A new interim government idea to levy a carbon tax on electric utilities beginning Sept. 1 will increase the cost of electricity and reduce economic growth — “hardly a recipe for economic recovery,” says Eddinton M. Powell, PPC Ltd. president and chief executive officer.

“We understand the dire straits government has gotten itself into financially, but this is not the way for the interim government to solve its financial difficulties,” Powell said in an April 10 letter to businesses across the Turks and Caicos Islands.

In its 2011-12 budget, the government abandoned a proposal to levy a 10-percent tax on electricity, which also drew fire from PPC and a host of business and community leaders. Instead, the government proposes a carbon tax on the carbon dioxide emissions from utilities burning fossil fuels such as diesel, which is used by PPC.

A carbon tax “will encourage the generating companies to review their generating efficiency and mix of sources, including from renewable technologies, over time,” the government said. “It also has the advantage that it cannot be passed directly to customers.”

A recent energy study by Castalia Strategic Advisors said that PPC “has not actively considered renewable generation, although it would consider purchasing it from an independent power producer as long as it is cost-effective and reliable.”

Turks and Caicos Utilities (TCU) on Grand Turk has been pursuing alternative energy since the 1990s and was ready to go forward with wind turbines when the government denied down land grants.

In 2010 TCU got approval for installing meteorological towers on Crown land for a period of three years to conduct a detailed assessment for a wind farm, but it has received no long-term approval, stalling the plan, according to Castalia.

The study also says that efforts to reduce carbon dioxide emissions “should only be pursued through those technologies that have a negative carbon abatement cost, meaning that they abate CO2 emissions while also saving money.”

Carbon taxes are used in only a handful of countries, and most are revenue neutral, meaning they don’t earn much income for their governments. Instead, they are an attempt to reduce and mitigate the damage carbon emissions cause to the environment.

Powell said PPC first heard of the proposal in the government’s budget statement of April 5, but the government said “moving towards a carbon tax will take some time in discussion with the generators.”

Powell says carbon taxes will erode PPC’s investor confidence and capital investment, which will increase the cost of electricity and reduce economic growth.

The Castalia report points out that both PPC and TCU on Grand Turk had reserve generating capacities in 2009 of 82 percent and 168 percent, respectively. That means neither will need to add new generating capacity for 3-5 years.

The amount of carbon produced in the TCI is so small that reducing it won’t have any effect on the environment, Powell said. “Instead, all this tax will do is harm the local economy further, by increasing the costs of all goods and services, including electricity.”

The government intends to use the revenue gained from a carbon tax to fund a new waste management programme.

“We can only conclude that the interim government’s proposed carbon tax is not designed to better the environment; but is designed to unfairly take money away from PPC (money that PPC now uses to invest in more efficient generators and better service for its customers) and redistribute it to others, like solid waste operators,” Powell said.

Carbon tax locations

Carbon taxes are levied in only a handful of countries.

• Finland enacted a carbon tax in 1990, the first country to do so.
• Sweden introduced carbon tax in 1991.
• Great Britain introduced a “climate change levy” in 2001 on the use of energy in the industry, commerce and public sectors. Revenues are used to provide offsetting cuts in employers’ National Insurance Contributions and to provide support for energy efficiency and renewable energy.
• Boulder (Colorado, U.S.) passed a carbon tax referendum in 2006; while Boulder’s tax equates to just $7/ton and applies only to electricity, the first and only climate-protecting tax ever levied in the United States.
• The 25-member European Union, representing nearly half-a-billion people, voted a carbon tax of $13/ton to be inaugurated during 2006-07, increasing to $33/ton during 2008-12.
• Quebec, Canada’s second largest province, began collecting a carbon tax on “hydrocarbons” (petroleum, natural gas and coal) on Oct. 1, 2007.
• Japan has mandated a “household energy tax” equivalent to $21/ton of carbon
• British Columbia inaugurated a revenue-neutral carbon tax in 2008 which returns the money to taxpayers through personal income and business income tax cuts.

Source: carbontax.org