Carbon tax which will reward and punish businesses accordingly will be introduced next year.
An innovative carbon tax that rewards and punishes businesses was raised in the treasury’s tax proposals document. Although it was not launched during the budget speech, it will be introduced next year. The first phase lasts until 2020.
The proposed tax, R120 per tonne of emissions, will penalise companies that do not start lowering their emissions. It will also reward efficiency.
Each company will have to calculate its carbon emissions, something many already do for the JSE’s voluntary disclosure project. Of these emissions, 60% will be exempt from tax, for now, but emissions over this threshold will incur the R120 tax. The amount will increase by 10% every year until 2020. Compounded annually, this means the tax will eventually be R212.
Companies can also offset 5% to 10% of their emissions above the 60% by buying carbon credits.
Electricity generation is the most heavily taxed, getting no reductions and no chance to off-set costs by buying credits. Most other industries have a chance to reduce their tax by as much as 80%. An additional 10% reduction is given to companies the treasury said had “trade exposure”, to keep them competitive.
Agriculture, forestry, land use and waste get a 100% exemption. Mining, outside of coal, is also exempt.
For now, the revenues from this tax have not been earmarked, but the treasury said “consideration will be given to spending to address environmental concerns”.
Ferrial Adam, Greenpeace Africa climate and energy campaigner, said the tax had to be ring-fenced to ensure it went towards renewable energy development. This would allow the government to fund medium-cost climate change projects, she said.
The hardest-hit companies will be Eskom and Sasol, based on their emissions supplied in the JSE’s voluntary disclosure project. At 230-million tonnes, Eskom will pay about R11-billion a year. Sasol, at 61-million tonnes, will pay R2.2-billion.
The tax is in line with the department of environmental affairs’s white paper on national climate change response. In response to parliamentary questions this month, Environmental Affairs Minister Edna Molewa said “market-based instruments such as an escalating carbon tax” could be used to lower the country’s emissions.
The plan was to lower business-as-usual emissions by 42% by 2025, she said.
The head of the World Wide Fund for Nature’s living planet unit, Saliem Fakir, said that although the tax was still being debated, he welcomed the “explicit acknowledgement” of the need for it.
By 2025, the treasury document said, the scheme could be replaced by an absolute emissions threshold. A second draft policy paper on the tax would be released this year.