Chile enforces South America’s first carbon tax

Chile has become the first South American country to introduce a tax on carbon, in a pioneering effort to tackle climate change.

On Friday the Chilean government ratified legislation that levies a new tax on energy companies, targeting the firms operating fossil fuel-powered plants with installed capacity equal to or larger than 50 megawatts.

Each such plant will initially be charged $5 (£3.08) per tonne of carbon emitted, while renewably powered plants and smaller facilities will be exempt.

Four companies – Endesa, AES Gener, Colbún and E.CL – will contribute the majority of the expected $160 million (£98.6m) revenue. The government says most of the funds will be invested in the country’s education system.

The continent-leading initiative makes Chile the second Latin American nation to pass a carbon tax, following its Central American neighbour Mexico.

In recent years, environmentalists have hailed carbon pricing as one of the most effective potential measures in the fight to curb climate change. Putting a price tag on emissions prompts polluters to clean up their act, while creating a more stable and attractive environment for renewable energy investment.

A carbon price can be established using a quota system, like the EU’s Emissions Trading System, but government-imposed taxes on the sale and use of fossil fuels seem to be the preferred method.

Around 30 countries, regions and states around the world have implemented or plan to implement a carbon price, though Australia recently scrapped its carbon tax to the dismay of environmentalists.

Further reading:

Big corporations already preparing for carbon pricing agreement, study reveals

60% of Americans would support carbon tax, poll finds

Australia first country to ‘irresponsibly’ scrap the carbon tax

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