64.7 percent of households in Kenya still use wood as their primary cooking fuel, followed by liquefied petroleum gas (LPG) at 19 percent, and charcoal at 10 percent. With efficient energy services, we can cut on our carbon emissions and promote clean energy, but only when laws support environmental conservation efforts.

Kenya continues to face high rates of deforestation which is affecting not only flora and fauna but also people. With a growing population, prime forests are being cut down for settlement, timber, and fuel. As many people continue to depend on wood and charcoal, which are cheap sources of energy, the rate of forest depletion will continue to increase. The introduction of clean energy sources is effective to reduce deforestation and even improve the health of people. When laws are amended to introduce a tax on previously exempted or incentivized items, it begs to call where our priorities are.

“More than 40 percent of the world’s population—3 billion—rely on polluting and unhealthy fuels for cooking.”

The Finance Act, 2020

On June 30, 2020, the Finance Act, 2020 (the Finance Act) was assented to by President Uhuru Kenyatta to make amendments to a raft of laws in Kenya. These include the Income Tax Act (CAP 470), the Value Added Tax Act, 2013, the Tax Procedures Act, 2015, the Miscellaneous Fees and Levies Act, 2016, and the Excise Duty Act, 2015 among other miscellaneous amendments. Source: Africa Legal Network.

The energy sector will be hugely affected as tax exemptions and incentives that were placed on the supply of liquefied petroleum gas (LPG); specialized equipment for the development and generation of solar and wind energy; manufacture or repair of clean cookstoves and non-electric domestic appliances such as stoves, grates, and barbeques among others; are subject to VAT at 14 percent. To add to these, other exemptions to incentivize investors in clean energy and recycling of plastics are now proposed to be withdrawn.

Impacts

The introduction of VAT into solar and wind energy will increase the cost of having clean energy in the country and thus discourage their use. LPG, a common household energy source in urban homes may become less accessible to many Kenyans especially as we go through the economic challenges of the COVID – 19 pandemic. Charcoal and wood fuel is very unsustainable even though easily accessible and cheap. With the advent of clean cooking stoves, the introduction of a tax to manufacture will increase the price thus making it inaccessible to many people, especially, in the rural areas.

There is an entire ripple effect if these items which were previously on VAT exempt are subjected to a 14 percent VAT. Not only will unemployment increase but we stand to lose our integrity worldwide and even investors. Our prime goal should be to seek and support clean energy sources to improve livelihoods in the country in both rural and urban areas. Women and children will also be affected as they have to go for long distances, spending a lot of time collecting firewood. Solar-powered torches and lamps have enabled children in rural areas to be able to study at night but subjecting these simple items to a 14 percent VAT tax only makes them expensive and inaccessible.

“The energy sector alone will create around 18 million more jobs by 2030, focused specifically on sustainable energy.”

When we are guided by the Sustainable Development Goals, we make better choices. Shaping a sustainable future is important in supporting livelihoods. Changes in the Finance Act, 2020 could increase poverty (SDG 1), increase gender inequality (SDG 5), increase the cost of clean energy (SDG 7) and hamper climate action (SDG 13).

In as much as some of the amendments will be effective on 1 July 2021, we call on the government to rethink the proposed amendments that will take environmental conservation efforts a step back.

Features image credit – Pixabay.