Institute for Development Research Riinvest

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Green Talk: Decarbonization and the Carbon Tax

Riinvest Institute organized a stimulating and thought-provoking discussion today on the topic of "Decarbonization and the Carbon Tax." This event is part of the "Green Talks" debates, a series of discussions hosted by the Green Action Space platform and supported by Policy Answers project.

This discussion brought together a diverse group of participants, including experts, civil society activists, government representatives, international organizations, and media. During the panel discussion, participants delved into crucial aspects such as the role of carbon taxes in the decarbonization process, the potential economic and environmental benefits, and the challenges and opportunities associated with implementing such measures.

 
This discussion holds significant relevance and timeliness for Kosovo, considering its commitment to decarbonize the energy sector and reduce greenhouse gas emissions. Kosovo heavily relies on coal-based power plants, which contribute significantly to its carbon emissions. Implementing a carbon tax could play a crucial role in incentivizing the shift towards cleaner energy sources and reducing emissions.

The carbon tax would likely have economic implications for industry, particularly for the energy sector. The energy produced by Kosovo A and B, which primarily use coal as fuel, would be subject to the tax due to their high carbon intensity. The tax would increase the cost of emitting greenhouse gases, making the energy produced by these power plants less competitive compared to cleaner alternatives. Consequently, this could drive investment and innovation in renewable energy sources and energy efficiency technologies.

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Moreover, the discussion emphasized the importance of environmental fiscal measures and carbon regulation mechanisms in promoting fair competition in the energy market. The European Union's existing mechanisms and measures, such as the EU Emissions Trading System (EU ETS) and the Carbon Border Adjustment Mechanism (CBAM), were also discussed in detail in a rather local context.

The EU ETS operates as a cap-and-trade system that sets limits on greenhouse gas emissions from selected sectors. By gradually reducing the allocation of free allowances to EU ETS participants and introducing the CBAM mechanism, the EU aims to align the carbon pricing strategy with its trade partners. This mechanism helps preventing carbon leakage, which refers to the relocation of emissions-intensive industries to countries with less stringent regulations. Moreover, it ensures fair competition for industries in the EU.

For Kosovo, adopting similar measures, such as implementing a domestic carbon tax or integrating into the EU ETS, could align its efforts with EU standards and facilitate future integration into the European energy market. It would also incentivize the transition to cleaner energy sources and contribute to the goal of decarbonizing the energy sector by 2050.

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In this regard, Riinvest Institute will soon publish a Policy Brief which reflects this discussion. This event was streamed live on Facebook.

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