the Treasury sketched outlines yesterday for the introduction next year of a “modest” tax to control emissions of greenhouse gases.
The rate proposed is R120 a ton of carbon dioxide (CO2) equivalent for emissions above certain yet-to-be-determined thresholds.
The Treasury said a draft policy paper would be published for comment this year.
“A modest carbon tax will begin to price carbon dioxide emissions so that the external costs resulting from such emissions start to be incorporated into production costs and consumer prices,” it said.
This would create incentives for changes in behaviour and encourage the uptake of cleaner-energy technologies and energy-efficient measures, as well as foster research and the development of low-carbon options.
According to the Budget Review, the “proposed design features” of the new tax would include “percentage-based rather than absolute emissions thresholds”. Below these thresholds, no tax will be payable.
There would be a higher tax-free threshold for process emissions, “with consideration given to the limitations of the cement, iron and steel, aluminium and glass sectors” to mitigate emissions over the near term.
There would also be additional relief for so-called “trade-exposed” sectors.
The design includes the use of offsets for companies to cut their carbon tax liability. Implementation would be phased.
“The tax will apply to CO2 equivalent emissions calculated using agreed methods. A basic tax-free threshold of 60 percent… and maximum offset percentages of 5 or 10 percent until 2019/20 is proposed.
“The reduction in carbon intensity will be measured with reference to a base year or industry benchmark.”
Tax-free thresholds would be cut between 2020 and 2025, and might be replaced with absolute emission thresholds thereafter. “A carbon tax of R120 a ton of CO2 equivalent above the suggested thresholds is proposed to take effect during 2013/14.”