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Carbon Tax in India

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February 08, 2017

What is carbon tax?

  • A carbon tax is a fee for making users of fossil fuels pay for climate damage their fuel use imposes by releasing carbon dioxide into the atmosphere, and for motivating switches to clean energy
  • India introduced a nationwide carbon tax in 2010, which is currently Rs.400/tonne

Where does India stand on climate change?

  • The National Action Plan on Climate Change was launched in 2008.
  • It has eight vertical missions on water, energy efficiency, solar, sustainable habitat, agriculture, forestry, Himalayan ecology and strategic knowledge on climate change. India’s ambition for renewable energy production is well known.
  • Under Prime Minister Narendra Modi, the timelines to achieve renewable capacity has been aggressively advanced, and the scale vastly enlarged.
  • So India’s commitment for action on greening, to mitigate climate change and to act against global warming is not in doubt.
  • Indeed by some reckoning, India’s initiatives and leadership for environmental activism dates back to the 1972 UN conference in Stockholm.

Is India overdoing the greening of energy?

  • In the aggregate terms, India is now in the third highest emitter of carbon dioxide. (not in per capita terms)
  • Firstly, the coal cess that was introduced a few years ago is now at Rs400 per tonne, almost one-fifth the cost of mining coal.
  • This is something like a 20% carbon tax.
  • India has the world’s third largest endowment of coal, which can help double our per capita electricity usage at a relatively low cost.
  • Due to the coal bidding scams and the coal cess, India now might have become the most expensive place to produce coal-fired electricity.
  • It is greatly hurting our competitiveness, and will directly undermine industry as it faces an onslaught of imports from China and other trade partners.
  • Also, we already have a system of renewable purchase obligations (RPOs) on all electricity distribution companies and also captive producers.
  • There is often not enough solar or wind energy available for purchase, within state boundaries.
  • Across states, wheeling of solar is not yet possible and the RPOs burden goes up steadily every year. This increases the cost of energy.

What is the solution?

  • It is not as if India should stay away from global joint efforts at curbing greenhouse gases.
  • Green energy, apart from mitigating climate change has great potential for job creation.
  • India is uniquely blessed with sunshine almost all the time, and hence solar can contribute hugely to our energy needs.
  • Electric vehicles are a nascent industry, which eventually can change the economics of oil and geopolitics.
  • But it is not necessary for India, whose per capita consumption of electricity is barely half the world average, to embrace the highest rate of carbon taxes in the world.
  • Success in mitigating climate change requires global and absolute cooperation.
  • India needs to cautiously calibrate its “greening pace” and de facto carbon taxation.

 

Source: Live Mint

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