Coal plants to remain profitable with 5-fold hike in carbon tax: Economic Survey

An almost five-fold increase in carbon tax on coal would still allow coal power plants to remain profitable, the Economic Survey 2014-15 says.

There is a potential to increase the carbon tax on coal from the current ?100 per tonne to as much as ?498 per tonne without compromising on the profitability of coal plants.

At this rate of carbon cess, the domestic coal prices would come on par with international prices and could, potentially, result in an emission reduction of 214 million tonnes — or 11 per cent of the country’s annual emissions.

Carbon emission

Considering that India is the third largest emitter globally, such a reduction would place India in good stead at international negotiations, besides significant benefits towards climate change mitigation, reduction in health impacts and others.

This, however, still falls significantly short of the health costs of using coal for power generation — a form that India still depends on heavily.

Health costs

The damage to Indian environment as well as health of local communities is even graver considering that most plants in India are still sub-critical — resulting in lower efficiency and more pollution per unit of electricity generated — despite technology being available for super and ultra-super critical plants.

The Survey, which has a focus on climate change, and sustainable development, has noted that the health costs of using coal for power generation in the country ranges between $3.41 per tonne to $51.11 per tonne, with an average of $27.26 per ton.

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