An almost five-fold increase in carbon tax on coal would still allow coal power plants to remain profitable, the Economic Survey 2014-15 says.
There is a potential to increase the carbon tax on coal from the current ₹100 per tonne to as much as ₹498 per tonne without compromising on the profitability of coal plants.
At this rate of carbon cess, the domestic coal prices would come on par with international prices and could, potentially, result in an emission reduction of 214 million tonnes — or 11 per cent of the country’s annual emissions.
Considering that India is the third largest emitter globally, such a reduction would place India in good stead at international negotiations, besides significant benefits towards climate change mitigation, reduction in health impacts and others.
This, however, still falls significantly short of the health costs of using coal for power generation — a form that India still depends on heavily.
Health costs
The damage to Indian environment as well as health of local communities is even graver considering that most plants in India are still sub-critical — resulting in lower efficiency and more pollution per unit of electricity generated — despite technology being available for super and ultra-super critical plants.
The Survey, which has a focus on climate change, and sustainable development, has noted that the health costs of using coal for power generation in the country ranges between $3.41 per tonne to $51.11 per tonne, with an average of $27.26 per ton.
Carbon tax
Currently, the Government is charging carbon tax of just ₹100 or about $1.8 per tonne. This had recently been raised from ₹50.
“India has cut subsidies and increased taxes on fossil fuels (petrol and diesel) turning a carbon subsidy regime into one of carbon taxation. This has significantly increased petrol and diesel price while reducing annual CO2 emissions... But there is still a long way to go with potential large gains still to be reaped from reform of coal pricing and further reform of petroleum pricing policies,” the Survey concluded on carbon tax regime in the country.