The Icelandic government has just approved a new government budget for the years 2019 to 2023 stipulating that the carbon tax on petrol prices will increase by 10% within next year, and by another 10% by 2020, Vísir reports.
At the beginning of this year, the government instituted a 50% tax on petrol, which now amounts to 12.60 ISK per litre for diesel and 11 ISK per litre for petrol. By further increasing the tax, the government expects to see an increase in revenue by 600 million ISK a year.
The goal is to drastically reduce carbon dioxide emissions in the next years by accompanying this decision with a decrease in excise tax on environmentally friendly cars.
Prime Minister Katrín Jakobsdóttir told the media that the new financial plan involves more provisions regarding the protection of our environment, and that a new carbon tax was necessary to fulfil Iceland’s commitment to the Kyoto Protocol and the Paris Agreement.
As we reported last year, in fact, in accordance with the Paris Agreement Iceland has pledged to a 40% decrease in emissions by 2030, but according to a recent report by the Institute of Economic Studies at the University of Iceland, emissions are actually set to increase 53-99% by 2030, compared to 1990 levels.
The government also aims to change the tax system regulating vehicles and fuel so that emissions standards will be tightened in relation to average emissions levels of new cars. Homes and companies will also be encouraged to choose more environmentally-friendly cars. The government plans in fact to partly refund the tax on petrol-vehicles once the car is disposed of or sold abroad, as well as reducing the excise tax on environmentally friendly cars.
Iceland has already seen a surge in electric cars in the past few years. As we reported earlier this year, according to Icelandic power company Orka Náttúrunnar, by the beginning of 2018 the number of registered electric and semi-electric cars in the country amounted to 4,848. Only 4 years ago, there were only 94 electric cars in Iceland. Hopefully the new changes in the tax system will prove to be another compelling reason to invest in more environmental choices when it comes to fuel and vehicles.