The paper, an update of a discussion paper released in december 2010, described in detail one of south africas efforts to respond to anthropogenic climate change and transition to a green economy. May 10, 2019 the south african government has introduced a carbon tax effective 1 june 2019 with the objective to reduce harmful greenhouse gas emissions. Stakeholder engagement in designing the south africa carbon tax effecs of e carbon ta list of boxes box 1. Revenue from a carbon tax a simple spreadsheet model is used to estimate revenue available from a carbon tax, given different emission projections hereafter referred to as carbon tax revenue scenarios. It has been clear since at least 20 that south africa would opt for a carbon tax in order to price carbon, as opposed to an emissions trading scheme. Government has indicated that the proposed carbon tax will be implemented by mid2016.
Recognising the importance of reducing carbon emissions and foreseeing the benefits that a low carbon economy can bring, the south african government has committed to ambitious greenhouse gas emissions reductions of 34% by 2020 and 42% by 2025 against a business as usual curve. Essentially, the carbon tax will be levied in respect of the greenhouse gasses ghgs that result from. As south africas carbon tax is delayed again what is the. It is globally recognized as a core carbon pricing policyinstrument for reducing. Cliffe dekker hofmeyr no more delays, carbon tax in south. Since much of mitigation in south africa will occur in the energy sector, reducing energy poverty may be an obvious area 4349. The reason for the implementation of carbon tax is twofold. Expected to come into effect on 1 june 2019, the carbon tax is expected to lower south african emissions but could have a knockon effect on south african consumers down the line. Research alternatives and develop potential funding plans. Summary of the carbon tax bill part 1 clause 1 definitions. Carbon tax will be levied on the sum of greenhouse gas emissions from fuel combustion, industrial processes, and.
Ignoring all potential benefits, the tax reduces national welfare by about 1. The president has signed the carbon tax act into law, which will be effective from 1 june 2019. Pdf introducing carbon taxes in south africa researchgate. Carbon tax in south africa no longer just hot air the. Generally the carbon tax will result in emission reductions, and depending on revenue recycling assumptions the impact on economic output growth will be neutral to a small negative. A tax aimed at cutting pollution it is set for its introduction to south africa, but what is it all about. In 2010, it began a process to develop a carbon tax to help put a price on carbon, and incentivise. While transitioning, 60% of emissions will be taxexempt up to 2022 to lessen the impact on industry. Tax alert get ready for carbon tax pwc south africa. Norway carbon tax act concerning sales tax and act relating to tax on discharge of co 2 tax in the petroleum activity on the continental shelf 1990 70 portugal carbon tax and green taxation reform law no. Carbon taxes in south africa overseas development institute. During the budget, the minister confirmed that the carbon tax will be implemented on 01 june 2019. The economic implications of introducing carbon taxes in.
The interface between a carbon budget approach and a carbon tax. Between 2015 and 2020 a basic tax free threshold of 60% is being proposed as well as offset amounts of 520% dependent on the industry. Taxpayers are liable for carbon tax should they conduct one of the activities in schedule 3 of the carbon tax act act no. Recognising the importance of reducing carbon emissions and foreseeing the benefits that a low carbon economy can bring, the south african government has committed to ambitious greenhouse gas emissions reductions of 34% by 2020 and 42% by 2025. The ndc requires that emissions peak in 2020 to 2025, plateau for a ten year. It enables south africa to meet its nationallydetermined contribution commitments as required by the 2015 paris agreement on climate change paris agreement which comes into operation in 2020, and aims to collectively address the threat of climate change within the context of sustainable development and includes efforts to eradicate. The interface between a carbon budget approach and a. Clause 2 imposes the carbon tax to be paid to the national revenue fund. Today the south african finance minister, tito mboweni, postponed the implementation of south africas carbon tax for six months in his first mediumterm budget policy statement given on behalf of the south african treasury. In the south african context, a carbon tax is more appropriate than a capandtrade scheme because of the oligopolistic nature of the energy sector. National treasury, 2010b a carbon tax is considered to be a recommended measure in an effort to reduce south africas carbon emissions as it is an instrument which is economically efficient in that it creates a broad. South africas carbon tax policy proposal an update. Carbon tax will be levied on the sum of greenhouse gas emissions from fuel combustion, industrial processes, and fugitive.
