Finance Minister Nhlanhla Nene
Finance Minister Nhlanhla Nene

Draft carbon tax bill proposed

By KAMCILLA PILLAY Time of article published Feb 27, 2015

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Durban -

Finance Minister Nhlanhla Nene’s Budget speech has received mixed responses from environmental activists, who homed in on climate change mitigation.

Nene said the government was proposing a number of tax measures to promote energy efficiency, which would be discussed further with industry, the electricity regulator, Eskom and other interested parties.

“The first proposal is a temporary increase in the electricity levy, from 3.5c/kWh (kilowatts per hour) to 5.5c/kWh, to assist in demand management. This additional 2c/kWh will be withdrawn when the electricity shortage is over,” he said.

“Second, an increase is proposed in the energy-efficiency savings incentive from 45c/kWh to 95c/kWh, together with its extension to co-generation projects.”

In the absence of a carbon tax, he said, this levy served to promote energy efficiency and encourage lower greenhouse gas emissions.

The introduction of a carbon tax next year would provide an additional tool to deal more sustainably with the current electricity shortage while lowering the electricity levy.

“A draft carbon tax bill will be introduced later this year for a further round of public consultation.”

To ensure the burden is fairly distributed, steps he said would be taken to ensure the electricity levy applied to all users, especially energy-intensive users while ensuring there were no double-payments.

“In October 2014 we announced a broad package for Eskom, including a capital injection of R23 billion, governance improvements, operational cost containment, additional borrowing and support for required tariff increases,” he said.

The amount will be paid in three instalments, with the first transfer by June.

Meanwhile, support for the Independent Power Producer Programme, which will be extended to include new generation capacity from hydro, coal and gas sources would be provided.

WWF project manager for Low Carbon Transition and Renewable Energy, Manisha Gulati, and head of the Policy and Futures Unit, Saliem Fakir, reacted positively to the programme.

They welcomed the government’s commitment to the mitigation of climate change and support which showed that South Africa was leading the way among developing countries in terms of policy measures towards easing the burden on the environment.

“The reinforcement of the introduction of the carbon tax from 2016 and the publication of the draft carbon tax bill for consultation are positive steps. We welcome the proposed public discourse on the bill. It is important to implement the tax sooner than later so that we can implement incrementally and adapt the instrument by learning and doing,” they said.

Gulati and Fakir also welcomed the measures to promote energy efficiency. “(This) will help manage the electricity shortage that we are likely to face for the next two to three years.”

They said it was important that the government spend more time understanding the viability of hydraulic fracturing as well as risks and trade-offs associated with hydraulic fracturing before developing the regulatory framework and granting licences for it.

Director for the Centre for Civil Society at UKZN, Professor Patrick Bond, blasted Nene for avoiding the subject of nuclear energy.

“He was obviously diplomatic in avoiding commitments to nuclear but the president claims a deal is being done to acquire 9600 MegaWatts. Nene’s silence here is not golden, it smacks of secrecy.”

He explained that the major emitters – the Energy Intensive Users Group (EIUG) of 31 multinational corporations – still got such cheap electricity and that the effect of the price hikes on ordinary people might be devastating while big business still abuses the environment.

“For example, BHP Billiton gets electricity at about R0.12/kWh (a tenth of what poor people pay), a scandal that everyone knows about but that Nene was apparently fearful of raising.

“Nene’s persistent reminders of climate change, which is the worst disaster to hit humanity, are bizarre given that his financing allows most of the country’s major polluters to continue unabated, including the R23bn for Eskom that will purchase diesel fuel to prevent load shedding, instead of getting real cuts in electricity consumption by the 31 largest businesses in the EIUG,” Bond said.

He said despite Nene pledging R296 million over the next three years to the oceans economy in order to “enhance climate change research and management of ocean resources”, oil and gas prospecting had already begun offshore Durban, which would ultimately contribute to climate change.

Bond said Nene had announced that R108m had been allocated for research and regulatory requirements for licensing shale gas exploration and hydraulic fracturing, yet the US experience showed how environmentally destructive and socially hazardous fracking can be, with a large proportion of the industry now going bankrupt given the low price of oil and gas.

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