Carbon tax may wipe out 70 000 jobs

DEVELOPMENT: MANY SOCIAL GOALS MAY ALSO SUFFER, EXPERTS WARN

Industry analysts warn that the proposed introduction of a carbon tax on emissions in 2015 could result in thousands of job losses – as high as 70 000 in the first year.

Despite a continuous national focus on job-creation, National Treasury has proposed that a carbon tax be levied at R120 per ton of CO2 emitted and that it should increase by 10% a year. A general taxfree threshold of 60% will apply.

Speaking at the South African Institute of Tax Practitioners’ (Sait) Indirect Tax Summit, Pietman Roos, policy consultant at the South African Chamber of Commerce and Industry (Sacci), warned that the introduction of the tax would create massive unemployment.

“It is not going to be frictional, it is going to be deep-seated and it is going to be difficult to redress it if the labour market is not flexible.”

Roos said the tax would force heavy industries and companies that are high emitters to reduce their workforce. These workers would then need to be absorbed in other sectors of the economy.

If SA had a dynamic, flexible labour market this may have worked, but SA did not have a flexible market, he said.

Prof Philip Lloyd, managing director at Industrial & Petrochemical Consultants and professor at the Energy Institute of the Cape Peninsula University of Technology, said while National Treasury had tried to quantify the impact of the tax on gross domestic product, other econometric studies suggested they’d been “a litt le optimistic”. One study estimated job losses would be in the order of 70 000 in the first year of introduction, he said.

The proposal goes counter to all South Africa’s developmental policies. For sustainable development to be successful, there had to be a balance between economic, social and ecological development, he said. The carbon tax did not focus on social and economic development, but rather tried to fi x a perceived ecological problem.

Roos said the proposal did not provide long-term certainty. The assumption was that the tax would increase after the initial phase, which was set to end by De- cember 2019.

He said it was worrying the policy paper mentioned one of the world’s most efficient coal power plants as a potential benchmark.

It was also important that a carbon tax should be revenue neutral, Roos said.

This meant that, if the government was to recover, say, R100 from the economy in carbon taxes, it should spend that R100 on improving efficiency in industry so that the carbon tax would reduce over time. Although potential options were discussed, there were no specifics on how this could happen.

He said South Africa had a massive infrastructure problem and the introduction of the carbon tax would make it more expensive to roll out infrastructure.