Argentina and its Carbon Tax on Liquid Fuels

On December 28, 2017, Congress enacted Tax Reform Act nr. 27.430 and with it, Argentina’s new Carbon Tax (“Impuesto al Dióxido de Carbono”) covering most liquid fuels (for fuel oil, mineral coal, and petroleum coke). It taxes the implicit GHG emissions in fossil fuels given typical usage by adopting fixed, standard emission factors by volume or mass, based on a price of 10 USD/tCO₂e. [1]

Due to the depreciation of the Argentinian peso in 2018, the equivalent carbon tax rate is USD6/tCO₂e from April 1, 2019. For fuel oil, mineral coal, and petroleum coke, the tax rate became operational from the beginning of 2019, at 10% of the full tax rate, and will increase annually by 10 percentage points to reach 100% in 2028. [2] The carbon tax was estimated to cover about 20% of the country’s GHG emissions and raise approximately ARS8.5 billion (USD300 million). Natural gas is exempted from the tax, as is CNG [3] and fuel consumption in international aviation and shipping, as well as the export of these fuels. [4]

How are the taxes on liquid fuels distributed among the different sectors in Argentina? [5]

• Within the road sector, gasoline is taxed at a higher effective tax rate than diesel. Natural gas is subject to the surcharge on natural gas. Biofuels are not taxed; only the proportion of fossil fuel is taxed when they are blended.
• In the off-road sector, fuel oil and diesel are untaxed when used for navigation (“marine”). Jet kerosene and aviation gasoline used for domestic aviation are taxed as regular kerosene and gasoline. Natural gas used in pipeline transport is taxed.
• In the industry sector, fossil fuels are generally taxed when used for heating purposes and to fuel stationary motors. Only the Carbon Tax applies to fuel oil, petroleum coke and mineral coal. Fuels used for energy transformation processes other than electricity generation and heating (e.g. coking coal to coke) are untaxed.
• Fossil fuel used in agriculture is taxed, except for LPG. [6] Fishing fuels are not subject to the Carbon Tax, but the energy balances do not report any such use for Argentina. Biofuels are not taxed.
• In the residential and commercial sector, LPG is not taxed, as in the other sectors. Natural gas is taxed. Biofuels are not taxed.
• Fossil fuels used to generate electricity are taxed. The final consumption of electricity is also taxed, but the rate is comparatively low and barely discernible.

References:

1. https://www.thepmr.org/system/files/documents/Argentina%2018-04-11%20Tax%20reform%20-%20Carbon%20tax.pdf
2. https://documents1.worldbank.org/curated/en/191801559846379845/pdf/State-and-Trends-of-Carbon-Pricing-2019.pdf
3. Compressed Natural Gas
4. https://www.thepmr.org/system/files/documents/Argentina%2018-04-11%20Tax%20reform%20-%20Carbon%20tax.pdf
5. https://www.oecd.org/countries/argentina/taxing-energy-use-argentina.pdf
6. Liquefied Petroleum Gas