Start taxing fossil fuels, industrial pollution

Taxing fossil fuel use alongside air and water pollution by industries can reduce consumption of the natural resources while generating additional revenue, speakers said yesterday.

It is high time for Bangladesh to adopt environmental fiscal reforms (EFR) to introduce additional taxes on energy use and industrial and water pollution to offset the impact of climate change, they said.

The observations came at a workshop on “Annual Dissemination Event” jointly organised by Policy Research Institute (PRI) in collaboration with Adam Smith International and the International Centre for Climate Change and Development (ICCCAD) at Amari Dhaka.

Giving a presentation on the EFR, Sadiq Ahmed, vice chairman of the PRI, said fossil fuel was subject to a value added tax (VAT) but there was no additional excise on carbon to discourage its use.

“Also there is no pollution charge for industrial emissions, either on output or input,” said Ahmed, a former top World Bank official.

On industries causing water pollution, he said though there were no direct levies, imposition of penalties were the first known example of the use of the EFR in pollution management in Bangladesh.

He also suggested setting priorities for the EFR such as improving pricing policies for water, sanitation and solid waste management and reforming the fuel pricing policy to eliminate subsidy and move towards a market price.

He also spoke of imposing a carbon tax on petrol and diesel use and a tax on timber use and introducing a tax on air and water pollution by industries and a charge on illegal waste dumping by urban households.

Zaidi Sattar, chairman of the PRI, said rapid growth has a serious adverse environmental consequence and industrial development leads to carbon emissions.

“There is a strong relationship between economic growth and environmental degration, associated mostly with greenhouse gas emission,” he said.

He said many developed countries have brought down industrial activities which lead to environment pollution. Now services sectors are dominating their economies, he added.

“It is now the turn of developing countries to industrialise, so they will be polluting more,” he added.

According to Sattar, tax and incentive mechanisms comprising taxes, subsidies, pricing and public expenditure programmes could be more effective in addressing the problem at hand.

Prof Shamsul Alam, member of general economic division (GED), expressed solidarity with the PRI presentation.

He, however, said it would take time to impose additional taxes on polluters as it was related to a number of reforms in different sectors.

He further said the climate change issue had been included in the government's 7th five-year perspective plan and delta plan. The environmental issue is related to sustainable development goals, said Alam.  

MK Mujeri, executive director, Institute for Inclusive Finance and Development, said additional tax need to be imposed for the collection of additional revenue to address climate change impact of polluters.

Among other, Saleemul Huq, director, ICCCAD, and Peter D'Souza, senior economic adviser, the UK's Department of International Development, addressed the programme.