Taxing carbon emissions

Malawi is among the countries bearing devastating effects of climate change, including unpredictable weather conditions such as floods and droughts rendering millions of families poorer and food insecure.

Experts warn that the world will continue to get warmer and weather patterns more catastrophic without a decrease in greenhouse gas emissions into the atmosphere.

Assessments by the United Nations show that efforts by countries to cut carbon emissions responsible for global warming remain far below the levels required to sustain temperatures as agreed in the Paris accord.

Malawi produces nearly two million tonnes of carbon dioxide per year.

It is Africa’s second country to adopt carbon tax after the continent’s highest emitter South Africa, which produces over 500 million tonnes. The tax acts as carbon pricing mechanism to raise funds to drive climate change mitigation and adaptation actions at both national and community level.

Introduced in 2019, the levy only targets motorists contrary to UN guidelines that extends carbon tax across all activities that use fossil fuel, including burning of coal for electricity and even deforestation.

Initially, motor vehicles, now taxed based on engine capacity, paid the tax to Malawi Revenue Authority at centres designated to provide vehicles certificate of fitness.

Treasury changed the pay point in June, requiring motorists to pay K5 per litre when buying fuel at a pump.

“Treasury has reported that in 2019/2020 fiscal year, the carbon tax generated K1.3 billion and the funds were used by government. In the 2020/21 the projection of the money to be collected from carbon tax is at K3 billion,” says Ministry of Finance spokesperson Williams Banda.

While South Africa has started using the carbon levy to bankroll programmes providing clean and safer energy to the poor, Malawi is still in debating what specific climate-related action the tax will be funding.

However, before that is done, a number of burning issues need to be addressed.

“To operationalise a fund, an institution requires to adhere to the Public Finance Management Act and Treasury instructions. Discussions are at an advanced stage to operationalise the Climate Change Fund in 2020/21 fiscal year,” Banda explains.

But some climate change campaigners feel the delay is unjustifiable.

Movement for Environmental Action (MEA) is among concerned civil society groups agitating for the authorities to speed up the process.

The civil society group supports the imposition of carbon tax, but its representative Clement Masangano feels the public is not being kept in the loop on progress made so far.

Masangano says the climate change fund should put its focus on mitigating deforestation.

He argues: “Deforestation due to household cooking and use of charcoal is a huge challenge. We need to accelerate generation of hydropower.

“This will improve efficiency of electricity and to make it cheaper, there is also need to financially empower small companies that produce solar electricity so that they produce in large quantities to feed into the national grid.”

For Masangano, there is a need to intensify efforts to senstise community members to the importance of the lost green cover and provide other commercial activities to divert the their attention from illicit charcoal burning.

He urges the government to promote use of resistant and high-yielding crop varieties as another adaptation strategies deserving financial support.

“Old varieties are not withstanding the harsh weather. We need to empower more research institutions to come up with early-yielding varieties,” Masangano adds.

Tawonga Mbale, director of Environmental Affairs Department, says the Ministry of Forest and Natural Resources is discussing with Treasury on modalities of accessing the carbon tax, but says the list of priorities is already there.

She states: “There will be different windows of opportunities targeting different sectors, including non-governmental organisations and academic institutions, .

“The target will be activities that are making an environmental impact in the areas of climate change and waste management, among others. It will be good to raise money domestically which we can use to leverage more funding internationally.”

The current carbon tax system is largely focuses on energy transition from fossil fuels, including petrol and diesel as used in vehicles, but MEA is of the view that other sources of emissions—including air travel, water transport and factories that burn coal for energy—should also be compelled to pay for their contributions to global warming and air pollution.