According to the National Treasury, South Africa’s president Cyril Ramaphosa signed the Carbon Tax Act into law to take effect effect from June 1.
“Climate change represents one of the biggest challenges facing humankind, and the primary objective of the carbon tax is to reduce greenhouse gas (GHG) emissions in a sustainable, cost effective, and affordable manner. Government has outlined its strong commitment to play its part in global efforts to mitigate GHG emissions as outlined in the National Climate Change Response Policy (NCCRP) of 2011 and the National Development Plan (NDP) of 2012,” the Treasury said.
The carbon tax which consists of a polluter-pays principle for large emitters, comprised of two phases where it will first apply to scope one emitters from June 1 to December 31, 2022, and the second phase takes effect from 2023 to 2030, encouraging firms to use cleaner technologies going forward, and gives the firms enough time to consider and implement cleaner technologies in their production, consumption and investment decisions in the future.
The design of the carbon tax also provides significant tax-free emission allowances ranging from 60 percent to 95 percent in this first phase. This includes a basic tax-free allowance of 60 percent for all activities, a 10 percent process and fugitive emissions allowance, a maximum 10 percent allowance for companies using carbon offsets to reduce their tax liability, a performance allowance of up to five percent for companies reducing the emissions intensity of their activities, a five percent carbon budget allowance for complying with the reporting requirements, and a maximum 10 percent allowance for trade exposed sectors.
“The introduction of the carbon tax will also not have any impact on the price of electricity for the first phase. This will result in a relatively modest carbon tax rate ranging from R6 to R48 per tonne of CO2 equivalent emitted… to further provide current significant emitters time to transition their operations to cleaner technologies through investments in energy efficiency, renewables, and other low carbon measures,” the Treasury said.
A review of the impact of the tax would be conducted before the second phase, after at least three years of implementation of the tax, and would take into account progress made to reduce GHG emissions. Future changes to rates and tax-free thresholds in the Carbon Tax would follow after the review, and be subject to the normal transparent and consultative processes for all tax legislation, after any appropriate Budget announcements by the Minister of Finance.
Source: Mining Weekly