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Jun 02, 2011

No ‘green’ earmarking plan for carbon tax revenue

National Treasury environmental and fuel taxes director Sharlin Hemraj discusses South Africa's proposed carbon tax policy. Camera Work: Nicholas Boyd. Editing: Darlene Creamer.
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Should South Africa, which produced about 500-million tons of carbon dioxide equivalents (CO2e) yearly, move ahead with the implementation of a carbon tax, the revenue generated would not necessarily be set aside specifically for environmental projects, National Treasury environmental and fuel taxes director Sharlin Hemraj stressed on Thursday.

The National Treasury, which aims to conclude its carbon tax policy ahead of the 2012 Budget, currently favoured a tax on carbon emissions, and its discussion document proposed R75/t CO2e, increasing to around R200/t CO2e over time.

“The imposition of a tax is that money should be spent in a certain way and one of the common misconceptions is that revenue will be used to finance specific environmental activities with the implementation of a tax,” she explained at the Transport Forum, held in Johannesburg.

National Treasury generally sought to eschew such earmarking to enable it to direct resources to a range of priorities, from boosting education to reducing the level of poverty in the country - money that would be spent accordingly to close the gap on challenges that strained economic growth.

However, Hemraj explained that revenue from the tax could also fund environmental projects that focused on mitigating greenhouse-gas emissions, provided there were solid business proposals.

“In the discussion paper, it is indicated that National Treasury does not support strict earmarking. But, we are looking into directing funds through different line departments and then considering those projects on merit. Full earmarking of revenues is not in line with Treasury policy, but it is recognised that funding can be channelled for specific on budget programmes that contribute to reducing emissions,” she explained.

Hemraj also pointed out that South Africa would not necessarily present a complete low-carbon strategy at the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, or COP17, to be held in Durban, in November. But the country would flag the efforts it was making in this area.

For South Africa to shift to a pure emission tax, a long-term intervention would require emission levels from different processes to be verified. Legislation making reporting mandatory would be required and would need to be developed by the Department of Environmental Affairs. Enforcement capacity would also have to be created.

National Treasury was behind with its schedule for finalising the design and modelling of the carbon tax options, which should be completed by July.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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