Proposed tax will undo climate change gains

The Tax Laws Amendment Bill 2020 proposes 14 per cent VAT on LPG and clean cookstoves. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • Kenya is a global leader in renewables, having recently ranked top five as conducive for investments opportunities in clean energy.
  • The proposed taxes will cut off millions from clean energy, encouraging reliance on dirty fuels with the environment paying the price.

Climate change compounds the threat to Kenya’s food security made worse by the desert locust invasion amid the Covid-19 pandemic, ravaging livelihoods through reduced agricultural yields, driving malnutrition and hunger.

Consequently, efforts to concurrently flatten its curve are needed to avert extreme crises.

Prof Wangari Maathai said planting trees and preserving forests is, perhaps, the most attainable option to ensure that we can feed the populace.

But deforestation costs the country 10.3 million tonnes of wood annually amid a struggle to have 10 per cent forest cover.

One of the major drivers of deforestation is use of biomass as fuel, with 75 per cent of households using charcoal and firewood, which contributes over 22 million tonnes of carbon dioxide equivalent yearly.

Consequently, there have been initiatives to promote clean cooking fuels such as Liquefied petroleum gas (LPG) through removal of import tariffs and VAT zero-rating.

INCENTIVES

Encouraged by the tax relief, investors have ventured into bioethanol as an alternative, anticipating that it will attract similar tax breaks. Clean cookstoves have also enjoyed VAT exemption.

The aim of these incentives is to offer more Kenyans the benefits of clean cooking, hence averting more than 20,000 deaths annually that result from indoor air pollution, not to mention saving our trees!

Sadly, the Tax Laws Amendment Bill 2020 proposes 14 per cent VAT on LPG and clean cookstoves, which will, obviously, lead to higher LPG prices.

Many urban households will be stuck with charcoal and kerosene while the 93 per cent of rural households continue using firewood. Subsequently, our dwindling forest cover will bear the brunt of the legislation.

There was optimism when Kenya launched East Africa’s first green bond, of Sh4.3 billion. Green bonds are a platform for investors to mobilise finance for sustainable projects, and the private sector plays a big role in this. But a major constraint is lack of enabling policies.

The Finance Act 2019 exempted green bonds from Withholding Tax, gesturing the government’s commitment to an investor-friendly environment.

But barely three months later, the tax bill seeks to introduce Withholding Tax, which does not build investor confidence in green initiatives and signals a tepid government attitude towards green growth.

CLEAN ENERGY

Kenya is a global leader in renewables, having recently ranked top five as conducive for investments opportunities in clean energy.

With the 50MW solar plant in Garissa recently commissioned, the share of renewable energy to the grid is at 93 per cent. This gives the poor access to electricity, improving their socioeconomic status and easing pressure on natural resources.

The Energy Act 2019 seemingly encourages private-sector investment in mini-grids. Off-grid solutions, including mini-grids and solar home systems, may be the most economic option to electrify 3.6 million households in Kenya.

The proposed taxes will cut off millions from clean energy, encouraging reliance on dirty fuels with the environment paying the price.

Let us heal our land and nurture it back to health. If anything, the Covid-19 pandemic has taught us to let nature have her way, she knows her business better than we do!


Ms Odhiambo, an advocate of the High Court of Kenya, is an independent climate change consultant. www.ednaclimate.com

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