/ 11 February 2009

Greening the budget

Greenies should approve Manuel’s environmental fiscal reforms, which include incentives for efficient energy use and clean development projects.

The Budget Review notes that with South Africa’s greenhouse gas emissions ranking in the top 20 in the world, and the country responsible for almost half of Africa’s emissions, the issue deserves a domestic policy response.

“We propose taking further steps to encourage energy efficiency and reduce harmful emissions, some of which have tax implications,” said the minister.

These steps include:

  • Tax incentives encouraging investment in energy-efficient equipment;
  • Tax exemptions for primary emission reduction credits
  • ;

  • An adjustment to excise duties on motor vehicles to account for carbon emissions; and
  • An increase in the international air passenger departure tax.
  • In addition, the levy on plastic bags increases from three cents to four cents per bag and incandescent light bulbs will incur an environmental levy of R3 per bulb at the manufacturing level and on imports. The plastic-bag levy is expected to generate R15-million in budget revenue while the incandescent light bulb levy generates an additional R20-million.

    A price on efficiency
    To support investment in energy-efficient equipment, the budget proposes the use of market-based instruments. Existing legislation allows for a “three year 50:30:20 percent accelerated depreciation allowance for investments in renewable energy and biofuels production”. For companies that can provide certified documentary proof of resulting energy efficiencies, the budget proposes an additional allowance of up to 15%.

    “It is important, furthermore, that we should encourage South African companies to take advantage of the clean development mechanism established in the Kyoto Protocol,” Manuel said. This mechanism allows for the issuing of certified emission reductions (CERs) in recognition of progress made in reducing greenhouse gas emissions.

    To encourage private-sector uptake of the clean development mechanism, the budget proposes that income derived from the disposal of primary CERs be tax exempt or subject to capital gains tax rather than income tax.

    Policy measures in the transport sector are aimed at promoting fuel efficiency, limiting the number of vehicles on the road and encouraging the use of public transport, the Budget Review states. Complementing this is an increase in taxes on petrol and diesel, which will rise by 40,5 cents and 41,5 cents per litre respectively.

    To encourage improvements in fuel efficiency, existing ad valorem excise duties on motor vehicles will include CO2 emissions as an environmental criteria as of March 1 2010.

    From October 1 2009, international air passenger departure taxes will increase from R120 to R150 per passenger on international flights and from R60 to R80 on flights to South African Customs Union member states. Presumably, this is meant to offset the carbon footprint associated with flight.