Chile’s Progressive New Call: Carbon Tax

Santiago, Chile
Santiago, Chile

With the previous blog post analyzing the switch from ‘cultivation to privatization,’ recent actions by governments like Chile have proven that a real movement to privatization is taking place within Latin America.

Chile has done a lot to rid itself of poverty, especially extreme poverty, since the return to democracy. But we still have a ways to go toward greater equity. This country does not have a neoliberal economic model anymore. We have put in place a lot of policies that will ensure that economic growth goes hand in hand with social justice, “said Chilean President Michelle Bachelet.

Bachelet intends to do just that, as proven by the carbon tax which has just been passed in Chile that will be implemented in the year of 2017. In 2017, the measurement of CO2 emissions will begin, and the tax will be imposed on companies the following year in 2018.

Chile is the first country within South America to approve a carbon tax, within in regards to Latin America; Mexico was the first to impose a tax on the sale of several fossil fuels. According to Reuters,

Part of a broad tax reform, Chile’s carbon tax will target the power sector, particularly generators operating thermal plants with installed capacity equal or larger than 50 megawatts (MW). These installations will be charged $5 per tonne of carbon dioxide (CO2) released. Thermal plants fueled by biomass and smaller installations will be exempt.”

As of now, about 80% of Chile’s energy is based on fossil fuels, and more specifically their imports of coal and oil.  The companies within Chile that are estimated to pay the majority of this new tax are: Endesa, AES Gener, Colbún and E.CL.

Although Chile on some levels is being praised for the new green reform that it will be making, while also planning to use the revenue earned from the tax for new educational programs for the country, there has also been lots of backlash.

Before the implementation Michael A. Hammer, the United States Ambassador to Chile, had “criticized the proposed carbon tax as a measure that would discourage foreign investment in Chile,” according to a Global Environmental Law blog post.

The companies have also complained that the tax will increase the price of electricity and were upset that industrial sectors were not targeted within the tax proposal.

However, the British environmental news website BusinessGreen reports the Chilean reform also features a number of other environmental taxes on nitrogen oxides and sulphur dioxide.

Regardless of criticism, this tax reform sends a message to the international community. Chile, one of the leading economies in Latin America is taking steps for reform, privatization, and a more nationalized economy geared towards success, that isn’t enslaved to the global market and outside investor policies.

 

 

 

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