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Carbon Tax in South Africa – Not much time left to prepare …

Written by Silvana Claassen, Senior Carbon Advisor at Climate Neutral Group

National Treasury presented an update on the status of South Africa’s proposed carbon tax on 13 September during public hearings held by the Standing Committee on Finance. Since the release of the Draft Carbon Tax Bill in December last year, stakeholder comments have been collated and considered whilst final amendments to the proposed Bill are being incorporated. The Bill is now ready to be tabled and enactment is anticipated early 2019. It may be that the projected implementation date of 1 January 2019 is not feasible and might be postponed with a few months (given South Africa’s NDC commitments).

The NDC (Nationally Determined Contribution) is a key document outlining South Africa’s minimal commitments to the international community in terms of its contribution to the global effort to prevent greenhouse gas concentrations in the atmosphere exceeding levels that would cause irreversible and unsustainable impacts to the planet. The NDC is based on a number of elements: greenhouse gas emissions reduction targets; an emissions reduction trajectory; time frames; and a policy framework.

Historically, South Africa’s emission reduction trajectory has been relative to a business as usual scenario. But through the NDC, South Africa has moved away from this and adopted an absolute target framework, in accordance with a so-called Peak Plateau Decline (PPD) trajectory. “The time-frames within the PPD trajectory range are 2025 and 2030, in which emissions will be in a range between 398 and 614 MtCO2e” (South Africa’s NDC). To put in perspective: in 2016, South Africa’s annual emissions were 468 MtCO2e (Global Carbon Atlas).

The NDC presents a mix of measures to be deployed in order to achieve the stated pledges. Among the mix of measures there is the carbon tax, carbon budgets, the obligation for emitters to submit emission reduction plans and strategies, as well as mandatory reporting of annual greenhouse gases by companies exceeding pre-defined emissions thresholds. A number of these measures have already been promulgated and have allowed for government to gain thorough insight in South Africa’s sources of greenhouse gas emissions. In turn this insight has enabled the development of an effective carbon tax proposition and the allocation of carbon budgets.

National Treasury and DEA have explicitly stated that in case the envisaged carbon tax implementation date of 1 January 2019 has to be moved, “it will not be moved too late given South Africa’s NDC commitments”. This is not surprising given that the NDC has laid down a five-year period, 2016-2020 to be specific, for the development and implementation of the proposed mix of measures. This is conforming the Paris Agreement timelines: coming into effect in 2020.

The carbon tax has been designed by taking into account a phased approach, so that companies that emit greenhouse gas emissions can take measures to start reducing their carbon footprint or making provision to utilise allowance-mechanisms such as offsetting. By not acting now, companies can face a situation where they will only be able to options available at the time of the carbon tax being fact: paying tax!

Please visit our page; Carbon Tax in a nutshell if you have any more questions about the carbon tax and click here for an overview of our carbon tax service offerings.