National Treasury tables carbon tax policy paper for final comment

0
40

South African industry have until August 2 to comment on the carbon tax proposals tabled by the National Treasury on Thursday.
The Treasury aimed to promulgate a phased-in tax rate of R120/t of carbon dioxide equivalent (CO2e), increasing 10% a year during the first phase, in an attempt to curb the country’s greenhouse-gas (GHG) emissions.
The country aimed to decrease its GHG emissions by 34% by 2020 and by 42% by 2025.
The second and final comment paper, titled ‘Reducing greenhouse gas emissions and facilitating the transition to a green economy’, followed on the 2010 discussion paper and takes into account all comments received, as well as the 2006 Environmental Fiscal Reform policy paper.
The government intended to publish draft legislation later this year, with promulgation expected on January 1, 2015.
During the first five years, from the date of implementation until December 31, 2019, the agricultural and waste sectors would be exempt from paying the tax, while the electricity sector and other yet-to-be-named select sectors would qualify for a tax-free threshold of up to 70% and 90% respectively.
The tax-free threshold and additional relief represented a tax of between R12/t and R48/t of CO2e. The exemptions would be reviewed as the second phase progressed.
From 2020, the five-year Phase 2 would kick in, while follow-up phases could be “explored at a later stage.”
“The primary objective of implementing carbon taxes is to change future behaviour, rather than to raise revenue,” the paper stated, citing a shift in production and consumption patterns to low-carbon and energy efficiency means and the uptake of low carbon emitting alternatives as consequences of carbon pricing.
The new policy had sparked concern among heavy polluters and general stakeholders, as their earnings could be hit.
The policy suggested basing the new tax on “revenue recycling” and “tax shifting”, wherein taxes were reduced on positive contributors such as income and payroll, while the tax on negative products, such as those that produce GHGs or pollution, were increased to balance the impact and generate both environmental and employment benefits.
The new policy, however, retracted Finance Minister Pravin Gordhan‘s indication of an abolishment of the electricity levy, as stated in his 2013 Budget speech.
Despite Business Unity South Africa’s (Busa’s) support of the transition to a less carbon-intensive economy, the organisation did not believe the impact of the tax would be “largely neutral”.
“There is a mismatch between the incidence of the carbon tax on industry and consumers generally, on the one hand, and the recycling benefits on the other.
“Busa would urge great caution in the implementation of a carbon tax in South Africa, not only because both external and internal economic circumstances have changed considerably since the carbon tax was originally conceived, but also [because] there remain a number of challenges around the carbon tax proposal that need to be taken into account in the final design if serious unintended consequences are to be avoided,” the organisation said in a statement.
Meanwhile, the carbon tax policy paper also noted that the tax was expected to “create dynamic incentives for research, development and technology innovation in low-carbon alternatives”, and reduce the price gap between conventional, carbon-intensive technologies and new low-carbon alternatives.
Sasol CEO David Constable previously commented that South Africa would be joining a group of only three countries to have introduced carbon taxes and that the unintended consequences should be analysed.
The Road Freight Association, in March, said it would lobby against government’s proposed carbon tax, especially as the local availability of clean fuels and biofuels, remained “an issue” and South Africa did not need another tax making it more uncompetitive.

Comments

comments