Get more Mail & Guardian
Subscribe or Login

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

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them and receive a 40% discount on our annual rate..

Related stories

Advertising

Subscribers only

Q&A Sessions: Zanele Mbuyisa — For the love of people-centred...

She’s worked on one of the biggest class-action cases in South Africa and she’s taken on Uber: Zanele Mbuyisa speaks to Athandiwe Saba about advocating for the underrepresented, getting ‘old’ and transformation in the law fraternity

Update: Standard Bank rejects climate proposal

Climate considerations are pressing Standard Bank shareholders to push for the recusal of those with fossil fuel ties.

More top stories

Denel money woes clip air force’s wings

A senior officer says the shortage of spares and and ability to service aircraft and vehicles has a negative effect on the SANDF’s operational ability

State fails at-risk children as R55m orphanage stands empty

Boikagong Centre in Mahikeng has been closed for almost two years because it did not meet safety requirements. The discarded children say they want a safe place to learn, but instead endure rape and other violence

Wildlife farming vs Creecy’s panel

The departments of environment and agriculture legislation are at odds over modifying the genes of wild animals

Drugs and alcohol abuse rage in crime stats

Substance abuse has emerged as a reason for the spike in crimes during the first quarter of 2021.
Advertising

press releases

Loading latest Press Releases…
×