Departamento Nacional de Planeaciónwww.dnp.gov.co

Noviembre, 2018dnp.gov.co

Germán Romero DNP

@DNP_Colombia

COLOMBIAN EXPERIENCE OF

IMPLEMENTATION CARBON TAX

@DNP_Colombia

1. Colombian context2. Carbon tax3. Leassons learned

Colombian experience ofimplementation carbon

tax

@DNP_Colombia

1. Colombian Contex

Colombian experience ofimplementation carbon

tax

Colombian experience of implementation carbon taxOct 2018

Without adaptation GDP could decrease by 0,49% each year

National economy would lose each year half point in

GDP, equivalent to 3,8 billions COP

Agriculture would be the most affected sector, with

annual yield losses of 7,4%

Fishing:Losses of unloaded fish cargo

Forestry:Increase in potential production per hectare.

Transport:Decreasingin averagetime closedroadsremain. Agriculture:

Reductioninagriculturalyields.

Livestock:Loss of productivity in meat and milk

Source: Fuente: BID-CEPAL-DNP(2014)

Colombian experience of implementation carbon taxOct 2018

200

220

240

260

280

300

320

340

2010 2015 2020 2025 2030

Em

isio

nes

(Mto

n C

O2e

q)

Escenario Línea base Escenario NDC

Meta unilateral66,5 Mton

Meta condicionada+33,4 Mton

335 Mton

Colombia has made commitments in mitigation and adaptation

Colombia commits to reduce its GHG by 20% respect to BAU by 2030

10 adaptation objetives(few examples):

Mitigation Adaptation

100% of the national territory

covered by climate change plans

2,5 million hectares in coverage

of newly protected areas

10 subsectors of the agricultural

sector with capabilities to adapt

Colombian experience of implementation carbon taxOct 2018

Short term NDC annual equivalent costs will be compensated in the medium and long term

Source: Fuente (Uniandes, MADS, 2015)

NDC Anual

equivalent cost:

3,1 billions COP

NDC annual equivalent

cost for public sector:

1,2 billions COP

NDC annual equivalent

cost for private sector:

1,9 billions COP

Estimation of required costs for colombian

achievement

38

%

62

%

0.15%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

Gro

wth

rate

to G

DP

AGENDA - Noviembre, 2018

@DNP_Colombia

2. Carbon Tax policies

Colombian experience ofimplementation carbon

tax

Colombian experience of implementation carbon taxOct 2018

Colombia has created political signals to close the gap in the climate change initiatives

POLICY SIGNALS

To generate an environment to

enable resources for climate

change

PRICE SIGNALS

To incorporate in the decision making externalities related to

de the climate change

FINANCIAL MARKET SIGNALS

To facilitate private and public investment in climate change

SIGNALS TO INTERNATIONAL COOPERATION

To achieve an ambitious goal in resilient and low carbon

development

Colombian experience of implementation carbon taxOct 2018

Carbon taxIntroduced in 2016 in the latest fiscal reform law

Source: Law 1819, 2016

Art. 221.

• Tax on the carbon contet of fossil fuels,

• It is levied on the sales, import withdrawal for sale orconsumption

• Subjects that demonstrate carbon neutrality do not payusing national certifications.

• Fossil fuels derived represent approximately 24% of thetotal GHG emissions in the country, are taxed

• Expectations are that the tax will help reduce over 4.3 million tons of CO2 between 2017 and 2030.

• Revenues are spent on environmental and rural development projects on postconflicts areas

Fossil Fuel Unit USD /unitGas Natural Cubic meter 0,01

Gas Licuado de Petróleo Gallon 0,03

Gasolina Gallon 0,05

Kerosene y Jet Fuel Gallon 0,05ACPM Gallon 0,05

Fuel Oil Gallon 0,06

$USD5 per tonelada of CO2

Colombian experience of implementation carbon taxOct 2018

Carbon tax will help reducing 4,3 CO2 million tons

Source:Alvarez-Espinosa, A., Ordoñez, A., Nieto, D., Wills, W., Romero, G., Calderón, S., . . . Delgado, R. (2015).

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-6%

-24%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

(%)

ch

an

ge

in G

DP

(%)

ch

an

ge

s in

em

issio

ns

Capital

Household

Labor

Government

Taxes and tax expenditures on energy can greatly

influence energy-related CO2 emissions

Consequences to carbon tax (5 usd) revenue on Colombian economy

Colombian experience of implementation carbon taxOct 2018

Carbon tax is not regressive tax in Colombia

Source:Alvarez-Espinosa, A., Ordoñez, A., Nieto, D., Wills, W., Romero, G., Calderón, S., . . . Delgado, R. (2015).

Hou

se

s’ w

elfa

re c

ha

nge

s (

%)

House welfare change

(by quintile) • The most affected are higer incomehousehold

• All households are afected by transportand agriculture

• Energy intensive sectors increase pricesso much afecting the most rich houses.

AGENDA - Noviembre, 2018

@DNP_Colombia

3. Leassons learned

Colombian experience ofimplementation carbon

tax

Colombian experience of implementation carbon taxOct 2018

Stages of carbon tax Design and Interlinkages between Design Options

World Bank (2017)

• Alignment of Policies and Objectives:• Peace process

• Involve on the discussion at Ministry of Finance and Environment

• The design of the tax require studies and policy options

• Even the carbon tax has a huge papers estimations, using local data are acquired

Departamento Nacional de Planeaciónwww.dnp.gov.co