Carbon tax act 15 of 2019 english afrikaans south african. With south africas commitment to tackling climate change, the tax engenders the polluterpays principle. There must be levied and collected for the benefit of the national revenue fund, a tax to be known as the carbon tax. Following a discussion of the motivations for considering.
It is a tax aimed at businesses and companies that emit a high level. Development of a south african carbon offset trading. South african greenhouse gas emissions south africa is ranked in the worst 20 countries by total emissions of carbon dioxide. The purpose of this report is to then consider how qbis can be combined with a carbon tax to support the effective and efficient achievement of deros.
We evaluate potential impacts using a dynamic economywide model linked to an energy sector model. The climate change response white paper makes provision for both carbon tax and offsets to be developed in the journey towards a low carbon, climate resilient south africa. South africa is considering introducing carbon taxes to reduce greenhouse gas emissions. Understanding the impact of a low carbon transition on. The costs and benefits of extending south africas climate ambition 71 6. South africa is not alone in its climate and carbon tax endeavours by november 2018, 46 national and 24 subnational jurisdictions had already put a. The timing of all risks external and internal in south africa 76 6. Finance minister tito mboweni delivered his maiden budget speech on 20 february 2019. Tax policy and carbon emissions in south africa1 shantayanan devarajan, delfin s.
The statutory rates at which these taxes apply differ across fuels and different users, as shown in the following table. The treasury published a second draft in december 2017, for consultation until march 2018. Erc welcomes the setting of a clear date for implementation, which ends years of deferral of implementation of a carbon tax. In february 2019, south africas parliament approved the longdelayed carbon tax bill. South africa exploring the 2016 planned carbon emissions tax. Modelling several studies have been undertaken to estimate the impact of carbon pricing in south africa. South africas national treasury released a carbon tax policy paper for public comment in may 20 national treasury, 20. How the new carbon tax will affect petrol and electricity. Clause 3 specifies the persons that are subject to carbon tax,namely those persons entities conducting activities in south africa resulting in greenhouse gas. South african carbon tax bill carbon footprint measurement. A marketbased climate policy case study background south africa emitted an estimated 544 mt of carbon dioxide equivalent co 2 e according to its latest published inventory in 20101. Pdf tax policy to reduce carbon emissions in south africa. The south african carbon tax turn carbon tax risk into opportunities what is a carbon tax.
The operation of emission generation facilities at a combined. The south african government has introduced a carbon tax effective 1 june 2019 with the objective to reduce harmful greenhouse gas emissions. This report begins with the premise that a carbon tax will be introduced as the mainstay of south africas carbon mitigation effort. A burning issue finance minister tito mboweni delivered his maiden budget speech on 20 february 2019. Assist with interpretation of the bill by explaining certain terminology used in the bill. Aug 23, 2019 south africa is not alone in its climate and carbon tax endeavours by november 2018, 46 national and 24 subnational jurisdictions had already put a price on carbon.
Moreover, labor market distortions such as labor market segmentation or unemployment will likely dominate the welfare and equity implications of a carbon tax for south africa. South africas carbon tax policy proposal an update national. South africa has also proposed legislation pdf for a carbon tax, which was originally mooted in a national treasury discussion paper in 2010. The draft bill now sets out the mechanics of the carbon tax.
South african ct overview administration of the carbon tax act. South africa is considering introducing a carbon tax to reduce greenhouse gas emissions. The economic implications of introducing carbon taxes in south. The ct is administered as if the ct is an environmental levy as contemplated in section 54a of the customs and excise act. The term carbon tax is also used to refer to a carbon dioxide equivalent tax, the latter of which is quite similar but can be placed on any type of greenhouse gas or combination of greenhouse gases, emitted by any economic sector.
