South African carbon tax bill heads for parliament vote after committee approval

Originally published on Carbon Pulse on February 5, 2019

A South African parliamentary committee on Tuesday approved the country’s carbon tax bill, moving the long-awaited levy a step closer to becoming law.

The Finance Standing Committee adopted the legislation, which if approved by the National Assembly and National Council of Provinces, and then signed by the president, will see the 120 rand ($8.97) per tonne tax enter into force on June 1 of this year.

The panel also approved a number of amendments made to the bill in December, according to consultancy EcoMetrix Africa.

“With this last technical hurdle overcome … it is now up to the political will in parliament,” said EcoMetrix partner Henk Sa, adding that, after gauging sentiment at today’s committee meeting, he believes that lawmakers will give the bill final approval.

Under current legislation, all emitters will face an effective rate of R6-48/tonne based on the suite of exemptions available and the admissibility of offsets, with some companies able to reduce their tax burdens by as much as 95%.

It’s not clear when the full parliament will vote on the bill, but there are a number of plenary sessions scheduled during the four weeks starting Feb. 19.

The term of the current National Assembly officially ends on May 6, but experts expect it to wrap up well before that as the country holds its general elections later that month.

During Tuesday’s committee session, a representative from South Africa’s Treasury said it will hold a review of the tax after three years of implementation, evaluating the headline rate and exemption thresholds while assessing the levy’s effectiveness in reducing greenhouse gas emissions.

The review will also consider how to better align the tax with other environmental initiatives – including South Africa’s carbon budget programme – and whether to expand its reach to other sectors.

The budgets will feed into sectoral targets that will help South Africa meet its Paris Agreement pledge to peak its GHGs in 2020-2025, plateau for a 10-year period from 2025 to 2035, and then cut them from 2036 onwards.

FACTFILE:

  • South Africa’s national carbon tax was first floated in 2010, a year before the country hosted the annual UN climate talks. But progress has been slow, with the government only publishing the first draft in Nov. 2015.
  • The tax will affect virtually all areas of South Africa’s economy, covering most stationary and non-stationary sources and applying to fossil fuel combustion, fugitive emissions, and industrial processes.
  • Waste, agriculture, forestry, and other land-use sectors are exempt from paying it or performing MRV until 2022 due to the difficulty in accurately measuring emissions from those sources.
  • A basic tax-free allowance of 60% is offered to all emitters, with an additional 10% for having process or fugitive emissions.
  • Another variable allowance of up to 10% is available for trade-exposed sectors, with an additional 5% available for above-average performance relating to sectoral benchmarks.
  • Each emitter has an offset usage limit of 5% or 10%, depending on their sector. Credits from projects certified under the CDM, Gold Standard, and Verified Carbon Standard (Verra) will be allowed providing they meet certain criteria.
  • Beyond that, a further 5% can be applied by companies that have developed an annual carbon budget and report it to the government.

How Climate Neutral Group can help

We are a leading carbon offsetting specialists providing carbon management and offsetting services, as well as being an established carbon tax consultant in South Africa.

Contact us to find out how we can assist to ensure that you comply with regulations and become a climate leader.

 

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