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Government backtracks on taxing clean cook stoves

By Macharia Kamau | September 29th 2020 at 09:00:00 GMT +0300

A few months ago, the National Treasury raised taxes for energy-efficient clean cookstoves and solar products.  

But even before it has collected enough taxes from the sale of the stoves to at least justify the shift in tax policy for the industry, the Ministry of Energy is lobbying for the removal of the taxes.

The ministry argues that while the stoves use dirty fuels such as charcoal, they nevertheless burn more efficiently, saving the user some money while at the same time slowing down the speed of cutting down trees.

The Finance Act, 2020 subjected clean cooking products and technologies, which were previously exempt, including the cookstoves, to Value Added Tax (VAT).

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This reduced their affordability to ordinary Kenyans, who cannot afford other forms of energy for cooking.

Isaac Kiva, the Secretary for Renewable Energy at the Energy Ministry, said they are working with Treasury on a possible reversal of the tax measure.

He added that the government was also looking to include more appliances that promote renewable energy or play part in reducing the country’s energy intensity in the list of products that enjoy some tax incentives.

“We are looking at tax exemptions for appliances that are being imported. Some of the appliances in the cooking sector suffered this year when taxation was introduced. But we are engaging with National Assembly and Treasury to reverse this and see whether we can bring on board more tax holidays for these green appliances,” said Kiva during a recent virtual forum on energy efficiency, which the ministry co-hosted with the World Bank.

The government together with the World Bank are implementing the Sh15 billion ($150 million) Kenya Off-Grid Solar Access Project (Kosap). Of this, Sh4.8 billion ($48 million) will go towards stand-alone solar systems and clean cooking solutions for households.

The inclusion of clean cooking technologies in the list of vatable products may not have been totally unexpected.

A few months earlier, it was shot down by MPs when it was part of the Tax Laws (Amendment) Act 2020, arguing that it is critical to promoting clean energy cooking as well as protecting the environment and health.

Different entities have since voiced their concerns since the passage of the Finance Act.

The Clean Cooking Association of Kenya (CCAK) decried the frequent policy changes, noting they do not auger well with investors.

Chief Executive David Njugi said the government should consider going a few years without a major policy shift, which gives players in an industry time to adjust and recoup their investments.

By increasing taxes on items such as clean cooking stoves, Njugi noted, the government might not rake in much revenue at the moment, considering the industry is relatively small.

Instead, he said, the State should support its growth and, in turn, save on cash used treating Kenyans who end up suffering respiratory complications resulting from use of dirty fuels in their kitchens.

Hivos East Africa noted that while the Energy Act 2019 encourages use of renewable and clean energy, the new tax measures do not resonate with the Act.

Unsafe technologies

The organisation said taxing clean cooking equipment and fuels would see some “clean cooking converts” revert to using unsafe technologies that are deemed cheaper.

“As a country in which a majority of the population still rely on unclean, expensive and unsustainable cooking options, there is a need to make clean cooking a priority. Zero-rating of clean cookstoves and parts has had positive impact on the uptake,” said Hivos East Africa in a recent report.

It is not the first time that different government agencies appear to be reading from different scripts before making public pronouncements on matters energy.

One of the areas that has perhaps been the most divisive within the government is the proposal to burn coal to produce power.

The ministry has insisted that the country needs diverse sources of energy and particularly when it comes to the baseload power plants, which can be called on to provide the grid with power at any time of day. It has to this end advanced coal and nuclear power plants as substitutes to geothermal.

The energy industry players note that power from sources such as wind and sun is intermittent, dependent on factors that are beyond the industry’s control, hence the need for coal and nuclear.

The Environment Ministry has, on the other hand, insisted that the country would be blundering in investing heavily in dirty fuels considering its endowment in renewable energy sources.

While it acknowledges the intermittent nature of renewables, the ministry noted the decline in the cost of technology such that in addition to power plants being cheaper, there are also available power storage systems whose cost is coming down.

Despite the apparent differences on how to move the energy mix forward, the Energy Ministry said it is keen on clean and renewable energy as well as improving energy efficiency.

“Energy efficiency and conservation is a priority area for the government so as to enhance the quality of life of its citizens. It is expected that the implementation of some of these initiatives will reduce greenhouse gas emissions, improve health as well as bring about economic benefits,” said Energy Principal Secretary Joseph Njoroge recently when the ministry launched a strategy on how to achieve energy efficiency.

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