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Can India implement a carbon tax?

Can India implement a carbon tax?

Climate change

According to a Intergovernmental Panel on Climate Change (IPCC) study, the planet will most likely rise by 1.5°C or more within the next two decades. Ambitious emission reductions and committed plans for building a sustainable future will be needed to keep global warming below a certain threshold. India is one of the ten nations most impacted by extreme weather brought on by climate change, according to the Global Climate Risk Index 2021.

The main cause of climate change is carbon dioxide, and burning fossil fuels like coal is the main source of GHG emissions. 

It is crucial to reduce carbon emissions as much as possible because we are a developing nation.

Steps to combat climate change in India

In the continuous discussion about climate change and its anticipated effects on the environment and development, lowering carbon emissions is allegedly one of the top priorities of the majority of the world's nations.

  • The Indian government has ratified the Paris Agreement, which aims to achieve carbon neutrality by the year 2050
  • India’s updated Nationally Determined Contribution commits to reduce Emissions Intensity of its GDP by 45 percent by 2030, from 2005 level and achieve about 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. 
  • India has increased its forest area significantly over the past decade. It ranks third globally in average annual net gain in forest area between 2010 to 2020, adding an average 2,66,000 ha of additional forest area every year during the period, or adding approximately 0.38 per cent of the 2010 forest area every year between 2010 to 2020.
  • Elimination of Identified Single Use Plastics : The Plastic Waste Management Amendment Rules, 2021 prohibits identified single use plastic items, which have low utility and high littering potential, by 2022. The manufacture, import, stocking, distribution, sale and use of identified single-use plastic, including polystyrene and expanded polystyrene, commodities is prohibited with effect from the July 1, 2022.
  • Tax concessions and incentives such as Production Linked Incentive scheme for promotion of manufacturing and adoption of renewable energy
  • Net Zero target by 2030 by Indian Railways will lead to a reduction of emissions by 60 million tonnes annually.
  • India’s massive LED bulb campaign is reducing emissions by 40 million tonnes annually. 
  • Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) Scheme aims to provide energy and water security, de-dieselise the farm sector and generate additional income for farmers by producing solar power. The scheme aims to add 30.8 GW of solar capacity.
  • Indian Green Building Council (IGBC) Green Data Centre (DC) Rating System was released during 2016. It is a first of its kind standard for DCs. It primarily addresses energy efficiency in DCs, while introducing many other green concepts.
  • Perform, Achieve, and Trade (PAT) programme : y establishing precise energy reduction targets, the Perform, Achieve and Trade (PAT) plan seeks to lower emissions from energy-intensive industrial sectors. 
  • Renewable Purchase Obligations (RPO) - Every power distribution company is expected to get a certain percentage of the electricity they need from renewable sources. The State Electricity Regulatory Commission for each state determines and controls the RPO. Through trading at power exchanges, the RECs are market-based products that assist in achieving RPOs.
  • Renewable Energy Certificates (REC) - Energy Saving Certificates (ESCerts), each of which is equal to one metric tonne of oil, are given to industries who surpass the targets. Industries who are unable to fulfil the targets must purchase ESCerts from units that have surpassed their goals via a centralised trading system run by the Indian Energy Exchange.
  • Internal Carbon Pricing is used by the business sector in India as a strategy to encourage voluntary emission reductions so that investments can be made in greener, more energy-efficient technologies to satisfy corporate sustainability objectives. ICP is currently used by numerous large Indian private enterprises to reduce their carbon footprints, including Mahindra & Mahindra, Tata, Infosys, and Wipro.

What is a carbon tax

A carbon tax is levied on the carbon emissions required to produce goods and services. It is levied on fossil fuels.  It generally only covers CO2 emissions, but can also apply to other greenhouse gases such as methane or nitrogen oxides. It reflects the social cost of carbon and is viewed as an essential policy tool to limit carbon emissions.

According to the World Bank, as on Aug 2022, there are 68 direct carbon pricing instruments operating in 46 national jurisdictions around the world. In 2022, these initiatives would cover 11.83 GtCO2e, representing 23.11% of global GHG emissions.

Pros and Cons of Carbon Tax

India contributes roughly 7% of the world’s CO2 emissions, making it the third highest in the world after China and the US.

The carbon taxing policy is said to be regressive in nature because it mostly affects lower-income groups as opposed to middle- or higher-income families because they can afford products with an energy incentive due to their greater income. Additionally, it is untrue to say that the money raised by the carbon tax may be used for welfare and distribution programmes. Because the revenue from the carbon tax has generally been misused and implemented poorly, it is likewise erroneous to utilise it to fund distribution and welfare programmes. Because the money raised through such a strategy has typically been used and implemented poorly.

Another common argument against carbon pricing is that it will increase the costs of production and manufacturing for regional businesses, which will then be reflected in the price of the finished goods. As a result, there will be less of a demand for such products on the domestic and international markets, which will lower the competitiveness of Indian goods.

Ultimately, India urgently needs a carbon tax, but not for financial gain, but rather to reduce greenhouse gas emissions (GHG). India needs to have a well-defined policy framework for how to spend the money raised from a carbon price before it is implemented.

Last Modified : 10/12/2023

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