Australia announced its introduction of a carbon tax last week and South Africa's plans for an emissions tax are reasonably advanced.
Australia announced its introduction of a carbon tax last week and South Africa’s plans for an emissions tax are reasonably advanced, with a possible implementation date as early as next year’s budget speech. But there are key differences between the proposed schemes for the two countries.
Australian Prime Minister Julia Gillard’s announcement that the country aims to implement the carbon tax next July has caused uproar and sparked countrywide protests.
Australia is targeting the country’s 500 worst-polluting companies with taxes per tonne of carbon emitted. South Africa is still on the fence about how its tax will be applied. A discussion document, “Reducing greenhouse gas emissions: the carbon tax option”, stated that although a carbon tax based on measured and verified emissions is preferred, a proxy tax, such as a fuel tax, could also be considered.
Australian companies will pay A$23 (about R170) for every tonne of carbon they emit. The South African fee is yet to be decided, although the treasury said it is unlikely to be as high as Norway’s tax of $50 (R340) a tonne.
Australia’s carbon tax will rise by 2.5% a year for three to five years before moving to an emission trading scheme. South Africa’s emissions tax will be slowly phased in over time.
Australia aims to address 60% of the country’s emissions and to reduce carbon pollution by 159-million tonnes by 2020. South Africa’s commitment under the Copenhagen accord is to reduce greenhouse gas emissions by 34% within the same time frame. Australia is the world’s largest emitter of greenhouse gases per capita; South Africa is the third-largest.
More than A$24-billion (R176-billion) will be raised from pollution permit sales in the next three years, Gillard said, which will go to household tax cuts worth more than A$15-billion (R110-billion). The scheme will include compensation for export-exposed industries, steelmakers, coalmines and electricity generators.
The South African discussion document recognises the need to address the impact on low-income households and notes that revenue from the tax “could be used to support developmental programmes—from reducing distortionary taxes — to the targeted roll out of free basic services such as electricity and water to poor households”.
In 2009 the Australian Labor government twice failed to have a carbon-trading scheme approved and the new tax is yet to be passed through Parliament. South Africa is yet to produce an initial draft policy.
Treasury supports the “polluter pays principle”, as does the Australian policy. Heavy carbon-emitting industries down under are expected to be the worst hit and critics believe the higher production cost will be passed on to consumers. Reuters reported that Australian airline Qantas said the carbon tax will cost it an estimated A$110-million to $115-million, whereas Virgin Australia estimated an impact of A$45-million in 2013. Both said they would pass on the cost by hiking airfares.
Similarly, in South Africa the country’s largest carbon polluters—Sasol and Eskom—are likely to suffer most and pass some of the financial burden down to the end user.
In January Eskom warned it would be unable to absorb all the cost. If a large portion of the tax is passed on to the end consumer, treasury said it will ultimately result in reduced demand for electricity and reduced emissions.
Australian economists and trade unions have expressed support for the tax, but small-business owners and farmers have voiced concerns. A nationwide poll conducted by Galaxy research on Monday showed 60% opposed the tax and 68% believed they would be worse off with it.
Despite the furore, the Australian model is better than what South Africans can expect next year, said Philip Lloyd, a professor at the Cape Peninsula University of Technology’s energy institute. “The Australians offer a host of kickbacks and it is just a temporary measure before they move to emissions trade.”
Lloyd said that no suitable carbon-tax models could be introduced in a developing country such as South Africa. “Australia’s GDP per capita is around US$40 000, while ours is around US$10 000.”
Steve Lennon, divisional executive of Eskom international, said there is a need to look at adaptation to the negative climate effects we will have to deal with and also the need to mitigate further damage. The integrated resource plan takes this into account and calls for reduced emissions of 34%.
“Carbon tax has a role to play,” Lennon said. “But it needs to play that role in line with the national plan.” The integrated resource plan has taken into account reduced carbon emissions - a carbon tax would also need to be factored in.
Lennon said mechanisms such as the Clean Technology Fund and Green Climate Fund could also play a part. “South Africa is not expected to carry the cost all by itself and it shouldn’t have to when there are these mechanisms where developed countries put money on the table.”