Creecy agrees with Treasury’s approach of gradual carbon tax increases
Forestry, Fisheries and the Environment Minister Barbara Creecy has welcomed the announcement made by Finance Minister Enoch Godongwana related to the trajectory of carbon tax increases.
She believes gradual carbon tax increases will act as a powerful incentive for the development of appropriate plans to lower emissions.
Godongwana, in his 2022 Budget speech on February 23, extended the first phase of the carbon tax by three years to December 31, 2025, with mandatory carbon budgeting to come into effect on January 1, 2023.
Creecy says this gradual carbon tax increase approach is consistent with South Africa’s Low Emissions Development Strategy deposited to the United Nations Framework Convention on Climate Change in 2020.
“The carbon tax, along with industry targeted carbon budgets and sectoral emission targets, are part and parcel of the mix of mitigation measures aimed at reducing South Africa’s greenhouse-gas emissions profile.
“In October last year, South Africa announced its revised Nationally Determined Contribution (NDC), which aims to reduce carbon emissions to a trajectory range of between 350-million and 420-million tonnes of carbon dioxide equivalent (CO2e) by 2030,” she notes, adding that future increases of the carbon tax in the second phase from 2026 onwards will enhance the country’s ability to meet NDC targets.
To prepare South Africa for the structural transition to a climate-resilient economy, government proposes to progressively increase the carbon price every year by at least $1 to reach $20/t of CO2e by 2026.
For the second phase of the tax, government intends to increase the carbon price more rapidly. It is projected to reach $30/t of CO2e by 2030, accelerating higher every few years to up to $120/t of CO2e by 2050.
Treasury assures that basic tax-free allowances will also be gradually reduced to strengthen the price signals under the carbon tax from January 1, 2026, to December 31, 2030.
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