Alternative Energy

Published on March 3rd, 2010 | by Guest Contributor

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India Will Fund Renewable Energy with Coal Tax, Leaving US in Cloud of Smoke

If you want to reduce fossil fuel use and increase renewable energy, one idea is to do an Energy Robin Hood- tax coal and use the money to fund renewable energy projects. And that’s exactly what India is planning to do– the world’s fourth largest polluter is imposing a clean energy tax of 50 rupees ($1) per metric ton of domestic and imported coal. India used 375 million tons of coal last year- meaning the tax could raise around 25 billion rupees per year (about $500 million).

Photo Credit: davipt India plans to fund renewable energy with a tax on coal.

India plans to fund renewable energy with a tax on coal.

“Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognized as a credible strategy for combating global warming and climate change.” — Indian Finance Minister Pranab Mukherjee

In addition, Mukherjee proposed tax incentives for solar, wind and geothermal investment and announced a 5% concessional import tax rate for machinery and equipment needed to set up solar power plants. And… solar equipment, wind turbine rotor blade parts, and electric vehicles will be exempt from production taxes. Geothermal heat pumps will be exempt from import duties.

Meanwhile in the United States, as the senate prepares a bipartisan agreement to drop cap and trade, the closest the Obama Administration gets to funding renewable energy is cutting oil/ gas tax breaks by $36.5 billion and coal by $2 billion- then giving nuclear $36 billion in loan guarantees for nuclear power plants and… $5 billion in loan guarantees for renewable energy.

According to the Environmental Law Institute, between 2002- 2008 the federal government provided $72 billion in subsidies for the fossil fuel industry and just $29 billion. More than half of the renewable subsidies- $16.8 billion- went to ethanol, which has a questionable as a “renewable energy.” Ethanol doesn’t cut it for the California Air Resources Board, who say that when you count the indirect emissions involved in growing and processing the corn it’s as bad or worse than petroleum. They won’t count it as a solution under California’s Global Warming Solutions Act.

Rework the numbers without ethanol and it works out to $12.2 billion for renewable fuels and $72 billion- roughly six times as much in subsidies for the fossil fuel industry.

The numbers lay out where the priorities are in the U.S. pretty clearly. Likewise, Ashutosh Pandey of Emergent Ventures in New Delhi characterizes India’s coal tax pretty plainly: “That’s a good-sized fund that will help encourage the development of cleaner energies and impose some kind of cost on users of coal.”





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