The South African Chamber of Commerce and Industry (Sacci) is “concerned” over the potentially negative economic impact of the National Treasury’s proposed carbon tax.

This follows the release of a Carbon Tax Policy Paper by Treasury on May 2, which outlined that South Africa was set to join Australia, Japan and India by phasing in a carbon tax from January 1, 2015, as part of the country’s efforts to mitigate the effects of climate change and encourage energy efficiency measures.

The paper specified a carbon tax rate of R120/t of carbon dioxide-equivalent emissions, increasing at 10% a year during the first phase – from 2015 to 2019.

However, Sacci CEO Neren Rau believed the economic impact of such a tax would be “significant”, and may have “severe” effects on the country’s level of international competitiveness and job creation.

“While Sacci is supportive of measures to reduce carbon emissions, in principle, these measures should remain tax neutral. There are serious doubts as to whether the paper accurately reflects the diverse and complex economic impact of a carbon tax on South Africa,” he said in a statement on Monday.

Further criticisms levelled by the chamber included the fact that the paper contained little detail or commitment to revenue recycling options, such as tax credits for investment in energy efficient machinery.

Moreover, Sacci was concerned that, as the carbon tax would be sizeable and revenue recycling was still unclear, the tax would not be applied to mitigation.
In addition, the policy paper “underestimated” the rigidity of the labour market and, by extension, the ability of business to absorb dismissed workers from energy intensive industries.

“The document accepts that investors need certainty over the medium to long term, yet is not willing to commit to a taxation schedule beyond 2020,” Rau averred.

Sacci said it would continue to engage with the National Treasury to develop a policy solution to climate change that would not endanger economic growth and job creation.