Thursday, September 24, 2020

We are taxed enough already, so no to a carbon tax!

The government deserves credit for presenting to parliament what, in my view, is a well thought out economic recovery and transformation plan. It is after all now a matter of fact that the coronavirus pandemic is wreaking extensive harm on livelihoods here in Botswana. So, it was appropriate that the government responded by cutting a path for economic stability and growth which thankfully parliament also approved.  

That was crucial because the economic toll arising from the virus and the resultant global and local lockdowns keeps rising every passing day. For a month now, liquor outlets for example have not traded due to the ensuing lockdown with devastating consequences for all players in the supply chain. So everyone from the maize and sorghum farmer all the way to the bar tender is feeling the pinch. The situation is simply not survivable and many people are not sure about their financial future.

It therefore goes without saying that right on this very month end weekend, bartenders are going home empty handed. Some liquor operators are literally giving handing back premises to landlords because they are now defaulting on rent. The situation is not any better with restaurant workers. Most of the restaurants are running with a lot of excess capacity and this means that their workers have been asked to stay home. As a result, they are not earning any income and this erodes their ability to fend for themselves let alone their dependents.

 Even beyond the much maligned alcohol industry, we are seeing cases whereby retailers are beginning to ask landlords to reduce rent. So except for government, the real world is reeling from the effects of the coronavirus-induced economic down turn.

While the recovery plan rightfully bets our future on deep structural reforms, it is difficult to see how that squares up with slapping us with a carbon tax. Somewhat out of the blue, we are told that: “the opportunity should be taken to accelerate this transition, e.g. moving towards solar power generation reducing subsidies to the use of fossil fuels and introducing carbon taxes. … The current low price of oil provides an opportunity to introduce a carbon tax without a short-term impact on fuel prices”

I know that climate change and renewables are fashionable among the global elite, but the truth of the matter is that our energy policy will continue to be girded by fossil fuels.  . The much adored solar energy is simply not economically viable and would just make electricity unaffordable to private commercial entities and poor households. You cannot, for example, power our mines with solar power.

Solar power does not give us the capacity we need especially in the morning and evening when demand is at its peak. That lack of capacity is not caused by the fact that fossil fuels are subsidised. Solar is unstable especially when it is cloudy or rains. So it does not necessarily lower your running costs if you are running a business. And you also have to put up with storage costs for which you need fossil fuels. This is why China and India are wisely, in my view, ignoring climate change alarmism and busy building coal fired power stations to produce reliable and competitive power supply.

So the only way many solar power stations   around the world stay afloat is due to massive government subsidies.  And subsidies are taxes we pay to prop up unprofitable unviable ventures.    

A carbon tax, would be an expensive and unnecessary experiment for Botswana. We cannot bury our economy under another tax.  So let’s can the carbon tax!

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