Carbon taxes are environmental taxes levied on precise units of carbon by governments to reduce emissions.
The Director General of Nigeria's Climate Change Council (NCCC), Salisu Dahiru, has announced plans to unveil a carbon taxing policy and budgetary system for Nigeria in accordance with the provisions of the Climate Change Act 2021.
Mr Dahiru, who spoke to journalists after the inaugural meeting of the council chaired by President Muhammadu Buhari on Friday, said his agency sought and obtained approval to initiate key deliverables contained in the Climate Change Act, including establishing a carbon budget for the country.
"That is now going to provide allowances for every entity, whether government or private sector, in terms of how much emissions it may be allowed, and exceeding those emissions could also attract penalties. What will be the nature of these penalties, these penalties are going to be contained in another deliverable that the Climate Change Act has also requested the council to do," Mr Dahiru said.
Background
In 2012, amidst an effort to promote low-carbon emissions and respond to the impacts of climate change, such as extreme weather events, droughts, floods, and food insecurity among others, Nigeria introduced the Nigeria Climate Change Policy Response and Strategy (NCCPRS).
In 2021, Nigeria's Environment Ministry through its Department of Climate Change introduced the National Climate Change Policy (NCCP) for the 2021 to 2030 period. The NCCP sets out Nigeria's climate change policy direction, addressing conditions required to attain Nigeria's vision to be a climate-resilient economy.
During the COP26 held in Glasgow (Scotland), last year, President Muhammadu Buhari announced a 2060 net-zero emissions target. Barely a week after the conference, Mr Buhari signed into law the Climate Change Act, 2021 (the Act), which was passed by the National Assembly in October 2021.
The Act provides a framework for achieving low GreenHouse Gas (GHG) emissions and to mainstream climate change actions into national plans and programs.
Apart from the establishment of the NCCC which shall have the power to make policies and decisions on all matters relating to climate change in Nigeria, the act also provides that the NCCC will collaborate with the Federal Inland Revenue Service (FIRS) to develop a mechanism for "carbon tax and carbon trading" in Nigeria.
The proceeds from these among other sources of funds will be used to fund the Climate Change Fund proposed by the Act.
Carbon Taxes
Carbon taxes are environmental taxes levied on precise units of carbon (or a proxy) by governments to reduce carbon emissions (through fossil-fuel-based energy) which occur as a result of the production or consumption of goods and services.
According to the United Nations' estimates, as of May 2021, 33 carbon taxes had been implemented by countries, including South Africa, to serve as a financial tool to fight climate change.
Under the arrangements, the federal government is expected to set a price which emitters would pay for every ton of GHG emitted over a certain period.
The tax, apart from helping to generate revenue for the government, is believed to encourage consumers to adopt the usage of environmentally friendly fuels, and new technologies and reduce emissions to avoid paying the tax.
Mr Dahiru explained that with the president's approval, the NCCC will develop a framework for a carbon tax system in Nigeria and look at where projects are being implemented in the country.
"These projects are capable of reducing overall carbon or greenhouse gas emissions. The harvest of these emissions reductions are normally contained in what we call an emissions reduction certificate, which can be translated into carbon credit, and then sold to potential buyers within the country and outside," he said.
The NCCC boss also disclosed that the council has instructed the secretariat to develop the framework for carbon trading and the establishment of the climate change fund for Nigeria.
This, he said, will serve as the main source of revenue that will be used for running the council as well as to undertake projects that will help Nigeria to fulfil all its obligations as enshrined in the Nationally Determined Contributions (NDC) and the net zero target of 2060.
"The President also endorsed the Council as the Designated National Authority for the United Nations Framework Convention on Climate Change (UNFCCC) and the DG, NCCC as the UNFCCC National Focal Point, in line with the Climate Change Act 2021," he noted.
On the net zero targets, the NCCC DG said the outlook of the council must reflect its mandate in terms of the way it runs its affairs. He explained that the structure should be as green as possible, and also be a net zero building in terms of the carbon emissions that could be associated with it.
"This means that the office complex must be seen to clearly demonstrate our commitments to renewable energy compliance for the main building and also reduction on its overall operations. And limiting, for instance, the use of paper, which we know comes from trees that have fallen," he said.
Gas Flaring
Speaking on gas flaring, Mr Dahiru said part of the Council's mandate is the implementation of the Energy Transition Plan (ETP).
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"This Energy Transition Plan, which is the first among many African countries, is predicated on the use of natural gas as the transition foil for Nigeria as the transition energy source, and we know that what has been flared, is actually natural gas. So, we also know that one of the added advantages that the energy transition plan is going to have is to help to close the energy or power or electricity gap that we're experiencing in the country," he noted.
"We are going to use the energy transition plan as the main launchpad for capturing the gas needed, if you take the population of Nigeria, which is over 200 million, and we are already experiencing shortages in terms of electricity, and utilising this gas for even domestic use alone is something that is going to be a big positive."
The NCCC DG said the government is pursuing the implementation of the ETP as a very important project that will have multiple benefits, including reducing the energy gap.
"It will also help to find, you know, economic utility or utilisation for our abundant natural gas and also to create, you know, the stimulus for industries to also shift from diesel to start the use of natural gas as the main fuel for the generators and for the operations and therefore help to promote economic growth and also create jobs," he said.
