The government has announced that as of 1 January 2019, a carbon tax will be implemented in South Africa. The proposed carbon tax amounts to approximately R120 ($10) per tonne of carbon.

Carbon tax effective January 2019The announcement has drawn mixed reactions. Trade union Solidarity has expressed concern about the carbon tax bill, but the University of Cape Town’s Energy Research Centre (ERC) has welcomed “the decision of the South African government to end years of deferral by setting a clear date”. Many other parties have added their voices to the arguments for and against the carbon tax.

Marius Croucamp, Solidarity’s Deputy General Secretary for the metal and engineering industry, contends that the proposed tax is a recipe for higher costs and economic inefficiency. “This tax discourages production and expansion of production. Given South Africa’s need for economic growth, this tax is a further restraint we cannot afford,” he said in a statement.

He added that the extra tax poses a serious threat to the sustainability of steel companies as the industry is already under major pressure. “Higher costs will make the industry even less competitive,” Croucamp said. “Higher steel costs could result in plants having to shut down and people losing their livelihood. Energy and fuel costs will also rise as a result of the tax, which would be another setback for consumers.”

However, the ERC believes a carbon tax is in South Africa’s national interest and that, by joining those countries moving to price carbon, South Africa is showing leadership. Despite this, the ERC believes the proposed tax rate of carbon dioxide-equivalent (CO2-eq) is too low, given that all taxpayers receive a 60% basic free allowance. Therefore, the effective tax rate starts at R48 per tonne of CO2-eq.

The ERC’s Professor Harald Winkler says that a simpler tax design would be better, as well as more effective. He proposes an effective tax rate adjusted in relation to our national mitigation goal. “A simpler and more effective design would be to tax the full amount of R120 per tonne and provide for a jobs and competitiveness programme, which would allow energy-intensive and trade-exposed taxpayers to claw back up to 50% of carbon-tax paid, provided they can demonstrate a contribution to increasing employment,” he told Parliament.

Image credit: Copyright: mikkolem / 123RF Stock Photo


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