Proposed environmental tax on coal would inflate electricity price: expert

Vietnam’s National Coal-Mineral Industries Group said the planned increase in environmental tax would hurt the coal mining industry and increase electricity prices.

Under the finance ministry’s proposal, which is pending parliamentary approval, the environmental tax for anthracite coal would increase from VND20,000 to VND30,000 per ton, while bituminous coal and lignite would have their environmental taxes increased from VND10,000 to VND15,000 per ton.

The proposal, which also covers petroleum and diesel, is intended to encourage the use of environmentally friendly fuels, energy efficiency and reduce greenhouse gas emissions. 

The coal tax would add VND800 billion ($35.7 million) each year to the state budget, according to government calculations.

However, Nguyen Hoang Trung, vice director of the National Coal-Mineral Industries Group, said the increased tax on coal would not only impede the coal mining industry’s development, but also increase the price of electricity in Vietnam.

He said taxes on coal already account for 14 to 15 percent of their total costs, and the group has to pay over VND5 trillion for environmental taxes every year. The proposal would cause the group to pay an extra VND350 billion in taxes and reduce its profit by VND170 billion, he said.

“The Ministry of Finance should rethink the proposal and tell the Government and the Standing Committee of the National Assembly that it is backtracking the coal taxes,” said Trung.

If passed, the environmental tax proposal would go into effect starting July 1.

By 2030, Vietnam plans to increase the share of renewable energy sources (excluding hydropower) to 10.7 percent of total electricity generated compared to 3.7 percent in 2013. The share of coal, however, is set to increase to 53.2 percent in 2030, compared to 19.8 percent in 2013. 

Vietnam could see 948 percent growth in coal emissions, an almost 20-fold increase, by 2030, if all its coal power plans are carried forward, according to research which used the CoalSwarm database.

This puts Vietnam among four other countries, China, India, Indonesia and Turkey, that will be home to “nearly three quarters (73 percent) of the global coal-fired capacity that is currently under construction or planned,” according to a study by the Mercator Research Institute on Global Commons and Climate Change in Berlin.