Carbon tax may yield Tk 4,300cr a year: PRI
Carbon tax would facilitate reduction in emission of environment-polluting greenhouse gas and allow the state to earn revenue, said the Policy Research Institute (PRI) of Bangladesh yesterday.
The research organisation said levying 10 percent carbon tax on the current prices of octane, petrol and diesel would enable the government to earn Tk 4,300 crore in revenue in the first year alone.
The receipts will rise to Tk 4,800 crore in the first year if the tax is slapped on fuel oil and kerosene.
At the same time, 11 lakh tonnes of carbon dioxide (CO2) emission will be reduced.
And the amount of tax receipts will increase to Tk 15,283 crore by 2031 and Tk 24,424 crore by 2041.
Some 67.92 million tonnes of CO2 emission could be reduced by then through the tax.
The prices of goods and services that use gasoline and diesel intensively will rise and output and employment will fall for imposition of the tax.
But the revenue from the carbon tax can be used for investment in clean fuel, clean technology and infrastructure projects and in the process offset the output loss, said Sadiq Ahmed, vice-chairman of the PRI, at a discussion on carbon tax in Bangladesh at its office in Dhaka.
The PRI, the Adam Smith International and the Economic Dialogue on Green Growth jointly organised the event.
The impact of price increase on low-income people will be less, Ahmed said while presenting a paper on carbon tax for Bangladesh, authored by him and PRI Director Bazlul Haque Khondker.
It would be higher on high-income people, he said, adding that the increase in the cost of living for the poor could be offset through increased investment in health, education and social protection.
“We primarily suggest withdrawal of subsidy on fuel to discourage its consumption to reduce emission. Then, we recommend levying excise tax on top of the prices,” Ahmed said.
The PRI has come up with the recommendation at a time when CO2 emission is growing 9 percent yearly owing to rapid urbanisation and industrialisation, which increases the use of electricity and transport.
From a global perspective, Bangladesh's contribution to greenhouse gas is 0.2 percent.
However, the country's increasing growth rate will push up the demand for power and transport, and this will lead to a spiral in CO2 emission to upwards of 10 percent.
Power, industry and transport together contribute 76 percent of the CO2 emission in Bangladesh. Power generation is the lead polluter at 44 percent, followed by industries at 18 percent and transport at 14 percent, according to the PRI.
“Fossil fuel is the culprit. That explains why Bangladesh has to go big on renewable energy,” said Zaidi Sattar, chairman of the PRI.
“Business as usual is no longer an option. We have to act, and act now to leave the future generation with a land that is green,” he added.
The PRI said globally the share of fossil fuel in power generation is declining while the share of renewable energy is increasing.
In Bangladesh, the share of renewables has fallen to 1.6 percent in 2017 from 9.8 percent in 1990, according to Ahmed.
“Contrary to global trend, much of the power production in Bangladesh is shifted to carbon-polluting fossil fuel.”
The government has set a target to generate 10 percent of electricity from renewable sources by 2020, but at the same time it subsidises fossil fuel, he said.
In countries that have moved ahead successfully with renewable energy, the use of fossil fuel has been taxed there considerably to discourage its use, Ahmed said, adding that a number of countries have slapped carbon tax to reduce consumption.
The government should have a clear policy on energy, said M Ismail Hossain, chairman of the department of economics of North South University.
“Carbon tax is a well-established practice to discourage something that is socially undesirable,” said Ahsan H Mansur, executive director of the PRI.
The revenue from the carbon tax could be used for road development to facilitate faster transport. It will reduce cost, time and emission, he said. Mashiur Rahman, economic affairs adviser to the Prime Minister, echoed the same.
This is high time for levying such tax, said Selim Raihan, executive director of the South Asia Network on Economic Modelling. “But, we should also note that Bangladesh is also a victim of actions taken by other countries.”
