Air pollution is becoming one of the biggest public concerns in India.
India needs a Carbon-tax policy to curb air pollution.
What is the contribution of fossil fuels to air pollution?
About 75% of all greenhouse gas emissions are CO2 emissions produced through burning fossil fuels oil, coal and natural gas to generate energy.
Since the early 2000s, carbon emissions have increased because of high growth in the Indian economy.
In 2014, India’s total carbon emissions were more than three times the levels in 1990, as per World Bank data.
This is because of India’s heavy dependence on fossil fuels and a dramatically low level of energy efficiency.
What is a carbon tax?
A carbon tax is a way to make users of carbon fuels pay for the climate damage caused by releasing carbon dioxide into the atmosphere.
The amount of CO2 released in burning any fossil fuel is strictly proportional to the fuel’s carbon content.
This makes a carbon tax simple to measure and document.
Which allows the carbon tax to be levied “upstream”on the fuel itself when it is extracted from the ground or imported.
Placing a tax on carbon gives consumers and producers a monetary incentive to reduce their carbon dioxide emissions.
How can India make use of carbon tax?
The Indian economy’s energy mix needs to be remodelled through investments in clean renewable sources of energy like solar, wind, hydro, geothermal and low-emissions bioenergy.
This energy mix overhaul requires an additional 1.5% of GDP (to the current annual level of 0.6%) annually over the next two decades.
This can be financed by the carbon tax revenue, it will be a revenue-neutral policy with no implications on the fiscal deficit.
Carbon revenue can be used for a transfer of free electricity to the population that contributes less carbon than the economy average.
Carbon taxes also delivers on providing more employment since the employment elasticity in greener forms of energy is higher than those in fossil fuel-based energy.
