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Bogota Plans Green Tax on Coal-Fired Generation



By Diana Delgado

February 23, 2021 - The Colombian government will propose a new carbon tax on coal consumption in the power and industrial sectors, according to coal federation Fenalcarbon's new president, Carlos Cante.

The finance ministry will propose the initiative in an upcoming tax reform bill that the government is expected to put before congress next month. The Colombian economy fell by 6.8pc in 2020, according to national statistics bureau Dane, and the new tax is intended to help plug the budget deficit created by the pandemic.

The tax on coal consumers is expected to be 16,000 pesos per tonne of CO2 equivalent (tCO2e), which is equivalent to around $4.50/tCO2e. "If the bill includes the tax on coal-burn, the government will collect Ps320bn/yr," Cante said. "The government is determined to move it forward," he added.

Coal-fired power plants accounted for 1.32GW of Colombia's 17.82GW of installed generation capacity as of September, and the power sector consumes around 9mn t/yr. A $4.50/tCO2e carbon price would add around $4/MWh to the generation cost for a 38pc efficient coal-fired plant, according to Argus calculations.

Colombian lawmakers have tossed out a "green tax" on two previous occasions, most recently within the government's 2019 national development plan. The initiative was also rejected in 2016.

Coal-fired power generators and industrial end-users were excluded from an initiative in late 2016 that imposed a tax on petrochemical plants and refineries that use natural gas and LPG. The proceeds of the new tax will add to the Ps500bn that the government collects from the 2016 tax on petrochemical plants.

Colombia's coal industry says the tax will deter coal production in the country's interior regions, where thermal coal production costs are too high to be viable for export.

The director of thermal power generators' association Andeg, Alejandro Castaneda, said the tax will increase electricity prices by 15-20 pesos/kWh, including spot prices and term electricity contracts.

Colombia's share of global emissions is relatively low at 0.46pc, thanks to strong reliance on hydroelectric generation.

Colombia has revised up its pledge to cut carbon emissions over 2012-30 to 51pc, from a previous goal of 20pc set in 2015, president Ivan Duque reiterated today. The country emits an average of 237mn t/yr of greenhouse gas emissions, but it is considered especially vulnerable to the effects of climate change, including severe flooding and drought. Deforestation alone accounts for some 52mn tCO2e/yr.