Clarity sought on carbon tax bill
• Industry is engaging with the Treasury amid concern about alignment of proposed laws with other climate-change mitigation tools
Uncertainty remains about some key aspects of the proposed carbon tax despite the Treasury’s mid-December release of a second draft Carbon Tax Bill for comment.
Uncertainty remains about some key aspects of the proposed carbon tax despite the mid-December release by the Treasury of a second draft Carbon Tax Bill for comment.
The tax, which is designed to meet SA’s international climatechange commitments by putting a price on greenhouse gas emissions, was postponed several times, partly because of the weak state of the economy. The tax is likely to be passed on to consumers in the price of goods and services.
The Treasury is inviting public comment on the second draft by March 9. The implementation date would be announced in the 2018 or 2019 budget.
The previous draft proposed introducing the tax in phases at an initial rate of R120 a tonne of carbon dioxide emissions. With offsets, it would be about R6 to R48 a tonne. The rate is unchanged in the second draft, with reduction for certain industrial businesses, fugitive emissions, trade exposure and carbon offsets.
To ensure the price of electricity is unaffected in the first phase, the electricity generation levy and renewable electricity premium will be reduced or credited. There will be a review of the tax after the first three years, the Treasury said.
The Industry Task Team on Climate Change, which represents the same companies as the Energy Intensive Users Group, said it was reviewing the second draft bill and developing a formal position.
Despite extensive consultation with the Treasury, some key concerns of the task team remained. These included the lack of clear alignment between the carbon tax and other climate change mitigation instruments after 2020, which the Treasury had committed to; the unclear duration of the first phase of the tax, which was problematic given other climate change mitigation instruments; and that a number of methodologies needed to implement the tax were still under development.
The task team was still engaging with the Treasury on these issues, it said.
Deloitte’s director of global investment and innovation incentives, Izak Swart, said the socioeconomic study with the release of the draft showed carbon tax would have a slight negative effect on GDP growth, meaning the overall effect on investors was likely to be negative for the first few years.
The proposed tax would make renewable energy and energy-efficiency industries more sustainable and competitive than fossil fuels and would encourage some capital investment, Swart said.
But for heavy industry, any additional tax would be negative. Certain industries, especially those in which a product or manufacturing process is reliant on carbon and cannot be changed, will be heavily affected by the proposed tax.
“It may be best to exempt process emissions [emissions relating to product or manufacturing processes] in total, which is the case internationally,” Swart said.
Certainty about the implementation date of the carbon tax would help investors with their planning and investment decisions, he said.
More certainty was also needed on the package of tax incentives and revenue recycling measures aimed at minimising the effect of the first phase of the carbon tax.