South African government postpones carbon tax to 2015

Submitted by: Margaret McKenzie, Thursday, February 28, 2013

The South Africa Government is planning to introduce a carbon tax effective from 1st January 2015 said Finance Minister Pravin Gordhan during his 27th February 2013 budget speech. The form of the tax announced by Gordhan is largely in line with the details of the carbon tax that were previously release in a government guide at the time of the 2012 budget speech. That guide indicated the carbon tax would be implemented in the 2013/2014 financial year but the latest announcement has postponed the imposition of the tax to 2015, leaving unchanged the proposed tax amount of R120/t of carbon dioxide (CO2) equivalent. 

According to the Minister Gordhan, “to soften the impact, a tax-free exemption threshold of 60 per cent will be set, with additional allowances for emissions intensive and trade-exposed industries”.  It is planned that the proposed tax will escalate by 10% per annum up until 2020 the end of the first phase of implementation for the tax.  

National Treasury has indicated that the intention of the tax is to create incentives to “change behaviour and encourage energy-efficiency measures” by “pricing the external costs associated with carbon dioxide (CO2) emissions.”   Since there is an existing levy of 3.5c/kWh on electricity generated from non-renewable sources National Treasury is considering “a gradual phasing out of the electricity levy as the carbon tax is phased in”. 

National Treasury has indicated an updated carbon tax policy paper to allow for further consultation will be published at the end of March 2013. 

National Treasury also announced an increase in the vehicle CO2 emissions tax from “R75 to R90 for every gram of emissions/km above 120 gCO2/km and, in the case of double cabs, from R100 to R125 for every gram/km in excess of 175 gCO2/km, effective from 1 April 2013.” 

In addition an extension of the exemption from tax of income from certified emission reductions was announced.  National Treasury indicates that the purpose of this exemption is “to stimulate the uptake of Clean Development Mechanism projects in South Africa”.  The exemption had been in place from 2009 to 2012 and has now been extended to 31st December 2020.

The environmental levy on incandescent light bulbs was also increased from R3 to R4 per bulb effective from 1 April 2013.

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Margaret McKenzie