The proposal by Kenyan Government to introduce a 16% Value Added Tax (VAT) on electric bicycles, solar batteries, and electric buses has raised concerns regarding its dedication to promoting the use of clean energy to combat pollution caused by fossil fuels.
These products were previously zero-rated as part of a series of incentives introduced by the Government in 2023 to support the e-mobility sector and encourage the adoption of green energy in transportation. As a result of these incentives, there has been a notable increase in the use of electric buses and bicycles in Kenya, with several new start-ups emerging in the country.
An analysis conducted by Bowman’s Kenya on the Finance Bill of 2024 suggests that the introduction of VAT on electric buses could lead to higher costs for these e-mobility products, potentially slowing down the growth of the sector.
This shift in policy comes at a time when the use of green energy in the transportation sector is gaining momentum, raising doubts about Kenya’s commitment to the Paris Agreement on Climate Change, which calls for the support and promotion of technologies that enhance climate resilience and reduce greenhouse gas emissions.
Furthermore, the proposal to tax solar batteries contradicts efforts to reduce greenhouse gas emissions, as it would increase the cost of installing solar power systems, hindering their adoption as a means of mitigating the impacts of climate change.
On a more positive note, there are provisions in the bill that, if approved by Parliament, could help promote the use of clean energy, particularly for households. One such provision is the proposal to exempt bioethanol vapor (BEV) stoves from VAT, which could encourage the adoption of cleaner cooking technologies.
Another promising proposal is the implementation of an Eco Levy on certain goods, particularly electronics, that are either manufactured in Kenya or imported into the country. This levy would be paid by manufacturers and importers, the aim being to hold them accountable for the negative environmental impacts of their products.
The concept of an Eco Levy is not new, as it has already been successfully implemented in various countries. In Ghana, producers and importers of Electrical and Electronic Equipment (EEE) are required to pay an advance “eco-levy” to ensure proper collection, treatment, recovery, and environmentally friendly disposal of EEE.
“While this proposal is a step in the right direction, considering that electronic waste is notoriously difficult to dispose of due to its non-degradable nature, there is room for flexibility. Manufacturers and importers who can demonstrate that they have effective waste disposal and recycling systems in place could potentially receive relief from the levy,” Bowman’s analysis shows.
