The Institute for Reducing the Share of the Shadow Economy, Improving Tax and Customs Administration, and Fiscal Analysis at the Ministry of Economy and Finance has put forward an initiative to begin preparations for introducing a carbon tax for large production facilities in Uzbekistan. This proposal was presented on July 30 during the 'Fiscal Dialogue' event.
According to the institute's plan, the preparatory stage should take place throughout 2027. This period will include tasks such as inventorying emissions, determining rates, selecting the tax base, and establishing the circle of companies that will be taxpayers.
The carbon tax itself is scheduled to be introduced in 2028, starting with the largest emitters. Subsequently, its application could potentially be extended to other enterprises. Two options are considered as the basis for calculating the tax: either the actual volume of carbon dioxide emissions or the volume of carbon fuel consumed.
It is planned that between 2029 and 2030, the tax rates will gradually increase according to a pre-approved schedule, although the exact parameters are currently under development. The fiscal effect of introducing the tax is expected to appear as early as 2028.
Goals of introducing a carbon tax
Institute experts believe that introducing this tax will allow the cost of emissions to be accounted for in the overall expenses of enterprises. This, in turn, should motivate companies to work on improving energy efficiency and reducing pollution levels.
Another important motive is the need to comply with international carbon regulation standards. Implementing internal pricing for emissions can minimize the likelihood that exporters from Uzbekistan will face the need to pay carbon levies outside the country.
It is important to note that this proposal is purely analytical and is not yet an approved legislative act or bill. Previously, in 2020, the publication 'Gazeta' covered international experience in carbon taxation. The essence of such a tax is to make pollution economically unviable: the more fuel consumed by both private households and companies, and the higher their emissions, the more they pay. Those who achieve emission reductions and improve energy efficiency do not incur such high costs.
An example from international experience is Canada, where the carbon tax was integrated into the cost of gasoline, natural gas, and other types of fuel. Furthermore, most of the collected funds were returned to citizens or used to subsidize energy-saving measures. This model is designed to encourage those who pollute less and increase the financial burden on large fuel consumers.
A recent achievement was Uzbekistan receiving the world's first payment from the World Bank for confirmed reduction of carbon dioxide emissions in June 2024. A grant of $7.5 million was transferred for a reduction of 500 thousand tons, which could potentially increase to $20 million. This payment was made under the iCRAFT project, which aims to improve energy efficiency, reduce state subsidies on energy, and develop carbon financing mechanisms. Part of these funds is planned to support families most affected by rising gas and electricity tariffs.
Previously, the World Bank indicated that Uzbekistan could effectively use carbon pricing, whether through introducing an emissions tax or through quota trading, to finance the transition to 'green' technologies and stimulate enterprises to reduce pollution levels.