Everything else.. Sri Lanka’s “Green” Carbon Tax: Who Does It Really Benefit?

Sri Lanka’s “Green” Carbon Tax: Who Does It Really Benefit?

2019 Mar 21

The Government has introduced a revised carbon tax through the 2019 budget to generate about $14 million a year in revenue. Older and hybrid vehicles are to be heavily taxed, while electric cars are exempted. However, the tax is being charged not on a car’s emission levels, but rather on its model year. So how effective does this make the ‘green tax’?

The announcement has left many in a quandary. So let’s get down to the nitty-gritty of it – from ‘what is carbon tax’ to its advantages and why enforcing it might not necessarily make sense in this context.

What is a carbon tax?
The combustion of fossil fuels such as coal, oil and gas has had devastating effects on our environment and are primarily the reasons we’re facing the crisis of global warming and climate change. The carbon dioxide released from burning these fuels rises into the atmosphere and usually remains there for at least a century, trapping the heat attempting to leave the Earth’s atmosphere. As of late, the consequences of this have been inescapable (you may have seen the many headlines of natural disasters hitting countries across the world, ranging from floods to extreme heat waves and wildfires). Usually, the economic cost of this is covered by homeowners, farmers, the government etc.

But what of the actual carbon users? Energy companies, utilizers and general supporters of carbon based living that produce these greenhouse gases hardly feel the financial effects.

Thus, the concept of Pigovian taxes come into play. A carbon tax is a type of Pigovian tax, essentially meaning that this is a tax placed on any market which is generating negative external effects that aren’t covered by market costs. The carbon tax on fossil fuels used in vehicles is a way of getting consumers to cover the climate damage they’re causing. If high enough, it can also act as an incentive for companies and individuals to switch over to greener forms of energy and reduce carbon dioxide emissions overall. The revenue from this is often used towards environmental agencies or to stabilize economic growth.

The World Bank reports that there are up to 40 countries and 20 municipalities already using either carbon taxes or the equally efficient alternative, carbon emission trading. This has already covered 13% of annual global greenhouse gas emissions but it is clearly not enough. The world has only over a decade left to get this situation under control and slash global emission by 45%, so global warming can be limited to 2℃ (as opposed to the 1℃ we are experiencing now). However, researchers are urging countries to aim for 1.5° instead as that .5 difference can lead to drastic environmental consequences.

You may find yourself thinking that these are small numbers. How could they possibly affect the state of this planet to such an extent?

We’ve seen the decline in the Artic sea ice and the sea level rise, we’ve heard of the extreme weather conditions all across the globe. A rise to 2° C means that harvests will decrease more than twofold, fisheries will be in a state of double the decline, at least TEN MILLION extra people will be at risk of coastal flooding with sea levels rising a mere two inches is stating just a few of the consequences.

So a carbon tax acts as a much needed incentive to make the switch – that much is undoubted.

However, the context in which this tax is now being administered in Sri Lanka appears to be a tad bit counterproductive to say the least.

Sri Lanka’s carbon tax

Speaking with Pulse on the matter is Environmentalist and Executive Director, Centre for Environmental Justice, Hemantha Withanage. “The carbon tax charge in many countries is based on the amount of carbon available in the fuel used. That is mostly because some vehicles emit more carbon when compared to the others. The way that carbon tax has been introduced now – for example, taxes have been imposed on public buses which can carry up to 60 people and use up the same gasoline as a vehicle carrying just 4 people. How can we be charging the lesser fortunate people, those who more often use the bus, motorbikes etc.? These people are the ones suffering because of climate change. In cases of flooding or drought it is these people that are mostly affected and now they have to pay carbon tax too.

With not taxing the electric vehicles, again the problem we have to consider is – where is this electricity coming from? It comes from burning coal, which is much more destructive. So while the vehicle might be run on electric charge, it is generated from worse fuels. If solar energy is used to run the electric vehicles, that’s fine but here we’re using coal so I don’t think its right for the government to not administer taxes to electric vehicles.

In principle, I agree with the carbon tax but it should be charged from the people who are responsible- the high carbon emitting individuals – and also not the lesser fortunate, who are already suffering the most.

Ideally, the carbon tax should take into consideration running time rather than the engine capacity and age of the car to allow for a more fair judgment of keeping the right people accountable.
However, the increased new tax imposed by the government is based on the engine capacity with the rates differing with age and fuel type. Older vehicles (also more often driven by poorer people) will be taxed and we are yet unsure as to how often these vehicles are used. They could be taken out just on grocery runs or on the more extreme side used in the daily commute to work.

There is also the case of exempting electric vehicles from this tax when the electricity itself is generated unsustainably. When you take all these factors into consideration, the tax seems to be just another avenue to make more money since these other issues aren’t being addressed.

What can be done instead?

While needing to address these issues, there are also other solutions the government could be utilizing in conjunction with the carbon tax (provided administered correctly), which include subsidizing sustainable energy forms while ending government subsidies to fossil fuel companies. There is also the rather favourable method of upgrading public transportation so that less people will drive cars (although in this instance, public transport is being taxed too) and the implementation of carbon emission trading.

Alongside the issues outlined, there are also plenty of destructive adaptation projects going on across the country that are taking part in deforestation. Trees are carbon sinks that absorb carbon from the atmosphere so all of these deforested areas are now (or will soon be) carbon saturated. So the question that should also be asked here is – how can the people be asked to pay carbon tax when blatant projects such as these are underway?

Essentially there needs to be a public discussion on the issue first, where all these matters are outlined and discussed, for the country to consider how much it is really doing to combat climate change.


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