One carbon tax too many, without govt’s responsibility

The Federal Government’s plans to unveil a carbon tax policy and budgetary system for Nigeria in accordance with the provisions of the Climate Change Act 2021, smirks of hypocrisyand lack of commitment to the ideals of climate change, except for areas where it can make some quick cash. With the exception of gas flaring, which has yet to be contained, the Federal Government is yet exploring opportunities to impose new taxes on businesses and individuals without commensurate accountability and responsibility.

The proposed tax seeks to punish emission at a certain level and if what the government did in Abuja is anything to go by, then alternative power generation will likely be the culprit. For a country where an approximately 40,000MW of energy is generated from diesel and petrol-powered generating sets, exploring a carbon tax that will penalise the use of alternative energy following gross supply inadequacy from the grid, is nothing but hypocrisy and would only set the government on a collision course with the citizens.

Lately, the Director General of Nigeria’s Climate Change Council (NCCC), Salisu Dahiru, announced plans to unveil a carbon taxing policy and budgetary system for Nigeria in accordance with the provisions of the Climate Change Act 2021. Mr Dahiru, after the inaugural meeting of the council chaired by President Muhammadu Buhari, said his agency sought and obtained approval to initiate key deliverables contained in the Climate Change Act, including establishing a carbon budget for the country.

According to Mr Dahiru, the provision “is now going to provide allowances for every entity, whether government or private sector, in terms of how much emissions it may be allowed, and exceeding those emissions could also attract penalties. What will be the nature of these penalties, these penalties are going to be contained in another deliverable that the Climate Change Act has also requested the council to do.” Apart from the establishment of the NCCC which shall have the power to make policies and decisions on all matters relating to climate change in Nigeria, the Act also provides that the NCCC will collaborate with the Federal Inland Revenue Service (FIRS) to develop a mechanism for “carbon tax and carbon trading” in Nigeria.

Though the carbon tax, apart from helping to generate revenue for the government, is believed to encourage consumers to adopt the usage of environmentally friendly fuels, and new technologies and reduce emissions to avoid paying the tax, there are concerns about the motive of the government. For instance, Dahiru explained that with the president’s approval, the NCCC will develop a framework for a carbon tax system in Nigeria and look at where projects are being implemented in the country. “These projects are capable of reducing overall carbon or greenhouse gas emissions. The harvest of these emissions reductions are normally contained in what we call an emissions reduction certificate, which can be translated into carbon credit, and then sold to potential buyers within the country and outside,” he said.

From the foregoing, it is apparent that the government only seeks revenue without readiness to put in the work. Ironically, the same government proposing to levy carbon taxes is also in charge of providing a sufficient supply of clean energy, although it consistently performs abjectly in that capacity. Experience from what the Federal Capital Territory Administration (FCTA) did with the implementation of its policy imposing annual levies on business organisations that use power-generating sets as a source of power supply in the Federal Capital Territory (FCT), Abuja is a warning signal of where the carbon tax is headed.

By ordering firms to pay a fine for using generators, it appears that the government is punishing them for its incompetence, inefficiency, and ineffectiveness. The situation is bleak and perplexing: the official supply of renewable energy is much below the minimum demand, despite the fact that many firms rely on electricity and other forms of economic infrastructure to thrive. Individuals and organisations resort to helping themselves by procuring and running generators at a huge financial cost in order to fill the electricity supply gap, yet the government has turned around to rub salt in their wounds by introducing an obnoxious tax policy. That is rather draconian, callous and unacceptable.

Despite its acclaimed ‘decade of gas’ agenda, efforts by President Muhammadu Buhari’s administration to push gas adoption has remained below par, both in strategy and implementation. Despite Nigeria being a gas country, utilisation remains extremely low. While the carbon tax policy might attempt to rein in environmental pollution by curtailing the level of toxic gaseous emissions into the environment; but it is difficult to fathom how Nigeria’s climate change agenda and lofty objective of a cleaner environment will be achieved when there is inadequate supply of electricity, except the government is suggesting that businesses should shut down.

