India is progressing on its journey to a low-carbon economy. The clearest indication came in February when Finance Minister Pranab Mukherjee announced in a budget speech that a “Clean Energy Cess,” or tax, will be levied at the rate of 50 rupees (US$1.10) per ton of coal—no matter whether it is domestic or imported.
Call it a carbon tax or an example of the “polluter pays principle,” the funds raised by the coal tax will go toward establishing the National Clean Energy Fund (NCEF) for financing “research and innovative projects in clean technologies.” Even though the government has not spelled out these technologies, there is a general understanding that the Fund would be deployed to support renewable energy projects like the ambitious National Solar Mission or innovations to promote more-efficient use of coal.
Given that India is expected to use 600 million tons of coal in the current financial year (April 2010 – March 2011), the tax would raise about 30 billion rupees (US$660 million) for the NCEF. In addition to the coal tax, the budget significantly reduces capital costs for investors in the solar industry by providing a concessional duty of 5 percent on all machinery and technical equipment required for setting up photovoltaic and solar thermal units.
Are these haphazard and unconnected events? Not quite. In January, the government set up a panel of experts to provide advice on the nation’s low-carbon development. It follows from Prime Minister Manmohan Singh’s announcement at last December’s Copenhagen climate conference of voluntary and unilateral targets to reduce the emissions intensity of India’s economy.
The panel has noted that, “a number of studies on low carbon growth have been undertaken by various organizations, and several initiatives in different sectors are already underway or are being planned. However, there is a need for a coherent view of potential options to be taken, and a mutually consistent strategy to be evolved to give the overall goal of low carbon development a concrete shape.”
Headed by Kirit Parikh, former member of India’s Planning Commission, the panel is supposed to give its interim report by the end of April, with a final report by the end of September.
Damandeep Singh is Senior Advisor to the Worldwatch Institute and is based in New Delhi. Through its blogs and other postings, Worldwatch will continue to provide in-depth reporting on India’s transition to a low-carbon economy. We will also offer insights to decision-makers from our extensive work on low-carbon strategies and potential.