Carbon tax is not a new concept. It has helped force industries in certain countries to become energy efficient by adopting greener technology and fuel. But in those countries, mostly developed economies, a host of prerequisite and support mechanisms are available which make the transition somewhat easier. And even if the desired impact of reducing greenhouse gases has been underwhelming, as per studies where these taxes have been in vogue for an extended period of time, the tax presents at the moment the best way to force the change.
In a country like Pakistan, which is still struggling to fully meet its peak summer energy demands and where fuel prices remain volatile owing to a fickle currency, it remains to be seen whether people will opt to pay more for their fuel rather than adopt change — as they do when fuel prices change on the first of every month. This is particularly truer when there is an absence of a genuine alternative.
Then there is the issue of the value of the tax imposed. A rupee per litre of fuel does not amount to much, not at least for the average consumer. There are some studies which call for an ‘effective tax’ reflecting new and higher forecasts for future costs of climate change. Imposing a new tax for climate change can certainly help generate revenue to fund these projects but without forcing concerted change in habits by making alternatives available, the plan is unlikely to work.
Published in The Express Tribune, June 2nd, 2019.
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