For an inclusive growth strategy in the country, direct carbon tax needs to be replaced with coal cess. Analyse (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Low-carbon, inclusive growth (LCIG), as a strategy, has been the hallmark of India’s vision on clean environment.
· This strategy is a multi-pronged one, which broadly includes the following policy instruments: regulations and standards, such as, building codes, bio-fuel standards and vehicle-efficiency standards; PAT, and renewable energy certificates) and price instruments (removal of subsidies and imposition of a carbon tax on fossil fuels).
· Among these, it is the price instrument of carbon tax that remains the most potent market-based policy tool for inducing fuel-switching towards cleaner sources of energy. Yet, it has not found favour with policymakers in India because of its supposed detrimental effects on economic growth and income distribution.
· Although India does not have an explicit carbon tax till date, it has an implicit or de facto carbon tax in the form of a coal cess since 2010. The reason for preferring a coal cess over a direct carbon tax is not explicitly stated in the policy documents of Government of India (GoI).
· It is not likely that the implicit carbon tax through cesses and excise duties on fossil fuels will produce better results in terms of reduction in carbon emissions and changes in GDP than an explicit carbon tax.
· The greater efficacy of explicit carbon tax vis-à-vis implicit carbon taxes has been shown to hold by many researchers on the subject. The real reason for the adoption of an indirect carbon tax in the form of cesses and excise duties seems to be the ease in their collection.
· Turning to options on usage of revenues generated through carbon taxation, it may be noted that, theoretically, the range here is rather wide. Carbon-tax action, in our view, must focus on distributing revenues uniformly to all household groups across-the-board or preferentially to the low income/consumption-expenditure household groups to compensate for the burden borne by them due to the imposition of the carbon tax in the first place, investing additionally in various sectors of the economy for capacity expansion, investing exclusively in clean (renewable) energy sectors, and investing in R&D for enhancing energy efficiency.
