Monday, October 6, 2014

Chile is the First South American Nation to Tax CO2

At the end of September, Chile became the first South American nation to apply a carbon dioxide (CO2) tax. Chilean President Michelle Bachelet of Chile implemented the new environmental tax legislation as part of broad tax reform. Chile's new carbon tax apply to power plants with a capacity of 50 megawatts (MW) or more. The rate of taxation will be $5 per tonne of CO2 released. Thermal plants fueled by biomass and smaller installations will be exempt. The new rules will take effect in 2018.

The move will help grow cleaner power production in Chile by making it more cost competitive. It will also help to diminish the country's greenhouse gas emissions so that Chile can meet its voluntary target of reducing CO2 emissions by 20 percent from 2007 levels by 2020.

Currently Chile derives approximately 80 percent of its energy from fossil fuels (oil and coal).

The companies that can expect to shoulder most of these new taxes are Endesa, AES Gener, Colbún and E.CL.

According to the Chilean government these new carbon taxes will raise about $160 million.

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