FG to unveil carbon tax system for Nigeria

The Director General of the Nigerian Climate Change Council (NCCC), Salisu Dahiru, has announced plans to open a carbon tax policy and budget system for Nigeria in accordance with the provisions 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.

“This will now give allowances to each entity, whether the government or the private sector, on the amount of emissions allowed, and exceeding these emissions may be subject to fines. What will be the penalty, the penalty will be in another post that the Amendment Act The climate also asked the council to do so,” said Mr. Dahiru.

The background

In 2012, amid efforts to promote low carbon emissions and respond to the impacts of climate change, such as extreme weather, drought, floods, and food insecurity, Nigeria introduced the Nigeria Climate Change Policy Response and Strategy (NCCPRS ).

In 2021, the Nigerian Ministry of Environment through the Department of Climate Change introduced the National Climate Change Policy (NCCP) for the period 2021 to 2030. The NCCP sets the direction of Nigeria’s climate change policy, addressing the conditions necessary to achieve Nigeria’s vision of becoming a climate resilient economy.

During the COP26 held in Glasgow (Scotland), last year, President Muhammadu Buhari announced a net-zero emissions target of 2060. Just a week after the conference, Mr. Buhari signed into law the Climate Change Act, 2021 (the Act), which passed by the National Assembly in October 2021.

The Act provides a framework for achieving low Greenhouse Gas (GHG) emissions and for implementing climate change actions into national plans and programs.

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Apart from the establishment of the NCCC which will have the power to make policies and decisions on all matters related 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.

Proceeds from this among other sources of funds will be used to finance the Climate Change Fund proposed by the Act.

Carbon Tax

A carbon tax is an environmental tax imposed on carbon units (or proxies) appropriated by the government to reduce carbon emissions (through fossil fuel-based energy) that occur as a result of the production or consumption of goods and services.

According to United Nations estimates, by May 2021, 33 carbon taxes have been implemented by countries, including South Africa, to be a financial tool to fight climate change.

Under these arrangements, the federal government will determine the price to be paid for each ton of GHGs emitted during a certain period of time.

The tax, in addition to helping generate revenue for the government, is believed to encourage consumers to use environmentally friendly fuels, and new technologies and reduce emissions to avoid paying the tax.

Mr. Dahiru explained that with the approval of the president, the NCCC will develop a framework for a carbon tax system in Nigeria and see where projects are implemented in the country.

“The project can reduce carbon emissions or greenhouse gases overall. The harvest of this emission reduction is usually in the so-called emission reduction certificates, which can be translated into carbon credits, and then sold to potential buyers inside the country and outside,” he said.

The NCCC boss also announced that the council has instructed the secretariat to develop a carbon trading framework and the establishment of a climate change fund for Nigeria.

This, he said, would be a major source of revenue that would be used to run the council as well as to undertake projects that would help Nigeria meet all its obligations as per the Nationally Determined Contribution (NDC) and net zero. target 2060.

“The President also approved the Council as the Designated National Authority for the United Nations Framework Convention on Climate Change (UNFCCC) and the DG, NCCC as the National Focal Point of the UNFCCC, in line with the Climate Change Act 2021,” he said.

On the net zero target, the NCCC DG said the outlook of the council should reflect its mandate in terms of how to run its affairs. He explained that the structure should be as green as possible, and also be a net zero building in terms of carbon emissions that can be associated with it.

“This means that the office complex must be seen to clearly show our commitment to renewable energy compliance for the main building and also reduce the overall operation. And limit, for example, the use of paper, which we know comes from fallen trees,” he said.

Gas Flaring

Speaking on gas flaring, Mr. Dahiru said part of the Council’s mandate was the implementation of the Energy Transition Plan (ETP).

“This Energy Transition Plan, which is the first in many African countries, is based on the use of natural gas as a transitional foil for Nigeria as a transitional energy source, and we know that what has been launched is actually natural gas. So, we also know that it is wrong an additional advantage that the energy transition plan will have is to help close the energy or power or electricity gap that we have in the country,” he said.

“We will use the energy transition plan as the main basis to get the gas we need, if you take the population of Nigeria, which is more than 200 million, and we already have shortages in terms of electricity, and using this gas for even domestic use will only be very positive .

The NCCC DG said that the government is pursuing the implementation of ETP as a very important project that will bring many benefits, including reducing the energy gap.

“This will also help to find, you know, economic means or utilization for the abundant natural gas and also create, you know, the stimulus for the industry to also switch from diesel to start using natural gas as the main fuel for generators and for operations and therefore help to promote economic growth and also create jobs,” he said.