07 April 2010

India Proposes a Coal Tax to Fund Clean Energy Innovation

Pranab Mukherjee, India's Minister of Finance, recently proposed in a speech outlining the government's 2010-2011 budget a tax on coal to fund clean energy technology innovation.
There are many areas of the country where pollution levels have reached alarming proportions. While we must ensure that the principle of "polluter pays" remains the basic guiding criteria for pollution management, we must also give a positive thrust to development of clean energy. I propose to establish a National Clean Energy Fund for funding research and innovative projects in clean energy technologies. . .

Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change. To build the corpus of the National Clean Energy Fund announced earlier, I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne. This cess will also apply to imported coal.
Worldwatch observes:

Call it a carbon tax or an example of the “polluter pays principle,” the funds raised by the coal tax will go toward establishing the National Clean Energy Fund (NCEF) for financing “research and innovative projects in clean technologies.” Even though the government has not spelled out these technologies, there is a general understanding that the Fund would be deployed to support renewable energy projects like the ambitious National Solar Mission or innovations to promote more-efficient use of coal.

Given that India is expected to use 600 million tons of coal in the current financial year (April 2010 – March 2011), the tax would raise about 30 billion rupees (US$660 million) for the NCEF. In addition to the coal tax, the budget significantly reduces capital costs for investors in the solar industry by providing a concessional duty of 5 percent on all machinery and technical equipment required for setting up photovoltaic and solar thermal units.

Taxiing today's energy to invest in innovation for tomorrow is a good idea. (Thanks SR)