Mexico’s Parliament on Wednesday began discussions on a fiscal reform proposed by President Enrique Pena Nieto that would impose a tax on carbon emissions from fossil fuel use.
The proposed policy would put a levy of 70.68 pesos ($5.41) per tonne of carbon dioxide from petrol, natural gas, propane, butane, aviation fuel, diesel, heating oil, coke and coal, the level of the tax calculated based on international CO2 permit prices between October 2012 and June 2013.
“It is necessary to design mechanisms to reduce the use of fuels with high levels of carbon dioxide emissions,” said the Mexican Presidency in a note to the Parliament.
“By introducing this new tax in Mexico we seek to reduce the use of fossil fuels, which will have their carbon content measured and will be taxed in values that reflect the prices of carbon credits in international markets,” it said.
The government said in a note that the new tax would increase gasoline prices by around 1.7 percent.
The carbon tax is meant to help Mexico meet its target of cutting greenhouse gas emissions 30 percent by 2020 and 50 percent by 2050.
Pricing carbon emissions has been controversial in countries such as Australia, Canada and the U.S., but opposition parties in Mexico did not immediately oppose the reform, saying they would evaluate the proposal.
Since the carbon tax is just a small part of the larger fiscal reform, and the increases in prices are not expected to be big, analysts believed it was likely to be approved.
“Numerous Mexican think tanks, institutions and parties have backed the initiative,” said Eduardo Piquero, a climate change consultant in Mexico for the United Nations Environment Program.
Part of a broader reform, the Mexican carbon tax is the first policy of its kind in a Latin American country.
Governments in the region have so far refrained from adopting such taxation, generally afraid to hurt their economies and increase costs for companies.
Mexico’s government is increasing gasoline and other fuels prices gradually, attempting to reduce subsidies that have been applied to these products for many years.
“Fuel consumption per capita in Mexico is superior to that of countries with similar GDP per capita. This proposal is in line with practices in several countries, where taxes on carbon were imposed so prices would reflect the negative effects of their consumption,” the government said. (Reuters Point Carbon)