In 2012, amidst an effort to promote low-carbon emissions and respond to the impacts of climate change, such as extreme weather events, droughts, floods, and food insecurity among others, Nigeria introduced the Nigeria Climate Change Policy Response and Strategy (NCCPRS). In 2021, Nigeria’s Environment Ministry through its Department of Climate Change introduced the National Climate Change Policy (NCCP) for the 2021 to 2030 period.

The NCCP sets out Nigeria’s climate change policy direction, addressing conditions required to attain Nigeria’s vision to be a climate-resilient economy. During the COP26 held in Glasgow (Scotland), last year, President Muhammadu Buhari announced a 2060 net-zero emissions target. Barely a week after the conference, President Buhari signed into law the Climate Change Act, 2021 (the Act), which was passed by the National Assembly in October 2021.

U.S. President Joe Biden delivers remarks during day 2 of the virtual Leaders Summit on Climate at the East Room of the White House April 23, 2021 in Washington, DC. Biden pledged to cut greenhouse gas emissions by half by 2030. Anna Moneymaker-Pool/Getty Images/AFP (Photo by POOL / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

The Act provides a framework for achieving low GreenHouse Gas (GHG) emissions and to mainstream climate change actions into national plans and programmes. Nigeria continues to sign agreements without considering the peculiarities of its challenges, yet seeks to embrace the opportunities for quick underserved wins. The lingering question is how this government wants to determine the allowable threshold for carbon emissions, when every facet of the country literally emits carbon? From the trucks on the roads to the generating sets in many homes and the numerous factories and cottage industries, the NCCC is attempting to bite more than it can chew, except to create new tax avenues that will quickly be replicated by governors seeking new revenue sources.

Already, manufacturers, banks, logistics and services industry, including hotels, apartments and estates, are feeling the pressure from rising energy costs as they have had to spend more on diesel to power their generators. While banks have staggered their operations in lieu of the present realities, real estate service providers are adjusting clauses relating to exclusivity on electricity provision. For the manufacturing sector, the burden of higher energy prices can only be passed onto consumers if they have to remain a going concern. Diesel costs should naturally not be a burden for many, except for those in the logistics sector. However, the nation remains underserved by the unstable and low capacity national grid. With less than 4,000MW from the national grid, Nigerians are left to generate their own energy.

While rejecting the continued Federal Government sole control of electricity matters under the Electricity Bill, the Nigerian Governors Forum (NGF), through its former Chairman, Dr. Kayode Fayemi of Ekiti State, argued that “After 71 years of sole and unchallenged central control of the electricity sector, we live with an electricity sector divided into two parts. One part is the FG-controlled and regulated national electricity market that today is insolvent, bankrupt and delivers no more than approximately 4,000MW/96,000MWh daily to 220 million Nigerians, or an average of 18w/432watt-hours daily, barely enough to power two (2) 10-watt light bulbs a day.

“The other part of Nigeria’s electricity sector is the alternative/back-up market, whose estimated capacity is approximately 40,000MW so much so that Nigerian citizens are their own electricity providers in their homes, factories, schools, hospitals and places of worship. Our calculations indicate that if the 40,000MW of electrical back-up capacity owned and operated by Nigerians were to be delivered to them by licensed private IPPs and distribution companies through organised public electricity markets, Nigerian citizens and governments would have saved up to N17trillion in 2021.” In essence, without adequate supply from the grid, Nigeria remains at the mercy of noise and CO2-polluting generating sets. The ensuing cost has an impact on the country’s inflation, considering that its productive sector is dependent on expensive alternative power.

Having failed to meet the country’s electricity demands, it is unjust and unfair for the government to consider a carbon tax, knowing fully well that it only seeks to generate revenue rather than curb emission. High tax burden on businesses is detrimental to investment and job creation and could ultimately undermine revenue generation prospects of the government. The best way to ensure that businesses rarely or never need to utilise generators to power their activities is to ensure that there is an adequate supply of power.

The goal of a cleaner environment will be accomplished in this way. Also, companies working in an environment with cleaner energy and comparatively cheaper power supplies will become more profitable and pay the government more taxes without the latter resorting to official extortion of the former through deception. It is also high time government put in the work by sensitising the public on the need for a cleaner environment by embracing behaviours that promote the ideals of climate change.