Carbon tax will motivate change

The commencement of a carbon tax on January 1 2015 serves as a clear call to action for all greenhouse gas emitters in South Africa.  Greenhouse gas emissions need to be measured and effectively managed to avoid heightened exposure to this future tax. While detractors of the carbon tax see it as a way to generate new sources of government revenue from already overburdened consumers, the tax actually has a key intention to support a resource efficient economy in aid of South Africa’s longer-term competitiveness, while stimulating investment in new industrial sectors. This tax will provide the economic motivation to achieve this objective.

The carbon tax is, however, a unique form of taxation, as any liability can be substantially reduced by companies mitigating their emissions.  Many of the large emitters will be able to reduce their exposure to the liability substantially through ensuring energy is used efficiently, partially displacing their electricity usage through on-site renewable energy generation, and reducing waste streams, amongst other areas. The technologies and knowledge currently exist to achieve many of these reductions.

There is, however, some outstanding detail of the tax policy that needs to be clarified before both large and small emitters can effectively react. These include aspects such as how the emissions thresholds will be set, the monitoring and reporting procedures to be applied, exactly how trade exposed and process emissions will be calculated, and more detail around the offsets allowance. This clarity is expected to be provided in the draft carbon tax policy, due at the end of March. 

The global economy is carbon constrained and the EU, Australia, China, South Korea and others are already implementing carbon pricing schemes, or are in discussions to commence implementation. While arguments around harming South African companies through increasing costs need to be considered, the costs of inaction (including continued exposure to rising costs of fossil fuels, significant resource wastage in the economy and penalties, or exclusion, from international markets) must also be evaluated.  With the phasing out of the electricity levy on non-renewable electricity, the initial impact of the carbon tax on electricity prices will be relatively small, while introducing a rigorous carbon pricing scheme can actually boost a country’s competitiveness as global energy prices rise and markets become more carbon aware.

Provided that the carbon tax is supported by effective policies to encourage competition within the electricity market, enable effective public transport and support green technologies, the net effect of the tax could be viewed quite differently in a few years from now.

It is without doubt that a carbon pricing scheme will increase certain costs for companies in South Africa, but it also brings about the opportunity to drive increasing efficiencies, provide water and health related benefits, and develop innovative ways to manage emissions.  There are only two years left before the carbon tax is enforced, and while there is still a way to go in finalising the tax, South African companies should begin to consider its impact on their operations and investments now, including implementing reporting systems and identifying ways to effectively mitigate the effects of the tax.  

The nature of the carbon tax proposed in South Africa is unique in that it actually encourages companies to implement activities that result in the avoidance of the tax liability. This is coupled with positive benefits that could flow from such activities such as encouraging investment in energy efficiency and renewable energy, developing new markets, encouraging the research and development of green technologies, decoupling emissions from economic growth, and in future, allowing South Africa to remain competitive in a resource constrained global economy.

Alex McNamara is a principal consultant at Camco Clean Energy, and Patrick Curran is an analyst at the same company.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories


Subscribers only

Q&A Sessions: Marcia Mayaba —Driven to open doors for women

Marcia Mayaba has been in the motor industry for 24 years, donning hats that include receptionist, driver, fuel attendant, dealer principal and now chief...

The war on women in video game culture

Women and girls make up almost half of the gaming community but are hardly represented and face abuse in the industry

More top stories

Gatvol Capetonians, EFF lash out at City of Cape Town...

Public infrastructure was allegedly damaged by the activist group in 2019 and by the Economic Freedom Fighters in 2020

Masuku loses appeal against SIU report on Covid graft

The judge found that when news of improprieties were brought to his attention, Masuku did not take steps to urgently intervene

Leaking De Ruyter’s affidavit countering racism claims was ‘malicious’ and...

Mkhuleko Hlengwa has pointed to people in Eskom or the public enterprises department for making the document public

SABS ‘contemplates’ 170 retrenchments to save R150m

Salaries account for 65% of the South African Bureau of Standards’ total operating‌ costs

press releases

Loading latest Press Releases…