SOUTH Africa’s proposed carbon tax is designed to get polluting companies to change their behaviour, cut greenhouse gas emissions and shift towards cleaner technology, the Treasury has said.
But the tax has been designed to ensure, in its initial phase, that it will not affect the price of electricity or hurt mining companies and “other distressed sectors”.
However, the Treasury conceded that initially the carbon tax would have “a marginal negative impact” on economic growth, but said over the long-term it would help the country’s transition to a low carbon economy and the creation of green jobs.
“The carbon tax will assist in reducing greenhouse gas emissions and ensure that South Africa is ready and better prepared to deal with future climate risks, and also be in a position to take advantage of new investment opportunities,” the Treasury said.
The draft bill was published for public comment this week after it had been postponed two years ago, largely because industry feared it would harm profits.
Experts have said putting a price on carbon is one of the single biggest interventions nations can take to cut greenhouse gas emissions.
The marginal rate in the draft bill will be R120 a ton of carbon. Because of various tax-free provisions in the bill, the effective rate would vary between R6 and R48 a ton of carbon.
The Treasury said the impact of the carbon tax on the economy could be assessed only by taking into account both the direct impact of the tax and how the carbon tax money was spent. It would be used to fund various initiatives, including the energy efficiency tax incentive, reducing the electricity levy, providing additional tax relief for roof-top solar PV energy, additional support for free basic electricity for the poor and providing additional funds for public transport.
“Measures to encourage the shift of some freight from road to rail will also be supported,” the Treasury said.
The carbon tax would mean the renewable energy sector would be able to compete more fairly with the fossil fuel sector.
The draft bill includes a range of tax-free allowances, including a 60 percent tax-free threshold from the implementation date until 2020. These may be reduced later or be replaced by absolute emission thresholds.
Carbon tax on petrol and diesel will be added to the current fuel tax system. Fuels used by the international aviation and international shipping sectors would be excluded from the carbon tax system initially, as the Treasury said these were covered by international agreements being developed. However, domestic aviation would be subjected to the taxation.
Harald Winkler, director of UCT’s Energy Research Centre, said putting a price on carbon was extremely important and provided a cross-cutting way of reducing greenhouse gas emissions.
“There is a very sound basis in economic theory that price is a very powerful lever to influence behaviour. The same applies for a price on carbon. Scandinavian countries have shown it to be effective.”
Winkler said South Africa had already made a commitment internationally to develop a carbon tax.
This had been included in the country’s voluntary contributions to tackling climate change – the so-called intended nationally determined contributions or INDCs – that South Africa had submitted to the UN in the run-up to the climate change talks in Paris in December.
The bill has been published at www.treasury.gov.za