Room for improvement in SA Carbon Tax Bill, says Centre for Environmental Rights

carbon tax 3Author: Chantelle Kotze (Mining Review).

At the start of December, the Centre for Environmental Rights (CER) submitted comments on the Carbon Tax Bill, 2015, which was published for public comment on 2 November by National Treasury.

The Bill, which is intended to take effect in January 2017, aims to put a price on carbon by levying a tax of R120 per each ton of carbon dioxide equivalent (CO2e) emitted.

The Centre notes the following:

  1. The Bill does not do enough to promote a meaningful reduction of GHG emissions, and makes provision for substantial allowances to be given to big GHG emitters. The Bill also provides for tax-free thresholds that can rise as high as 95% and will remain fixed until 2020, after which time they may be reduced or replaced.
  2. The amount of tax – i.e. R120 per ton of carbon dioxide equivalent – is insufficient to serve as an adequate incentive to reduce GHG emissions, and it is not an accurate reflection of the true external cost of carbon emissions. Despite SA’s dubious status as the leading CO2 emitter in Africa, accounting for 40% of African emissions, and the 13th largest emitter in the world, the carbon tax rate is substantially lower than in numerous other jurisdictions.
  3. The Bill fails to provide that the revenue generated from the tax will be used on measures to reduce South Africa’s GHG emissions – in keeping with the aim of the Bill.
  4. The Bill provides for a carbon offset allowance, which allows a taxpayer to reduce their liability for carbon tax by utilising carbon offsets. Offsets contradict and would not achieve the objective of reducing GHG emissions, as they would allow large GHG emitters to emit in perpetuity.
  5. The Bill fails to provide for measures to avoid industry simply passing on the tax burden to consumers, where consumers don’t have alternative carbon-free options.
  6. The tax is technically complex and its implementation – particularly reporting by industry of their emissions – will be difficult to monitor. It is essential for reports submitted under the Bill to be publicly available to promote effective implementation and compliance monitoring.

The CER’s submissions emphasise the need for alignment of the Bill with the objectives and principles in national legislation such as the National Environmental Management Act, 1998 (NEMA) as well as the right to an environment that is not harmful to health or well-being and the right to have the environmental protected for the benefit of present and future generations in terms of s 24 of the Constitution.

Meanwhile, the Chamber of Mines too believes that the introduction of a carbon tax should be delayed by five years.

The Chamber, which still needs to scrutinize the proposed bill, says a delay in the publishing of the bill will be advantageous given the absence of a proper regulatory impact assessment on the economic costs and benefits of imposing such a tax.

Commenting on the effect that it could have on the mining sector, Chamber of Mines CEO Roger Baxter said that “with electricity prices already having trebled in real terms in the past seven years, further cost increases imposed by carbon taxes could further undermine the embattled mining sector.

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