Carbon tax looms as Treasury and department finalise plans

carbon tax 1Author: Paul Vecchiatto (BDlive)

The Department of Environmental Affairs and the Treasury are finalising an approach to a carbon tax, says department deputy director-general Judy Beaumont.

Addressing a media conference on Tuesday, Ms Beaumont said the introduction of a carbon tax was still considered one of the means to reduce SAs high levels of greenhouse emissions.

Last year, the Treasury issued a discussion document on the possible implementation of a carbon tax.

The first phase of the tax will be for five years, from January 1 next year to December 31 2019, followed by phase 2 for another five years, from 2020 to 2025.

“The question raised by industry (then) was the need to align carbon tax with the emission reduction objectives. We are in the process of finalising that,” Ms Beaumont said

SA signed the Copenhagen Accord in 2009 to reduce carbon emissions, with target cuts of 34% by 2020 and 42% by 2035.

Ms Beaumont said this meant that emissions would actually increase until at least 2025.

She said a carbon tax was a vital instrument in reducing greenhouse gas emissions, but not the only one. The department was revising the greenhouse gas inventory published six weeks ago for comment.

“We must not forget that SA is a developing country,” she said.

SA has one of the highest carbon emissions in the world as most of its electricity comes from coal-fired power stations.

Ms Beaumont said a major priority was to get local industry to start “bending the curve” so that carbon emissions started to reach a “plateau” by 2025 and decline by 2035. “So yes, our emissions are increasing, as expected. That increase is really associated with an increase in energy generation, industry and economic growth.

“The challenge, however, is to build in energy efficiency and lower carbon capacity.”

In May last year, the Treasury issued its paper proposing a carbon tax to change behaviour, ” not to raise extra revenue”.

It proposes three ways the tax could encourage good producer and consumer behaviour.

The first is a shift in production and consumption patterns towards low carbon and more energy-efficient technologies by altering the relative prices of services based on their emissions intensity.

The second is that carbon-intensive factors of production, products and services be replaced with low-carbon-emitting alternatives.

The third is creating dynamic incentives for research, development and technology innovation in low-carbon alternatives.

The Treasurys proposal was for a carbon tax rate of R120 a ton of carbon dioxide produced, increasing at 10% a year. This would be implemented in the first phase.

When the tax-free threshold and additional relief are taken into account, the effective tax rate will range between R12 and R48 a ton of carbon dioxide. There will be zero tax for agriculture and waste.

The Treasury said in its proposal that a way to recycle carbon tax revenue is by reducing other taxes.