Colombian Carbon Tax

Colombian Carbon Tax:

The carbon tax in Colombia came into force on 1 January 2017, and applies to the sales and imports of all fossil fuels, including all petroleum derivatives, except for coal. The National Directorate of Taxes of Colombia (DIAN) is in charge of the revenue collection and administration, whereas the Ministry of the Environment and Sustainable Development oversees the emissions reporting as well as the accredited verification entities.

Currently, all of the funding raised from this tax goes towards the Fund for a Sustainable Environment and Rural Sustainable Development to support the peace process in areas affected by conflict. In June 2017, the Colombian government approved Decree 926 establishing the rules and conditions that allow certain entities to offset their carbon tax obligation under the Carbon Tax Law (Law 1819). The carbon tax obligation applies to producers and importers of liquid fossil fuels and industrial uses of natural gas, at the time of sale or import—for commercialisation or own consumption—and is currently set at a level of approximately US$5/tCO2e.

Offset rules:

Under the newly adopted Decree 926, regulated entities may be certified as ‘carbon neutral’ and consequently be exempted from the tax liability. The projects eligible to be certified under this scheme must occur after January 1st, 2010 within Colombian territory and must comply with one of the following methodologies:

ü  Clean Development Mechanism (CDM)

ü  Those developed by certification programs or carbon standards that have been either publicly consulted and verified by a third party appropriately accredited or issued by the UNFCCC, or recognized by the national government through a National Normalization Body, or meet the requirements for the registration of initiatives established by the REDD+ registry.

The carbon tax can also be offset with voluntary carbon offsets, if they have been verified according to the methodology established by ISO 14064-2:2006 or other suitable standard, in compliance with Decree 926.

Reductions and removals that have been implemented outside the national territory will be valid until December 31, 2017, except for the CDM projects that are not eligible at all to be certified under the ‘carbon neutral’ scheme.

It has been envisaged that Colombia ETS will accept all kinds of GHG standards except: VER+, RGGI, CAR. However, the market is evolving with many aspects of development and synchronization.