Is Green Tax a necessity for carbon-negative country?

… it is to ensure the status of carbon-negative of country

Puran Gurung

Coming into effect on June 20, 2012, the government started to levy a green tax on vehicle imports in addition to sales tax (ST) and customs duty (CD).

Government decided to levy various percentage of green tax on motor vehicles and petroleum fuel to reduce vehicular emissions by reducing the import of fossil fuel-based transports and promote electric vehicles.

It is also for environmental preservation and protection.

The green tax is applied differently on the basis of engine type and engine capacity of the vehicle.

However, many people are of the opinion that the government should do away with the green tax for a carbon-negative country. “We already face various taxes and green tax in a carbon-negative country is simply a burden to the citizens,” said a source.

He added that the government should rather just promote electric vehicles because every vehicle serves different purpose, and levying a green tax on the already price escalation of vehicle cost and fuels. “Government is even taxing us on fuel, and this will definitely empty our pockets,” added the source.

The source said, if you consider India that has more vehicular emission than our country and also the forest coverage is lesser than ours, they are levying green tax of just Rs 300 that too on just old vehicles, and to dissuade people from using polluting vehicles.

Meanwhile, Finance Minister says that green tax is levied irrespective of whether the country is carbon neutral or carbon-negative as prevention is better for us. “Through this tax, we want to maintain the carbon neutral or carbon-negative status of the country,” added Lyonpo.

“We want to ensure that we maintain carbon-negative status,” said Lyonpo Namgay Tshering.

Lyonpo said that if people consider green tax as immaterial and if we allow imports of more fossil-fuel based vehicles, then it is a policy in disaster. “It is also for environmental protection, and green tax is like any other tax, it is government’s revenue,” Lyonpo added.

Similarly, an economist said that green tax is levied in a carbon-negative country to maintain status quo being carbon negative than emitting more by lifting the green tax.

The economist stressed that taxes are of two types called contractionary and expansionary, and that the green tax is a contractionary tool to reduce or discourage import of vehicles to ultimately reduce carbon emission.

However, the economist said that the government should have initiated impact assessment of green tax as in number of vehicles before and after imposition of green tax to find out whether did the tax serve its purpose or not.

Further, the economist added that taxes are inevitable, and one of the main sources of government revenue. “However, judicious decisions must be taken with data driven and evidence-based findings, and overall objectives and goals should be defined before levying tax and thus imposed to serve the purpose,” said the economist.

Background:

Key messages from a report, The Bhutan Electric Vehicle Initiative.

Bhutan’s economy is on the rise and is driven largely by hydropower development, tourism, and services.

Green growth is at the heart of Bhutan’s development goals, and the national strategy calls for ecologically balanced sustainable development.

Bhutan currently runs a large and growing account deficit due to increasing demand for imports, which poses a key macroeconomic management issue.

Bhutan’s fiscal position is sound with prudent management of spending, but

tax collection could be improved to increase revenue.

Improving the availability and quality of urban transport services in Bhutan is

important. To accommodate the growing urban populations and increasing levels of motor vehicle ownership, the main urban centers of Bhutan (Thimphu and Phuentsholing) will need to focus on expanding the availability and quality of urban infrastructure and services, including transport services.

The focus of 11^th Five-Year Plan is Self-Reliance and Green Socioeconomic Development.

The Royal Government of Bhutan (RGoB) recognizes that Bhutan is facing both the challenges and opportunities of the 21^st century in adapting social, environ- mental, and economic integration to a more globalized world.

The 11th Five-Year Plan (FYP) for 2013–2018 focused mainly on self- reliance and inclusive green socioeconomic development. Even with the robust growth rates of the economy over the past decade, Bhutan’s dependence on imports, its narrow tax base, large dependence on hydropower revenues, and low levels of productive employment make self-reliance a major development target for the country.

In addition to self-reliance, as a crosscutting principle the FYP also calls for the adoption of rigorous environmental standards and mainstreaming of green or carbon-neutral strategies in all activities, specifying the promotion of electric vehicles as a strategy to address environmental issues and reduce dependency on fossil fuel.

An excerpt from The Bhutan Electric Vehicle Initiative, Global EV initiatives and the context of the Bhutan EV initiative:

EV technology has only recently been introduced to the global market, and the EV initiative of the RGoB will be one of the first in the emerging markets. Internationally, countries have initiated EV policies with a mix of objectives, such as to enhance energy security, reduce GHG emissions and local air pollution, and promote domestic car industries. In fact, EV initiatives in the five countries with the highest EV stock by the end of 2014 (China, Japan, the Netherlands, Norway, and the United States) are driven by clear strategic policy objectives or national mandates. Among this top five, three countries—China, Japan, and the United States—are global leaders in auto manufacturing with clear strategic reasons to invest in research and development (R&D) to maintain their industry’s competi- tive advantage. In comparison, European countries are driven more by their climate and environment policies with committed targets for GHG emission reduction. The Norwegian government, for example, has adopted a target to reduce average carbon dioxide (CO2) emissions for new passenger cars to 85 g/km by 2020 in order to meet a target of reducing GHG emissions in the Norwegian transport sector by 2.5–4 million tons. EV initiatives are also used by local governments such as those in Beijing, California, and London to address local air pollution. California’s Zero Emission Vehicle Program chiefly aims to address local air pollution; the regulation requires major car manufacturers to increase the number of electric battery and fuel cell electric vehicles in the state.

In the case of Bhutan, the RGoB in its recent FYP announced its vision for Thimphu to become an EV city. The FYP explicitly stated that the “promotion of electric vehicles will be pursued to address environmental issues and reduce dependency on fossil fuel” (Gross National Happiness Commission, Royal Government of Bhutan 2013). As such, the policy environment for EVs in Bhutan is unique compared to that of other countries, as the EV program in Bhutan is pursued in the broader context of the country’s external vulnerabilities (such as a fuel dependency risk), as well as to fulfil its environmentally sustain- able development vision.