Chile announces Latin America’s first carbon tax

The President of Chile, Michelle Bachelet, has endorsed new environmental legislation that will make the country the first in Latin America to have a carbon tax.

The tax will be targeted at companies that utilise a larger or a capacity equal to 50 megawatts and the government hopes it will lead to a greater uptake of cleaner gases and reductions of greenhouse gas (GHG) emissions.

If successful, the gases could potentially be cut by 20 per cent in 2020 from 2007 levels.

Each plant will be charged US$5 (£3.08) per tonne of carbon emitted.

Plants that are powered by renewable sources and also contain smaller facilities will be exempt from this rule.

Companies including Endesa, AES Gener, Colbún and E.CL are expected to pay a large bulk of the tax and have complained that certain industrial sectors have not been targeted with the new tax law.

Earlier in the year, Mexico taxed the sale of fossil fuels depending on the degree of carbon content, averaging US$3 per tonne of carbon dioxide.

In Mexico, companies utilise carbon credits to reduce their tax bills. Costa Rica also has environmental tax which is aimed at gasoline sales.

Fossil fuels are the source of 80 of Chile’s energy, focusing particularly on imported oil and coal.

Chile’s government will begin to measure carbon dioxide emissions from thermal power plants in 2017 and the new tax will come into existence in 2018.

The government are expecting to accumulate US$160 million, equivalent to £98.6 million, from the carbon tax.