Energy-intensive companies operating in South Africa have established an ‘Industry Task Team on Climate Change’, or ITTCC, to prepare a formal response to the National Treasury’s ‘Carbon Tax Discussion Paper’, which was released for public comment on December 13, 2010 – interested parties have until February 28 to make submissions.
Government published the paper as part of a follow up to South Africa’s 2009 Copenhagen commitment of reducing greenhouse gas (GHG) emissions by 34% by 2020, and by 42% by 2025, when compared with a “business-as-usual” scenario.
It has also been published ahead of Durban hosting the ‘COP17’ United Nations Framework Convention on Climate Change talks, which will take place from November 28 to December 9, 2011.
The discussion paper interrogates three options for reflecting the external costs of climate-altering GHG emissions, including a suggested R75/t tax, rising to R200/t, at 2005 prices.
The paper has caused a stir among energy-intensive companies, some of which have already warned of adverse business consequences, as well as potential negative effects for job creation and growth.
Some have also cautioned that, should such taxes be applied to power utility Eskom, South Africa’s single largest carbon dioxide emitter, the charge will simply be passed onto consumers, which are already facing steeply rising tariff increases.
These concerns will, no doubt, be reflected in the ITTCC submission, but many businesses are also planning their own individual submissions.
Xstrata Alloys’ Mike Rossouw, who is participating in the ITTCC process, tellsEngineering News Online that inputs are currently being garnered from local and international experts.
He indicates that the submission will call for the development of an “agreed set of principles” to guide the policy’s design and will also highlight the fact that a carbon tax is but one of many instrument options – the ITTCC will recommend nine principles to guide South Africa’s climate change policy.
“A comprehensive toolkit of measures must be considered before settling on the carbon tax option,” Rossouw asserts.
Any policy change should also be premised on a fact-led economic analysis, through which the effectiveness of various potential measures should be outlined. For instance, it will be argued that the way carbon tax revenues are used will be critical to success. “If implemented, a carbon tax must be revenue neutral.”
The ITTCC has also submitted comments on the Climate Change Response Green Paper and is working with Business Unity South Africa, the Chamber of Mines and Business Leadership South Africa to engage government on these issues.
Through these engagements, business is likely to seek a consistent signal on any future carbon price. It will also insist that the core policies are transparent and designed in a manner that influences producers and consumers, such that emissions and carbon consumption is reduced and the incentive to develop low-carbon technologies is increased.
