DHAKA (Thomson Reuters Foundation) - Bangladesh is set to impose its own carbon tax on fuel next month – despite the hugely climate-vulnerable country producing relatively tiny per capita emissions.

The tax is expected to be put in place on June 1 as part of the country’s annual budget and will be part of a larger bundle of “green” measures, Nojibur Rahman, chair of the National Board of Revenue, told the Thomson Reuters Foundation in a telephone interview.

Many businesses and environmental groups have welcomed the plan, saying that Bangladesh – one of the countries considered most threatened by climate change impacts – needs to make a strong statement as governments like that in the United States pull back from action on climate change.

The new tax may not make any significant contribution to achieving the Paris Agreement’s goal of keeping average global temperature increases below 2 degrees Celsius above pre-industrial levels, they said.

But “when a country pollutes, the other countries are also affected. So, we need to reduce carbon emission as much as possible and imposing a tax is only way to do it,” said Abdul Matlub Ahmad, outgoing president of the Federation of Bangladesh Chambers of Commerce and Industry.

He said the tax would not only raise the price of using fossil fuels but the added income could help push more use of renewable energy.

“If the government wants to cut the import duty on environment-friendly renewable energy products, it needs to charge taxes on polluters,” he said in a telephone interview.

Bangladesh produces about 0.44 tonnes of carbon dioxide per person, much lower than the United States’ 16.4 tonnes, Australia’s 16.3 tonnes and Qatar’s whopping 40.5 tonnes, according to World Bank figures.

RISING RISKS

Carbon taxes – which raise the cost of using fossil fuels by creating a charge for the climate damage they do – are one of the simplest, most market-friendly ways of driving climate action, experts say.

But they have proved politically tricky to put in place, and not just in poorer parts of the world where incomes are low and making fuel more expensive can be politically risky.

But low-lying Bangladesh, which faces huge risks from sea level rise, worsening storms, floods, droughts and other climate change impacts, has made a name for itself as an international leader in climate action, particularly in terms of innovative adaptation to climate change.

“Although our contribution to climate change is very nominal, we are one of the worst victims of climate change. Aware of the problem, we have the most successful and best climate change programmes the world has so far witnessed in any country,” Finance Minister A.M.A. Muhith, said earlier this month at a Dhaka summit on climate change and disaster risk reduction.

While it seeks international finance to help with programmes to address climate change, Bangladesh also has paid for projects out of its own nationally funded climate change fund.

M.A. Matin, general secretary of the Bangladesh Poribesh Andolon (Bangladesh Environment Movement), said in a telephone interview that any carbon tax would need to be accompanied a “long-term carbon reduction plan” from the government.

In the short term, higher taxes on industry can drive up production costs, with those costs passed on to consumers. That might mean “it’s not a right method for reducing emissions,” he said.

Md. Khalequzzaman, a Bangladeshi professor at Lock Haven University in Pennsylvania, said he believed that in a poor nation like Bangladesh industry – rather than consumers – should bear the cost of the new tax.

“I feel that the financial beneficiaries of carbon emissions should bear the tax as a part of their corporate social responsibility. The ordinary people should not be burdened with the additional cost of using power,” he said in an interview.

He suggested that alongside imposing the carbon tax, the government should look at developing renewable sources of energy in the country.