Clarity on the design of South Africa’s carbon tax policy could be a feature of the 2014/15 National Budget to be presented by Finance Minister Pravin Gordhan in February, professional services firm Deloitte said at its pre-Budget event on Wednesday.
“If announced, the new look carbon tax policy will probably present improved linkage between the proposed carbon tax pricing mechanism and the desired emission reduction outcomes (DEROs) proposed in the National Climate Change Response Policy,” Deloitte director Izak Swart said.
Deloitte manager Barry Drotsche explained that the DEROs, as mentioned in the National Climate Change Response Policy, considered sectors that played a vital role in the country’s emissions space, identifying what could be done to bring about change in those sectors.
Another aspect that was also mentioned in the response policy, that could be taken into account when refining carbon tax pricing measures, was that of a carbon budget, a tax-free threshold, or cap placed on emissions, that was in line with the limitations of the country’s technologies.
For example, South African technologies, such as coal-to-liquids processes, were some of the most advanced in the world; however, it had high emission rates and, therefore, the country would have to decide whether it wanted to close down the sector and lose that revenue to reduce the country’s carbon emissions, Drotsche noted.
Further, the Department of Environmental Affairs (DEA) was also expected to in future be more prominent in the measurement, reporting and verification of greenhouse gases, with emphasis being placed on an updated greenhouse-gases inventory, he said.
“It is hoped that the desired emission reduction outcomes and the national greenhouse-gas emissions trajectory range, as published by the DEA in 2011, will be instrumental in determining the price path for carbon tax,” Swart said, adding that this would reinforce carbon tax as a policy instrument, as opposed to being purely a means of collecting additional revenue for government coffers.
Meanwhile, Drotsche added that the Budget Speech could potentially also provide greater clarity on the carbon tax rate and tax-free thresholds adjustments post 2019, as the Carbon Tax Policy paper did not indicate what carbon tax measures would entail in the longer term.