Colombia revives plan to tax coal burners

Coal-producing Colombia is reviving a plan to levy a carbon tax on coal-fired power generators and industries.

The ministry is working on a "clean growth and sustainable development" bill that would apply a tax of 16,000 Colombian pesos, equivalent to $5, per metric ton of CO2 equivalent on coal burners, according to environment ministry adviser Karen Schutt.

"We are not demonizing the coal sector, but we want the tax, that already exists, to apply to industry and generators that burn coal and emit Co2," Schutt told a conference organized by the Colombian thermal generators' association Andeg.

Schutt told Argus on the sidelines of the event yesterday that industries and coal-fired generators would be exempt from the tax if they offset the emissions.

The finance ministry is discussing the bill before it is sent to the congress.

Prodded by the coal industry, Colombian lawmakers have tossed out a "green tax" on two previous occasions, the latest when it discarded the provision in the government's National Development Plan earlier this year. The initiative was previously rejected in 2016.

Colombia consumes 9mn t/yr of coal for power generation and industries, including cement and brick makers. Coal-fired power stations account for 1.32GW of Colombia's total 17.3GW of installed generating capacity.

Industries and coal generators were excluded from an initiative in late 2016 that imposed the tax on petrochemical plants and refineries that use natural gas and LPG for industrial use.

Colombian gas association Naturgas president Orlando Cabrales told Argus today that this bill is likely to be approved because Colombia must do more to cut emissions, and also because the government needs to increase tax revenue.

"It is logical that the tax be applied to all fossil fuels, and that should include coal that is the most polluting of all. It is an outrage that coal was not included initially," Cabrales said.

He said that the tax would generate Ps400bn/yr in government revenue. Coal-consuming industries account for 20pc of the country's CO2 emissions.

Colombia's coal industry said the tax would deter coal production in the country's interior regions, where steam coal resources are too expensive to ship to coastal export terminals at current prices.

Cabrales said the $5/ton tax is low compared to $50/ton in the UK, adding that the levy would increase the cost of electricity but only marginally.

Alejandro Castaneda, director of the thermal power generators' association Andeg, told Argus that the tax will increase electricity prices by 15-20 pesos per kWh, including spot prices and electricity contracts.

Hernando Diaz, general manager of coal-fired generator TermoTasajero, has said he canceled plans to build the 180MW Termotasajero 3 unit because of uncertainty over the carbon tax, but noted that he was already having problems obtaining insurance and financing for the project.

Colombia's share of global emissions is 0.42pc, relatively low thanks to the preponderance of hydroelectric generation.

The government has pledged to reduce emissions by at least 20pc by 2030 under the Paris climate accord. The government wants to cut 11 mn t of CO2 equivalent by 2030.

Colombia produces 80mn t/yr of steam coal. The proposed tax would not apply to production.