Carbon tax could earn govt R82,5bn a year

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    Picture by: Bloomberg

    The South African government stood to collect some R82,5-billion a year in additional revenue from carbon tax, if a price of R165/t of CO2e (carbon dioxide equivalent) was assumed.

    This was according to research done by Deloitte using the 2010 South African Carbon Disclosure Project (CDP) as a reference for disclosed emissions of companies, which estimated that South Africa’s total emissions stood at about 500-million tons a year of Co2e.

    The study was conducted following the release of the carbon tax discussion document was issued by the National Treasury last month.

    The discussion document stated that a tax of R75/t of CO2, with an increase to around R200/t CO2 (at 2005 prices) would be both feasible, and appropriate, to achieve the desired behavioural changes and emission reduction targets.

    Deloitte’s initial tax of R165/t was based on the tax rate given in the second Integrated Resource Plan, or IRP2010, and calculated the direct impact of the proposed carbon tax on power utility Eskom and a number of the Top 100 JSE-listed companies, which provided information to the CDP.

    The Treasury’s discussion document explored three options for imposing carbon tax and stated that a tax imposed directly on measured emissions of CO2 appeared to be the most appropriate.

    According to the CDP, Eskom’s publicly reported calculated emissions of CO2 for the year ended March 2010, was 224,7-million tons, which constituted about 45% of South Africa’s total estimated emissions.

    Deloitte calculated that this would mean that Eskom would be required to pay to R37-billion a year in carbon tax.

    Other heavy emitters could also face steep taxes, for example petrochemicals giant Sasol could be required to pay some R9,9-billion a year, and steelmaker ArcelorMittal South Africa about R1,7-billion a year.

    This cost to companies would likely be passed on to the consumer.

    One of the most contentious issues raised regarding carbon taxes and environmental taxes, was related to the fact that South Africa’s National Treasury did not ‘ring-fence’ or earmark certain revenues received, for specific initiatives. Thus there were concerns that money collected from environmental taxes could be put towards unrelated initiatives in the national budget.

    In the discussion document, the National Treasury stated that it “does not support full earmarking of revenues generated from environmental taxes. However, partial ‘on-budget’ earmarking of some revenue for specific (environmental or social) purposes may be appropriate to promote public and political acceptance of the benefits of the reform. Such arrangements should not undermine the normal budgetary process and should allow adequate funding for changes in government priorities.”

    Deloitte tax director Duane Newman told Engineering News Online that this seemed to be a softening of the stance of the National Treasury, which previously merely stated that it would not ring-fence revenues.

    “The phased introduction of the tax at initial low rates, with a commitment to phase-in increased levels of taxation over a specific time period, would provide certainty and an opportunity for taxpayers to adjust to the new tax. This will also provide a strong price signal to both producers and consumers to change their behaviour over the medium to long term,” the National Treasury said in the document.

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