Ghana’s adoption of a carbon tax on vehicles followed pressure from more than seven African countries that did the same. Do these product-linked taxes represent a better path for African countries seeking to develop their carbon pricing systems amid global pressure to do so?
Degradation. This makes carbon pricing more administratively complex. In this context, “product taxes” on cars may be more attractive to governments, which can use them to raise revenues and (apparently) change behavior. But to bring about a change in behavior in this sector, realistic alternatives must be provided.
This means strengthening electric vehicle infrastructure, along with appropriate policies and incentives. Ethiopia, for example, exempts all electric vehicles from value-added tax, excise duties and surcharges. At the same time, it may be useful to learn about the different forms of carbon pricing across the continent.
This is particularly the case when African countries determine their policy positions in response to CBAM: not every country can or wants to impose a carbon tax or ETS.