South Africa’s National Treasury publishes draft Carbon Tax Bill for public comment

Thursday, November 5, 2015

The National Treasury has released the Draft Carbon Tax Bill for public comment, providing the public and stakeholders at large, the opportunity to provide comments on the design and technical details of the carbon tax policy and administration. The published Draft Carbon Tax Bill is an output following a consultation process conducted over the past five years that was initiated with the 2010 discussion paper on carbon tax, and followed by the 2013 Carbon Tax Policy Paper and the 2014 Carbon Offsets Paper. The published draft Bill has therefore taken into account comments received in writing, and those noted from stakeholder engagement meetings and workshops, which included various stakeholders such as businesses, NGOs, academia, civil society and labour. The closing date for comments is the 15th of December 2015.

Following this comment period, a revised Bill incorporating the comments received will be submitted to Cabinet for approval and thereafter presented to Parliament in the course of its proceedings.

Revised Carbon Tax design

The carbon tax seeks to price carbon by obliging the polluter to carry the costs of carbon emissions, and contribute towards addressing any negative effects caused by such pollution. The revised Carbon Tax design detailed in the Draft Carbon Tax Bill includes:

  • A basic 60% tax-free threshold during the first phase of the carbon tax, from implementation date up to 2020
  • An additional 10% tax-free allowance for process emissions;
  • Additional tax-free allowance for trade exposed sectors of up to 10%;
  • Recognition for early actions and or efforts to reduce emissions that beat the industry average in the form of a tax-free allowance of up to 5%;
  • A carbon offsets tax-free allowance of 5 to 10%;
  • To recognise the role of carbon budgets, an additional 5 % tax free allowance for companies participating in phase 1 (up to 2020) of the carbon budgeting system;
  • The combined effect of all of the above tax-free thresholds will be capped at 95%; and
  • An initial marginal carbon tax rate of R120 per ton CO2e will apply. Taking into account all of the above tax-free thresholds, the effective carbon tax rate will however vary between R6 and R48 per ton CO2e.

The proposed tax-free exemptions range between 60% and 95% of total emissions, meaning that the carbon tax would be imposed on only 5% to 40% of actual emissions up to 2020. These exemptions could possibly be reduced or replaced after this initial phase.

Carbon Tax and the economy

The carbon tax is a core component in the implementing of government policy on climate change as outlined in the 2011 National Climate Change Response Policy and the National Development Plan. South Africa has committed to reduce greenhouse gas emissions below business as usual by 34% by year 2020 and 42% by year 2025 including adaptation measures. The carbon tax is being developed with the aim of decreasing anthropogenic greenhouse gas emissions which contribute to global climate change, by changing the behaviour of South African companies and firms, and through an incentivised process motivate a shift towards cleaner technology when replacing or renewing machinery, technology or processes. Implementation will however be gradually phased-in to ensure that South Africa transitions to a low carbon, climate resilient economy in a cost effective and economically efficient manner. Different economic modelling exercises are currently being carried out by various stakeholders to estimate the impact of the carbon tax. Overall the tax has been designed to ensure that through various revenue recycling measures, the economic impacts will be revenue neutral, and take into account the various distressed sectors such as mining and electricity, to ensure that these sectors are not adversely affected.

Implementation and Administration

The carbon tax will be implemented together with complementary measures such as a reduction in the electricity levy and other revenue recycling measures. The carbon tax will be administered by the South African Revenue Service (SARS). SARS will liaise with the Department of Environmental Affairs (DEA) and be able to access the National Atmospheric Emissions Information System which will contain emissions information as reported by companies.

Comments Submission

The Draft Carbon Tax Bill is available for downloading from the National Treasury website. Written comments should be submitted by email to Dr. Memory Machingambi by the close of business on 15 December 2015.


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