It said however that it has taken the current state of mining and other distressed sectors into account. The combined effect of the exemptions in the carbon tax and the reduction in the electricity levy “will be designed to ensure that such sectors are not adversely affected when the carbon tax is implemented”.
“The tax and revenue recycling measures are also designed to be revenue neutral from a macroeconomic perspective, but will not necessarily be neutral for (scope one) companies with significant emissions.”
A reduction in the electricity level is one of the recycling measures proposed.
The carbon tax will especially affect those that use a lot of energy. During the last two years of the current consultation process, which started in 2010, there have been concerns that the introduction of a carbon tax could cripple those industries that are already struggling with competitiveness issues. Some industry commentators have also been skeptical about the ability of a green tax to change behaviour and said the South African economy – which is built on coal – is not yet in a position to offer the alternative technologies that could facilitate a switch to cleaner energy.
Initial proposals were for the carbon tax to be introduced on January 1 this year, but it was pushed out to 2016 during the 2014 February budget.
“The National Treasury is in the process of finalising Regulations to give effect to the carbon offset scheme and is engaging the Department of Energy (DoE) and the DEA [Department of Environmental Affairs] on the administration aspects of the offset scheme. Draft regulations will be published for public comment in early 2016,” it said on Monday.
The revised carbon tax design proposes a basic 60% tax-free threshold during the first phase of the carbon tax, from the implementation date up to 2020, an additional 10% tax-free allowance for process emissions and an additional tax-free allowance for trade exposed sectors of up to 10% amongst other measures.
Treasury said the combined effect of all the tax-free thresholds will be capped at 95% and an initial marginal carbon tax rate of R120 per ton CO2 emitted will apply. However, if all the tax-free thresholds are taken into account the effective carbon tax rate will vary between R6 and R48 per ton of CO2 emitted.
“These tax-free exemptions will range between 60% and 95% of total emissions. This implies that the carbon tax will be imposed on only 5% to 40% of actual emissions during this period,” it said.
When Treasury published its updated carbon tax policy paper in May 2013 the effective tax rate (after additional relief was taken into account) was between R12 and R48 per ton of CO2 emitted.
The proposed implementation of the carbon tax is part of government’s commitment to reduce greenhouse gas emissions by 34% by 2020 and 42% by 2025. National Treasury said it introduction will ensure that South Africa is ready and better prepared to deal with future climate risks and challenges.