Carbon Tax

Carbon Tax Latest News

Recently, India, along with 62 other countries, voted in favour of the first global carbon tax on the shipping industry, adopted by the International Maritime Organisation (IMO) in London.

About Carbon Tax

• A Carbon Tax is an environmental tax levied on the carbon content of fossil fuels such as coal, oil, and natural gas.
• The objective is to reduce greenhouse gas emissions by creating a financial disincentive for pollution and encouraging clean energy alternatives.
• It is calculated based on the amount of CO₂ or other GHGs emitted and promotes a market-based climate solution.

Types of Carbon Tax

• Emissions tax: Tax on total GHG emissions, based on the carbon content of fuels used.
• Energy tax: Levied on fossil fuel consumption, calculated from carbon or energy usage.
• Cap-and-Trade System: Sets a cap on emissions; permits traded in a carbon market to incentivise reduction.
• Border tax adjustment: Applies carbon tax on imported goods based on emissions during production to prevent carbon leakage.

Carbon Tax in India

• India currently does not have a nationwide carbon tax, but there have been proposals to introduce one.
• In 2015, India proposed a carbon tax of INR 50 per metric ton on coal production/import, but it remains unimplemented.
• Some states, like Tamil Nadu, have introduced state-level carbon levies, particularly on coal used in electricity generation.
• India promotes clean energy and emission reductions through initiatives like the following:
  • National Clean Energy Fund
  • National Solar Mission
  • Energy Conservation Building Code (ECBC)

About the International Maritime Organisation (IMO)

• The IMO is a United Nations specialised agency responsible for the safety, security, and environmental performance of international shipping.
• It contributes to SDG 14: Conserve and sustainably use oceans, seas, and marine resources.
• While the IMO sets global maritime rules, their enforcement depends on member states converting them into national laws.
• The IMO also deals with legal matters like liability, compensation, and maritime traffic facilitation.

IMO – Quick Facts

• Established: Founded in 1948 as IMCO; became a UN specialised agency in 1959; renamed IMO in 1982.
• Members: 174 Member States.
• Headquarters: London, United Kingdom.
• Main bodies: Assembly (highest body), Council (executive), Five Committees (policy-making).
• Funding: Funded by member contributions, voluntary donations, and commercial income.

Carbon Tax FAQs

Q1: What is a carbon tax?
Ans: A levy imposed on fossil fuel emissions to incentivize reduction of greenhouse gases by making polluters pay for environmental damage.

Q2: How does it work in India?
Ans: India uses an implicit carbon tax via fuel excise duties (e.g., ₹18/liter on petrol) but lacks a direct nationwide carbon tax framework.

Source: TH