One of Cyril Ramaphosa’s first acts as the re-elected South African president is the signing of the long-contested carbon bill, which aims to reduce pollution by taxing companies, manufacturers, and individuals for carbon emissions from industrial processes and activities. The tax will be implemented in two phases, with the first starting June 1, 2019, through December 31, 2022. The second phase begins from 2023 through 2030.
The carbon tax, planned since 2010, has been postponed thrice, under pressure from mining companies and state-owned power company, Eskom. A historic abundance of coal is to blame for the country’s high carbon economy.
Already one of Africa’s worst polluters, South Africa ranks fourteenth in the world. Ramaphosa’s administration is hoping this decision marks a turning point in that history. Inclusive of tax incentives at tidy percentages for efficient use of energy, the country hopes to become a low carbon economy.
According to a statement by the Treasury, “Climate change represents one of the biggest challenges facing humankind, and the primary objective of the carbon tax is to reduce greenhouse gas (GHG) emissions in a sustainable, cost-effective, and affordable manner. Government has outlined its strong commitment to play its part in global efforts to mitigate GHG emissions as outlined in the National Climate Change Response Policy (NCCRP) of 2011 and the National Development Plan (NDP) of 2012.”
Tina Costas, an environmental lawyer, told Businesstech that the tax will enforce the polluter-pays principle. Which means companies, individuals and public entities will be liable to pay the carbon tax if conducting an activity that results in the emission of GHGs above the prescribed emission thresholds.
Manufacturers and miners are being pushed towards investing in cleaner industrial processes. Previously, they had expressed concerns about the carbon tax raising electricity prices. But according to the Treasury, that won’t happen until the beginning of the second phase by 2023.
“The introduction of the carbon tax will also not have any impact on the price of electricity for the first phase. This will result in a relatively modest carbon tax rate ranging from R6 to R48 per tonne of CO2 equivalent emitted… to further provide current significant emitters time to transition their operations to cleaner technologies through investments in energy efficiency, renewables, and other low carbon measures,” the Treasury said.
Analysts agree that South Africa may be unprepared for the tax, but say there is no reason to wait. Franz Rentel, SA director of Climate Neutral Group, which works with organizations to help calculate and manage their carbon footprints, said, “The majority of SA corporates are not ready for the carbon tax but purchasing carbon tax offsets can reduce carbon tax payable by up to 20%. There is no longer any time to wait.”
The immediate impact of phase one of the carbon tax will see 10 and 9 cents increases in the per litre price of diesel and petrol respectively. The initial rate for phase one has been fixed at R120 per ton of carbon dioxide.
By Caleb Ajinomoh