Jul 20, 2010
SA business should investigate carbon tax implicationsBack
Engineering|Africa|Energy|PROJECT|System|Webber Wentzel|Africa|South Africa|Corporate Law|Energy|Environmental|Scandinavia
© Reuse this
The National Treasury has previously confirmed with Engineering News Online that the discussion document on carbon taxes would be released for public comment by the end of July or the beginning of August.
Treasury head of communications Jabulani Sikhakhane explained that comments on the document would be captured, and where ever possible, the document would be refined to reflect comments received. It would then be submitted to Cabinet for endorsement.
He said that any changes, or announcements, would be made at the time of the Budget or the Medium Term Budget Policy Statement.
Carbon tax is described as an environmental tax on emissions of greenhouse gases, and it is a flat tax, as opposed to a progressive tax.
The three ways to levy a carbon tax were: to tax the final consumer; to tax dirty output; or to tax the producer of the emissions. The discussion document would outline the approach that the country intended to pursue.
Webber Wentzel partner Hennie Bester recommended that a unified approach among business was the best way to understand how viable the carbon tax was in achieving its policy aims.
"However, a unified approach will only be possible if business players educate themselves on the important issues arising from a carbon tax, what the international best practices around these are, and how it should fit in with an overall mitigation policy."
REVENUE-NEUTRAL TAX PREFERRED
Bester hoped that such a tax would be revenue neutral, but warned that businesses should plan for the alterative scenario as well.
Thus, if emissions were taxed, tax collection elsewhere would be eased, for example there could be rebates or incentives for low-carbon dioxide (CO2) emitting growth.
Also, it would focus more clearly on the policy consideration underlying the tax.
Bester said that the imminent introduction of the CO2 vehicle emissions tax was a case in point: the overall observation was that this tax was a new source of State revenue - because it was not accompanied by corresponding relief elsewhere.
"Insisting on revenue neutrality is a reliable method for keeping the State honest about the purported policies underlying these new taxes," Bester said.
In Scandinavia for example, the desire to reduce very high personal income tax created a favourable environment of the introduction of a carbon tax.
South Africa's fiscal policy has actively aimed at addressing "bracket creep" for personal income taxpayers, and a carbon tax could further boost such policy, although, added Webber Wentzel, all of that could change in the context of the current global financial crisis.
TAX BASE, AND RATE, IMPORTANT
Bester says that the impact of a carbon tax depended on its rate and its base - for example, whether it would be imposed on emitters of carbon, producers of carbon intensive energy, or on the users of such energy.
Extensive modelling in this regard, according to the Long term Mitigation Scenario (LTMS) planning project of the South African Cabinet, has shown that a carbon tax was a highly effective instrument in combination with other policy mechanisms such as a cap-and-trade mechanism, assistance programmes, exemptions and incentives.
High emitters would be expected to seek exemption or holiday periods from the carbon tax and the support for this from low emitters would be very significant.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Policy and Enforcement News
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
South African construction company Group Five says work on the rehabilitation of the 800 km stretch of the Plumtree–Mutare highway, in Zimbabwe, should be completed by the end of this year. Giving evidence before the Parliamentary Porfolio Committee on Transport...
The Space Operations division of the South African National Space Agency (Sansa) revealed on July 17 that it had supported the successful launch of the US National Aeronautics and Space Administration’s Orbiting Carbon Observatory-2 (OCO-2) satellite on July 2. The...
Phase 1A of Johannesburg’s Rea Vaya bus rapid transit (BRT) system should carry around 42 000 people a day, while it was been expected that Phase 1B, rolled out last year, would add another 60 000 daily passengers. However, the entire system is currently carrying...
A stormwater project in Bedforview, east of Johannesburg, has stalled for eight months after project managers in the Ekurhuleni municipality resigned and municipal managers were placed on special leave without designating replacements. Construction to reinforce the...
The design of the Beit Bridge border post is the biggest impediment to efficient freight movement between Zimbabwe and South Africa, says Cross-border Road Transport Agency CEO Sipho Khumalo. Beit Bridge is the busiest border post in Africa. A research study on the...