India Slaps Taxes on Coal, While China Uses Less of It

India is doubling its tax on coal, aiming to temper the country’s dependence on the fossil fuel.

Though Prime Minister Narendra Modi’s government is increasingly looking toward renewable and nuclear energy, the nation remains heavily reliant on coal.  Last year, the government said it hoped to double how much domestic coal the country consumes over the next five years.  That would be seriously bad news for Indians.  In some areas, pollution is already so extreme that it is taking years off millions of people’s lives.

But the new coal tax might signal an intent to push the country’s energy economy in a more sustainable direction.  Bloomberg reports:

Coal fires about 60 percent of India’s electricity generation capacity and is among the cheapest sources of power in the country.  The higher tax will lead to an increase of as much as 0.06 rupees in coal costs for every kilowatt hour of electricity, [said Kameswara Rao, who oversees energy, utilities and mining at PwC India].

“As the Paris convention approaches, these steps will show the government is serious about climate change,” said Debasish Mishra, a senior director at Deloitte Touche Tohmatsu India Pvt. in Mumbai.  “We have to take care of the environment, and at the same time use fossil fuel to make sure we have energy at a reasonable cost for our growth.  It’s not an either or situation.”

Much of India is incredibly poor; hundreds of millions of people lack electricity, and the Modi government has maintained that, in its quest to develop rural areas, it won’t turn its back on any source of energy.  But the new coal tax, along with new taxes on petroleum, show that the government is trying to make the country’s fossil fuel–intensive economy slightly cleaner — without going so far as reining it in.  The tax will, in theory, incentivize coal-burning utilities to make their plants more efficient so that they use less fuel.  It could also push the country to strengthen its grid system, which loses huge amounts of power.  The funds from the tax will go toward encouraging renewable energy.

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