Carbon Tax: Urgent Fundamental Changes

Abstract

The Carbon Tax is used in several countries around the world to at least partially account for the negative externalities of greenhouse gas emissions from fossil fuel use; its importance and relevance are therefore growing. Colombia adopted it in 2016, and Decree 926 of 2017 added the concept of "non-liability," i.e., the possibility of preparing reforestation, biodiversity protection, and non-conventional renewable energy projects to avoid paying the tax. Today, four years later, the initial tax amount is low, and the "non-liability" option reduces it even further. Additionally, coal was not included. This article therefore proposes strengthening the tax with a novel formula — its "dual use": the first allocation of the tax would fund a "soft loan" pool to develop alternative energy sources, aiming to replace polluting vehicles with zero-emission, electric, or hydrogen vehicles, as well as replacing polluting industrial processes with significantly cleaner production systems. As repayments on these soft loans are received, they would feed a second fund, which would support — without requiring repayment — community reforestation projects, individual agrosilvopastoral systems, agroecology, ecosystem regeneration, and energy transition and sovereignty, among others, constituting the tax's second allocation. Currently, the funds collected through the Carbon Tax are allocated only to municipalities with Development Programs with a Territorial Focus (PDET); however, since 7% of royalties are already directed to these municipalities, these resources should be expanded to the entire national territory. Likewise, the "non-liability" clause should be eliminated and coal should be included, to make the tax more transparent and allow departments and municipalities to submit projects to access and promote it.