Is carbon tax justifiable?

There is a promotion that is running on some local radio stations on the intent by government, through the National Road Funds Administration (NRFA), to introduce toll-gates on selected roads in the country.

Despite its relevance, the promotion on the introduction of the toll-gates, which are barricades that are erected on the roads for purposes of tax collection from road users, has not attracted hype.

These taxes are paid in the form of toll-fees. In countries where there are toll-gates, the funds are specifically used for road maintenance.

However, while the news of introduction of toll-gates would be exciting in Malawi, the big question is whether the introduction of the tax barriers is justifiable, considering that the country already has a fuel levy—the tax collected from fuel pump sales. 

Funds from fuel levies are used for different social purposes, including road rehabilitation as well as the purchase of medicine and provision of social services to the public.

And meanwhile, the Malawi Revenue Authority (MRA) has introduced carbon tax to be paid by car owners at the renewal of their vehicle’s certificate of fitness.

In principle, the fuel levy and toll gates are good developments, just as the recently introduced carbon taxes. However, the carbon tax which became effective on November 25 has stirred debate.

The observation is that the carbon taxes are some form of double taxation, considering that the country already has a fuel levy which could as well be used for purposes of decarbonisation projects.

Another observation has been that while the introduction of carbon tax shows the government’s commitment to addressing the impacts of climate change, the same could be considered as a contradicting trajectory on Malawi’s commitment to responding to the effects of climate change.

This is a case when we consider the fact that while government has introduced the carbon tax in a bid to mitigate to the extreme effects of climate change, the same government is promoting projects that are contrary to the goals of decarbonisation.

Consider the proposed Kam’mwamba coal powered electricity station for instance. When fully operational, the coal-fired power plant is expected to produce around 300 megawatts (MW) which will increase household clean energy use and increase national environmental costs.

Different studies indicate that coal-fired power plants would emit around less carbon into the atmosphere and the magnitude of a 300 MW fuel powered plant would be contrary to the country’s trajectory of providing clean energy to the masses.

Additionally, the Aggreko operated diesel-powered generators, while providing an immediate solution to the country’s electricity woes, goes contrary to the country’s commitment to reducing carbon emissions.

Considering the above projects, one would wonder wherever the introduction of the carbon taxes is justified as they portray a contradicting route to Malawi’s commitment to decarbonisation.

While funds realised from carbon levies is used for different social programmes, one of the major worries that many in opposition to the carbon taxes have highlighted over the funds is on how the funds from the carbon taxes will be managed.

While these taxes are meant to meet the set targets to releasing greenhouse gases from fuel combustion and industrial process as negotiated under the historic 2015 Paris Agreement, these funds will end up being abused as there is no specific body set in place to manage the carbon funds.

As it now stands, these funds will end up in Account Number One which will be prone to political interference and abuse.

Malawi’s trajectory in as far as decarbonisation is concerned will not change by double taxation on fossil fuel users but rather by political will and commitment by government to responding to global warming and its extreme effects.

Meanwhile, as machinery continues to emit more greenhouses into the atmosphere, and more taxes are paid in response to the greenhouse emissions, the sad reality of the taxes is that the consumer who is at the very end of the carbon chain will have to bear the brunt. Sadly, this is a cost that the consumer has to pay in the bid to creating a carbon-free society.