Finance Minister Trevor Manuel showed his green fingers in this year’s national budget with a new levy for coal-fired electricity usage, funding for renewable energy and energy conservation, and a barrage of other incentives under consideration.
But no relief is given to individuals and businesses that have invested in generators. “There have been some appeals for financial assistance in purchasing electricity generators, for reasons we all understand. But several correspondents have pointed out that subsidising fossil-fuel burning generators would send the wrong signal in the light of environmental considerations,” Manuel said in Parliament.
R2-billion was set aside for programmes encouraging energy efficiency, generation from renewable sources, installation of electricity-saving projects and co-generation projects, although details of these still need to be worked out.
Transport also got a boost, with R8,2-billion to be spent on public transport programmes, roads and railway infrastructure. With luck these initiatives will encourage South Africans to leave their cars at home more often.
An additional tax on electricity was introduced at a rate of 2c per kilowatt hour to support demand-side management and to contribute to reducing reliance on carbon-based energy. This is expected to raise R2-billion in the 2008/09 financial year and R4-billion a year in following years. Manuel said households and businesses that reduce their consumption by 10% or more will not be affected. This levy will encourage consumers to save energy, in line with the government’s power-rationing programme.
A Treasury official told the Mail & Guardian that this tax was first proposed three years ago and was pulled just days before that budget was announced. “The feeling was that the climate was not right,” he said, adding that in previous years South Africa had not been as environmentally conscious as it is now and that it was believed there was a trade-off between economic growth and environmental sustainability. “It’s taken this much time to persuade the powers that be.”
He said the new tax is intended as “more of a signal than anything else”. The levy will add about 5% to the energy bills of “normal households” and possibly as much as 12% to the bills for intensive industrial users, such as smelters. Poor households, which receive a free basic amount of electricity, will not be affected. But the hope is that the levy will encourage people to conserve energy and possibly switch to cleaner and more efficient technologies.
According to budget documents, tax incentives to encourage the uptake and development of renewable energy are already in place and could be further enhanced. These include an accelerated depreciation allowance, which allows capital costs for renewable energy production to be written off over three years instead of four. Excise duties could be reformed to encourage the purchase of vehicles with reduced emissions and increased fuel efficiency. Tax incentives to encourage uptake and/or development of “cleaner” competitive technologies are being considered, as are emission charges and tradeable permits.
The National Treasury was adamant that electricity prices must increase. A new pricing structure is needed to reflect the full economic cost of electricity to avoid wastage, ensure efficient use and create space for independent power producers. Sustainable energy and water investments, reduced wastage and effective maintenance of infrastructure will require phased increases in tariffs, this year’s Budget Review stated.
“South Africa must pay more for electricity,” stated the review. But it added that energy saving will also create benefits, because the economy will be more energy efficient and competitive.
More than 2Â 000 proposals from South Africans were submitted to the Treasury, with just more than 10% offering ideas on energy security. These included proposals encouraging energy efficiency in building standards, subsidies for solarÂpowered geysers, replacing incandescent lightbulbs and clamping down on unnecessary energy use in government offices, mines, factories and in the home. A proposal to encourage biodiversity conservation by private landowners through an income-tax deduction is being considered.
The missing link in the South African energy picture is the formal introduction of a grid feed-in law, which would encourage independent power producers to invest in electricity-generation plants that could sell their product to the national utility at a fair and profitable price, said the Sustainable Energy Society of Southern Africa. But the society welcomed the greener budget.
Eskom, whose capital expansion programme requires R343-billion in funding, will receive R60-billion from the government over five years, with R20-billion expected to be drawn in the next three years. The utility might have otherwise found it difficult to raise funds on the capital market because it has been placed on credit watch by at least one major ratings agency, Standard & Poor’s.
But Manuel was careful to emphasise that this money is not a grant. “The return on an investment in power generation is very long term and the repayment of debt must be similarly deferred. But we would not be supporting these investments if we were not confident that they were economically and financially viable,” he said.
This year’s budget documents were printed on a paper stock called Triple Green, which is manufactured in accordance with three environmental standards. It is 60% sugar-cane fibre, chlorine free and provides for sustainable afforestation. Nevertheless, 726 trees died to produce the budget and 38Â 169kg of carbon dioxide was emitted.
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