The 2009 Budget gave heightened priority to environmental fiscal reform, and noted that as mitigating climate change moved higher up the global agenda, South Africa would focus on transforming its environmental profile over the longer term.

The 2009 Budget provided R45-million to Working for Energy, a new programme that uses biomass to generate electricity. The programme was expected to create 230 000 person workdays by 2011/12.

A further R30-million was made available to support research on mitigation and adaptation strategies that would lead towards the development of the national climate change response policy.

Over the long term, environmental considerations would affect the sustainability of growth, and government said that it would promote efficient use of energy and water resources by producers and households, alongside measures to mitigate the effects of climate change.

The government further noted that it has launched several initiatives, including programmes to improve energy efficiency, reduce carbon emissions (particularly in the transport sector) and support more environmentally advanced technologies in power generation.

The 2008 Adjustments Budget provided R180-million to Eskom for the roll out of the electricity demand-side management programme, which focuses on replacing incandescent light bulbs with compact fluorescent light bulbs and the exploration of new energy sources. Over the three-year Medium Term Expenditure Framework, R675-million was allocated to municipalities for electricity demand-side management through a conditional grant.

“Prices that reflect economic cost and well-structured environmental taxes should provide incentives for efficiency improvements and new investment,” the National Treasury said.

ENVIRONMENTAL FISCAL REFORM

“Climate change requires both global and domestic policy responses. Internationally, government is playing an important role in the post- 2012 Kyoto Protocol negotiation process,” said Finance Minister Trevor Manuel.

At the domestic level, environmental challenges were likely to be aggravated by economic growth if natural resources were not adequately managed. These include: excessive greenhouse gas emissions, large-scale release of local pollutants that result in poor air quality, inappropriate land use that leads to land degradation and biodiversity loss, deteriorating water quality and increasing levels of solid waste generation.

A number of ‘green’ market based instruments were proposed by the National Treasury, and these included incentives for use of energy efficient equipment, taxation of incandescent lightbulbs, making the sale of certified emission reductions tax-exempt, motor vehicle ad valorem excise duties, increased international air departure tax, and increasing the plastic shopping bag levy. (Make link to other story)

The National Treasury noted that in recent years, the role of market-based instruments has gained prominence in addressing environmental concerns. Such instruments, which include taxes, charges and tradable permits, use the price mechanism to deter environmentally detrimental activity and encourage improved environmental-management practices.