This being the case, if south africa were able to remove some of the distortions. Structure of the south african carbon tax proposal. A significant proportion of these emissions can be attributed to fossil fuel combustion. A person is a a taxpayer for the purposes of this act. Cliffe dekker hofmeyr no more delays, carbon tax in. Energy and carbon taxes in south africa, a range of taxes apply to oil products. Carbon tax act 15 of 2019 south african government. The carbon tax policy paper proposed that the tax rate will be r120 per ton of co2. Oct 27, 2017 as part of south africassubmission of the ndc, the carbon tax was noted as an important component of the countrysmitigation policy strategy. Reducing energy poverty through carbon tax revenues in south. Carbon tax effective from 1 june 2019 following presidential assent. The implementation date had previously been set as 1 january 2019. The carbon tax act gives effect to the polluter paysprinciple for large emitters and helps to ensure that firms. We evaluate potential impacts using a dynamic economywide model.
Jun 01, 2019 the president has signed the carbon tax act into law, which will be effective from 1 june 2019. While transitioning, 60% of emissions will be tax exempt up to 2022 to lessen the impact on industry. With south africa s commitment to tackling climate change, the tax engenders the polluterpays principle. These taxes are included in the energy tax profiles of south africa, but the tax on.
Between 2015 and 2020 a basic taxfree threshold of 60% is being proposed as well as offset amounts of 520% dependent on the industry. It is globally recognized as a core carbon pricing policyinstrument for reducing greenhouse gas emissions which are causing climate change. It is now imperative that clear direction is provided so that investors, companies and individuals can plan accordingly. Introducing carbon taxes in south africa sciencedirect. There must be levied and collected for the benefit of the national. This act is called the carbon tax act, 2017, and comes into operation on a date determined by the minister by notice in the gazette. A brief overview of the carbon tax act, which took effect on. Pdf south africa is considering introducing a carbon tax to reduce greenhouse gas emissions. Carbon taxes in south africa the political and technical challenges of pricing carbon smita nakhooda usual dev south africa has been a pioneer on climate change policy internationally, despite being a carbon intensive developing country. Not only would implementing a carbon tax support the emergence of global policy, but it would also serve to cement south africas position as a leader on the continent. High kpmg south africa tax communication february 2019.
As south africas carbon tax is delayed again what is the story so far. Carbon tax in south africa south african tax guide. The rate will increase at 10% a year during the first phase of implementation. Implications of ghg mitigation objectives for carbon tax design 43 box 4.
Tax alert indirect taxes pwc 2 carbon tax act same ipcc code occurs. Noting that south africa may be one of the few african countries that could contribute to mitigating climate change, the authors explore the impact of a carbon tax. Reducing energy poverty through carbon tax revenues in. Africas longrun interests, including those of south africa, favour effective global mitigation. It enables south africa to meet its nationallydetermined contribution commitments as required by the 2015 paris agreement on climate change paris agreement which comes into operation in 2020, and aims to collectively address the threat of climate change within the context of sustainable development and includes efforts to. Tax policy to reduce carbon emissions in south africa. The carbon tax acts implementation certainly draws attention to the changing landscape and will have both financial and administrative consequences for companies manufacturing in south africa. Carbon tax policy context south africa voluntary committed at cop 15 in 2009 to curb ghg emissions by 34% by 2020 and 42% by 2025 below the bau trajectory subject to support from developed. A carbon tax is a tax levied on the carbon content of fuels transport and energy sector and, like carbon emissions trading, is a form of carbon pricing. The faster principles for successful carbon pricing box 2. The carbon tax should help south africa to meet its mitigation goals and to unlock the opportunities of a low carbon economy.
The additional carbon tax will also trickle down into cost of living everyday i. Jul 23, 2019 the carbon tax bill was tabled in parliament late 2018 for consideration, to be implemented mid 2019. Calculation of amount of tax payable part ii allowances 7. The carbon tax bill was tabled in parliament late 2018 for consideration, to be implemented mid 2019.
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