World Bank has advised the government to impose carbon tax. It said the tax would be a “fiscally prudent measure” by protecting the country’s revenue.
World Bank’s new country director for Bangladesh Qimiao Fan made the advice in a letter to Finance Minister AMA Muhith on March 17.
A carbon tax is usually defined as a tax based on greenhouse gas emissions generated from burning fuels.
“A carbon tax will be a fiscally prudent measure by protecting revenues when domestic prices are linked with the currently low international prices, given a stable nominal exchange rate against the US dollar,” Qimiao Fan’s letter read.
Referring to a note on petroleum products pricing, he said: “Essentially the note argues that the best approach is to let domestic prices follow international prices while using a tax instrument to account for carbon pricing.”
“This can be done through periodic automatic indexation of domestic petroleum prices to reflect changes in international oil prices and the nominal exchange rate.”
Fan said a protracted period of low oil prices such as the one the world was experiencing currently was also ideal to introduce carbon tax.
In the global market, the price of crude oil has gone down by 70% since the summer of 2014, and is expected to stay in the range of $30-40 a barrel in the next few years.
Meanwhile, the lower price of oil in international markets has been a boon not only for the motorists, but also homeowners who use heating oil to keep their homes warm during winter, as well as other industries, such as airlines, tourism, automobiles, etc. which get a shot in the arm with lowering fuel cost.
In December, 2011, the government had hiked the local fuel oil prices with an increase by Tk5 per litre each petroleum products. Energy ministry increased diesel and kerosene prices from Tk56 to Tk61 a litre, petrol from Tk86 to Tk91, octane from Tk89 to Tk94 and furnace oil from Tk55 to Tk60 a litre.
In February this year, Prime Minister Sheikh Hasina said there would be no reduction in the prices of fuel oil in the local market until the all loans of Bangladesh Petroleum Corporation were paid.