Economic growth in 21st century is enhancing consumer choice as more products are available, often at lower prices.

However, the ever-growing industrial competition is threatening the natural environment of the planet due to carbon emissions and industrial waste from factories and vehicles.

The impact on the environment is visible as air pollution and water quality affects the lives of citizens around the world.

The government needs to convince the general public and industries to use equipment and vehicles which consume less. For this purpose, some green tax credits should be introduced

In developed countries, governments have adopted measures to reduce the environmental impact of industrial growth. These measures include carbon taxation and market based solutions in the form of carbon credit trading. In carbon taxation, governments have imposed heavy taxes on manufacturers and transporters who release large amounts of carbon into the environment.

Similarly, in market based solutions, carbon credits are allocated to different industrial units with a prescribed limit on the amount of carbon released in the environment. For releasing more than the prescribed limit, the industrial unit has to purchase carbon credits from the market.

In Europe, Finland introduced a carbon tax in 1990 on electricity generation plants, followed by Sweden. Even, China and India have introduced a carbon tax on coal fired power plants. Similarly, governments are now offering green tax credits to individuals and companies who comply with the prescribed carbon control criteria.

According to the World Bank, Pakistan’s global Green-house Gas Emission (GHG) is 304.85 metric tonnes with an overall global share of only 0.7pc. In the country, the use of oil and gas contributed Rs587bn to the budget of 2015 through sales tax, petroleum development levy, gas development surcharge etc.

However, the government needs to convince the general public and industries to use equipment and vehicles which consume less oil and gas as 51pc of Pakistan’s carbon emissions are generated by the manufacturing and transport sector.

For this purpose, some green tax credits should be introduced to encourage public and corporate bodies to buy energy efficient plans and vehicles.

A green tax credit can be offered to those people and companies who use hybrid or electric vehicles whose energy efficiency is higher than normal vehicles. Similarly, transporters and commercial carriers using carbon compliance vehicles, employing Euro 3, 4, 5 or 6 standards, can be offered income tax credit or toll tax reduction.

In the same manner, solar energy tax credits can be offered to those who use solar energy panels for electricity generation and other investments in renewable energy systems.

A general awareness can be created in the public by imposing a lower rate of GST on those products of daily use whose producers have used green technology in the manufacturing process.

Further, to increase the number of trees, a green tax incentive can be developed for tree plantation and for increasing forestation in the country.

All these measures need to be included in National Climate Change Policy to signal a commitment on the part of government to develop a climate-friendly economic system.

The existing Clean Development Mechanism Cell in the Ministry of Environment and Climate Change needs to expand its working and include more industries and projects with a view to promote the adoption of green technology.

—The writer is an assistant professor at AIOU, Islamabad.

Published in Dawn, Business & Finance weekly, December 12th, 2016