July 20, 2024, Saturday
Nepal 1:37:26 pm

Environment and climate taxes in Nepal, with unanswered questions

The Nepal Weekly
June 18, 2024

Nepal, a mountainous country, is one of the least contributors to the emissions of greenhouse gases (GHGs). With aspirations of development and improving the country’s economy, its development agenda is constrained given that it is one of the most vulnerable countries to the adverse impacts of climate change.

The country’s mountainous and challenging topography and socio-economic conditions make it a highly vulnerable country to climate change. The country offers energy generation in immense amount from various natural resources which are known as renewable energy (RE) resources. Renewable Energy Technologies (RETs) to develop means it replaces use of fossil fuels which is a cause to spend huge fund to import them and also RETs also stops air pollutions, create employment opportunities and many more social and economic benefits to the country. 

Although, RE has been prioritised in the budget of the Nepal Government for the Fiscal Year 2024-25, it allocates budget for the promotion and development of RE is small in size and there is no clear action plan also. Moreover, in the next year’s budget, the government says it will commence gradual action to replace fossil energy with clean and renewable energy in order to achieve the goal of zero carbon emissions by 2045, arrangement will be made to connect 100 megawatts of solar electricity generated by the private sector to diversify energy production, and research and development to promote green hydrogen as well.

Moreover, the budget of the fiscal year 2024-25 has introduced the ‘green tax’ on petroleum products and coal. This has taken an exclusive place in the intellectuals’ circle. The bill stipulates that a green tax of Re 1.00 per litre will be imposed on petrol and diesel. This tax has been proposed with the objective of curbing the consumption of fossil fuels. 

In a similar vein, a green tax of 0.5% will be applied to furnace oil and base oil, and a 1% tax will be levied on lubricant oil. Petroleum oil and oil derived from bituminous minerals, constituting 70% or more of petroleum oil, will also be subject to a 1% tax.

Climate experts opine that the renewable energy sector should get benefit from the green tax as all simply understand that the heading of the tax or fund should be invested on similar activities. They also stress that ‘Pollution Control Fund’, the tax collected on petroleum products has not been spent so far for the benefit of the heading of the tax. The ‘Pollution Control Fund’ was brought into effect since 2066-67 BS. The fund collected under this title has been swelled to a size of nearly 30 billion rupees by this time.

Moreover, the Bagmati Provincial Government has been collecting yearly vehicle renewal tax where extra tax is collected on old vehicles against their contribution of air pollution. The real size of the collected fund is so far not known and the fund has not been utilised for controlling the air pollution or similar or relevant purposes.  

Thus, it is highly possible that the newly introduced ‘green tax’ will also produce similar results that ‘Pollution Control Fund’ and the ‘extra tax on old vehicles’.

A segment of experts say that Nepal should be well able to bring in supports as grants from international funds created to support climate actions. So as Nepal is one of the countries hit by climate change effects and the ways have been created for claiming ‘loss and damage’ funds as well.

Moreover, other segment of experts emphasises on utilising local resources also along with the external supports. Such big shots might be happy with the environment or climate taxes being collected and even introducing green tax that the commoners have to bear on their heads ultimately.  

Therefore, the experts and campaigners should talk loud and clear on the appropriate utilisation of the tax collected in environment or climate or air pollution aspects as per the given headings. That can be big relief to the immediate climate actions to take in the country. That means financial supports for the renewable energy technologies should priorities and the experts and professionals should get engaged in climate actions without delay.

Notably, fossil fuels are identified as the contributors of climate change while renewable energy technologies have been recognised as the effective tools to reduce consumption of fossils fuels. A such the financial resources collected as taxes should be wisely spent in RETs for agriculture, transportation, industries and residential consumptions.

The funds should be visibly invested on Government led programmes and extending supports to private sector to operationalise green entrepreneurship. So as industries could get relief in using renewable energy devices for the energy to their needs with at least support on purchasing RETs and relief in bank interest rates. The fund should also well consider on promoting electric vehicles for public transportation. The support should be in the form of subsidy on purchase of ebuses of different sizes and also support sharing bank interest rates. Supporting with computerised passenger services in information and fare collection may be a further relieving to the transport service providers.

Why not the Government initiate irrigation facilities supported by RETs with users’ involvement. This is raised here that users in a number of situations cannot be supportive in Government designed projects due to various reasons including misunderstanding among the Government system, users and the installers – all three at a time or two of them – in the strategic points. 

Similarly, support to last mile electrification to the people ‘next to impossible to be accessed by the national electricity grid. They could get better ‘large size Solar PV Home System’ with energy storage systems capable to support cooking and all household energy needs.