Finance Minister Trevor Manuel gave special attention to environmental fiscal reforms in his budget speech this year, encouraging business in particular to conserve energy and operate more efficiently.
The budget makes provision for tax incentives to encourage investment in energy-efficient equipment, provides clarity on the taxation of certified emission reductions (CERs) and adjusts the excise duties on motor vehicles to account for carbon emissions.
It also increases levies on plastic bags from 3c to 4c a bag and proposes a R3 levy on incandescent light bulbs. The air passenger departure tax increases by R30 for international flights and R20 for flights to Botswana, Lesotho, Namibia and Swaziland. In addition, tax on petrol and diesel increases by 40,5c and 41,5c per litre respectively.
“It’s a very good budget,” says Peet du Plooy, WWF South Africa’s trade and investment officer. “All the correct signals are being sent.”
Levies on plastic bags, incandescent light bulbs and air travel will bring in a combined R155-million in revenue for 2009/1010, but the big question for environmentalists is how much of this revenue will be ploughed back into greening programmes. “It’s good at inducing positive behaviour,” says Gareth Morgan, DA spokesperson on environmental affairs, “but only a small percentage of [the revenue] is being used for recycling.”
On the other hand, the increased taxes on fuel will net the government an additional R4,89-billion in revenues. A tax increase of this size is bound to make consumers think twice before filling up at the petrol station and then driving to work alone. At the very least, it will serve to encourage car-pooling and greater use of public transport, leaving fewer cars on the road and so reducing carbon emissions.
Du Plooy says this move, which anticipates a future price rise and discourages fuel use, is a clever way of stabilising the economy. “Revenues will be passed to municipalities, hopefully for better public transport.” For Du Plooy, the most significant proposal is the adjustment of excise duties on cars.
This constitutes a sales component of up to 12%, he says, and for extremely efficient vehicles that component is zero — which could be a great disincentive to buy high-emission cars.
This year’s budget takes significant steps towards encouraging the use of energy-efficient equipment. 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 also helps clarify how sales of carbon credits will be taxed, stipulating that “income derived from the disposal of primary CERs be tax-exempt or subject to capital gains tax instead of normal income tax. Secondary CERs are to be classified as trading stock and taxed accordingly.”
So money gained through the sale of carbon credits, which are earned through the use of clean energy and energy-efficient equipment, will be tax-exempt, while the secondary market or resale of carbon credits will still be subject to taxation. This discourages speculative trade in carbon credits, according to Du Plooy.
Most agree that carbon trading is not the answer to preventing climate change. “Carbon credits will be bought by foreign countries. It won’t help us reduce our emissions. It doesn’t free us of that responsibility,” says Lance Greyling, Independent Democrats MP.
The bottom line for environmentalists is that government needs to invest more in green initiatives, particularly the use of renewable energy. An area of concern for Du Plooy is the deferment of the 2c/KwH levy on non-renewable energy proposed in the previous budget.
“We have a concern that this not be delayed any further this year,” he said. For environmentalists, it seems, the budget won’t be green enough until our power is clean.
But Manuel’s commitment to the environment is apparent and the reforms he proposes are progressive. If we compare his energy plan with that of the Obama administration, South Africa is not lagging far behind. The country is already heavily involved in the discussions on climate change regulations following 2012 and our energy sources are diversified, secure and domestically supplied. Manuel’s plan now also pushes for greater fuel and energy efficiency and more considerate fuel and energy use.
The only area in which the plan fails to make an impact is in the drive for cleaner energy sources and the creation of “green collar” jobs. But the factors preventing a drive in this direction are structural and institutional. The state has been slow to disburse the finances required to make a significant switch to renewable energy, the National Energy Regulator isn’t ready for the switch, and stakeholders are still debating the feed-in tariff for subsidising clean energy sources.
Manuel has done much to champion the cause of environmental fiscal reforms but perhaps this task is greater than one finance minister can manage.