for the world's ecosystems. AP
Carbon emissions are a growing liability for the world's ecosystems. AP
Carbon emissions are a growing liability for the world's ecosystems. AP


Why your personal carbon footprint might be worth money someday


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July 09, 2021

The most important metric of our collective existence hinges on reducing carbon emissions.

Carbon emissions due to human activity continue to change the planet’s climate, resulting in melting ice caps, rising sea levels and extreme weather. The bulk of carbon output comes from burning fuels in industry, transport and energy generation. Almost anything we do or buy has some kind of carbon balance that makes its way into the Earth’s atmosphere.

Consider this: in a single year the world emitted more than 28 million tonnes of carbon dioxide, the climate change-inducing gas. Sound like a lot? Well, that was back in 1800. Fast forward to 2019 and that went up more than a thousand-fold to well over 35 billion tonnes per year.

If we are to survive this century, this course must be reversed.

In the future, I predict there will be carbon trading among people to limit individual carbon excesses. Folks with carbon-intensive lifestyles may purchase unused allocations from people with fewer emissions, thereby moving back into an acceptable carbon range. Indeed, there may come a time when we are assessed as individuals against our carbon consumption.

To an extent, we are already there: it is possible to purchase carbon offsets when buying an airplane ticket, giving peace of mind that the emissions associated with your trip are offset with some tree-planting project. Then there are a number of locations – principally in Europe – that forbid the use of high-emission vehicles (not just carbon, mostly particulate matters) in city centres. In some cities an emission fee must be paid, yet many cities are entirely off-limits to older, more polluting cars. And the list goes on.

But it’s not enough.

As much as we find this transitional period painful, it is necessary to change our habits as individuals and consumers.

Much of what we do today as individuals and nations is determined by financial wealth. As folks at Sodertorn University in Stockholm demonstrated a few years ago, a growing economy leads to increasing carbon dioxide emissions. In other words: wealth means carbon-rich.

It is already possible to purchase a 'carbon offset' when buying a plane ticket. AFP
It is already possible to purchase a 'carbon offset' when buying a plane ticket. AFP
It is necessary to change our habits as individuals and consumers

But as carbon is increasingly considered a liability, how might societies anticipate this to play out equitably?

It is not unreasonable to imagine that consumption data may one day be aggregated to calculate an individual’s carbon profile. To meet national emission targets, our individual consumption - from how we get around to the way we heat or cool our homes and the kinds of clothes and food we buy - might be monitored by algorithms that churn the data and block our credit cards as we reach our carbon allocation; or increase prices to purchase a carbon offset.

Such a solution isn’t so far-fetched, but there are major open questions: How much control might we have over how our consumption habits are measured? Could such a concept be trialled out on a voluntary basis? And how will our individual, family or community allocations be determined – and who will be in charge?

As we grapple with such a future, we need to get a number of things right to anticipate and prevent the worst fallouts.

Imagine what cybercriminals might get up to.

Hackers may dump masses of excess carbon onto our carbon accounts, and remove them only when a ransom is paid. Insurance coverage may shift to provide peace of mind in case of a dreaded carbon-cyber-hack. This would guarantee that plans we had made for a trip – saving up both money and carbon – are not derailed by a hack, and the mandatory boarding pass, health certificate and carbon balance will be safeguarded.

Data will help: optimisation, new business models and enforced limits will all play their part.

I mentioned a painful transition: at first it is imaginable that low-carbon products are costlier as the required industrial processes do not yet exist, or are just budding, to cater to mass markets. The more data there is about consumption, production and transport, the better we will be at finding solutions to fit everyone’s needs. It’s therefore also critical to ensure the algorithm-based decision-makers that are put in charge are trained to understand the diversity of countries and their people.

Yes, I am thinking of artificial intelligence. We are already beholden to algorithms that push on us all manner of hyper-individualised products and services, catering to our every whim. In future, will we take notice if algorithms nudge us to low-carbon anything in advertisement sidebars as we are inching closer to our carbon allocation?

Perhaps that’s precisely what we need: someone or something else to take a decision conveniently for us – is this not how we got into this 35bn tonne-a-year mess in the first place?

How to get there

Emirates (www.emirates.com) flies directly to Hanoi, Vietnam, with fares starting from around Dh2,725 return, while Etihad (www.etihad.com) fares cost about Dh2,213 return with a stop. Chuong is 25 kilometres south of Hanoi.
 

Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Updated: July 12, 2021, 5:17 AM