Chile is set to become the second country in Latin America to put a price on polluting, as the government gets ready to vote on its first carbon taxation scheme.
The carbon tax goes before the country’s House of Representatives this week as part of a broader package of tax reforms.
If approved the new tax on fossil fuel generation would begin in 2017 at a rate of $5 per tonne of CO2.
This rate would stay in place through president Michelle Bachelet’s term in office.
Gariazzo Rodrigo Pizarro, head of the division of environmental economics in the Chilean government said:
Chile is not a great contributor to greenhouse gas emissions, but we are very vulnerable. It is in our national interests to see significant commitments in terms of climate change. It is quite a significant tax for the Chilean economy.
The tax is part of a package of reforms, which includes other environmental taxes intended to drive down air pollution and tackle climate change, and the resulted funds are expected to be used for education.
The country will become the second in Latin America to implement such a scheme.
In January, Mexico initiated a tax on carbon, taxing the additional emissions of fuel over natural gas. Different fuels have different rates, averaging out at $3.50 per tonne.
The tax covers approximately 40% of the country’s total greenhouse gas emissions.
Chile has large potential for renewables, including solar and wind energy, with vast deserts and 6,400 km of coastline and has committed to a voluntary emissions cut of 20% by 2020 based on 2007 levels.
It came a step closer to meeting such a target last month as the country inaugurated its biggest ever wind farm as part of its bid to wean itself off fossil fuels and tap into its home-grown renewable potential.
Chile still imports around 70% of its domestic energy supply.
The El Arrayan farm is located on a coastal hillside 400 km north of the capital Santiago.
The farm consists of 50 giant turbines and cost $300 million. It has the capacity of 115 megawatts – small by European or US standards but one of the biggest to date in South America.
Despite it size, it still represents less than 1% of Chile’s total electricity generating capacity.