The implementation of a carbon tax in South Africa – things are heating up!

The draft Carbon Tax Bill has been released for public comment. The introduction of a carbon tax aims to alter producer and consumer behaviour by punishing polluters to protect the planet. According to the United Nation’s climate change unit, global temperatures have increased by two degrees in the last century. This has altered rainfall patterns and increased the frequency of floods and droughts in South Africa, making it all the more urgent that the amount of greenhouse gas emissions in the atmosphere are reduced.

South Africa’s National Climate Change Response Policy (NCCRP) and the National Development Plan (NDP) both emphasize the importance of government’s policy on climate change. Introducing a carbon tax should form a major part of implementing these policies. The National Treasury has published the draft Carbon Tax Bill to allow the public an opportunity to comment. Although the Minister of Finance will determine the final carbon tax rate, exemptions and the actual date of implementation; members of the public have an opportunity to comment on the design and technical details of the carbon tax policy and administration.

The proposed tax is expected to be imposed at a rate of R120 per tonne of carbon dioxide, rising by 10 percent every year. There are certain tax-free thresholds which would mean that a company shall only pay R6 per tonne of carbon dioxide if all the thresholds were applicable, and a maximum of R48 per tonne of carbon dioxide if not. This aims to influence the behaviour of companies by incentivising them to move towards cleaner technology. It is estimated that the carbon tax would help South Africa achieve its goal of reducing greenhouse gas emissions in 2020 by 34% and by 42% in 2025.

The chairman of the Davis Tax Committee, Judge Dennis Davis, has warned that the implementation of a carbon tax will result in companies passing on the additional cost to consumers, and that this will place a heavy burden on the poor. Others have noted that a carbon tax would make it very difficult for South African businesses to compete in the international arena because of its dependence on fossil fuels.

Once the comments have been incorporated into the revised bill, it will be submitted to Cabinet for approval for tabling in Parliament.

To view the draft bill go to www.treasury.gov.za

Written comments must be submitted to Dr Memory Machingambi at Memory.Machingambi@treasury.gov.za by the close of business on 15 December 2015.

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