JOHANNESBURG – The introduction of the controversial carbon tax has been postponed to 2016.
According to the Budget Review 2014 government will propose several adjustments to the policy package before it is implemented.
It will implement the carbon tax and reduce the electricity levy at the same time, with the net tax burden being low in the first five years of implementation, rising slowly thereafter and more steeply after 10 years.
The announcement follows the publication of a Carbon Tax Policy Paper in May last year. It proposed that a carbon tax be levied at R120 per ton of CO2 emitted from January 1, 2015 and that it should increase by 10% per annum.
The proposal has been widely criticised with some industry commentators suggesting that the tax would cripple those industries that are already struggling with competitiveness issues.
The tax would affect everybody that uses a lot of energy, but especially large emitters such as Eskom and Sasol. Preliminary estimates have suggested that the tax would lead to an increase of around 8% in the electricity price and that it could add up to an additional R20bn per annum to state coffers.
According to the Budget Review 2014, National Treasury has received more than 100 written comments on the issue following the publication of the policy paper. Two public workshops have since been held as well as a number of bilateral meetings.
“Overall, the comments acknowledged the need for a carbon pricing mechanism to reduce greenhouse gas emissions and address climate change. Ninety-four per cent of respondents support the policy intent, and more than half are in favour of the carbon tax, with some suggesting changes to improve its effectiveness and minimise negative economic consequences,” the review states.
The Budget Review notes that several adjustments to the policy package will be proposed. These include:
- Reducing Eskom’s tax liability, with a credit for the renewable energy premium, limiting the potential effect of the tax on electricity prices.
- Lowering the current electricity levy.
- Addressing concerns about international competitiveness, including a formula to adjust the basic percentage tax-free threshold to reward overperformance.
- Refining the research and development tax incentive to provide for related green technology.
- Using firms’ carbon offsets to reduce their carbon tax liability by between 5% and 10% of actual emissions, as outlined in the soon-to-be-published carbon offsets policy paper.
- Minimising the effect on households by providing subsidies to install solar water geysers and improve public transport.
- Using some of the revenue generated from the carbon tax to fund the energy-efficiency tax incentive, which began operating on 1 November 2013.
- Aligning reporting and classification of greenhouse gas emissions for tax purposes with mandatory emissions reporting to the Department of Environmental Affairs.
Finance minister, Pravin Gordhan, said in his Budget Speech National Treasury and the Department of Environmental Affairs have agreed that a package of measures is needed to address climate change and to reduce emissions.
“This will include the proposed carbon tax, environmental regulations, renewable energy projects and other targeted support programmes. To allow for further consultation, implementation of the carbon tax is postponed by a year to 2016,” the minister said.
Further investments into renewable energy and support for the transition to a low-carbon economy is one of the initiatives the minister believes could support the government’s objective of economic growth of 5% per annum or more.
Source: Moneyweb