Treasury Briefs Parliament on Carbon Tax Policy

National Treasury

National treasury has briefed the standing committee on finance on the Carbon Tax Policy Paper.

The updated Policy Paper entitled “Reducing greenhouse gas emissions and facilitating the transition to a green economy” was published for comment at the beginning of May 2013.

According to a national treasury statement released at the time, this is the second and final call for comment on the policy proposals before a draft bill is drawn up.

Written comment is invited until 2 August 2013.

The plan is for carbon taxes to be implemented from 2015.

The latest policy paper includes input from the previous round of public comment.

A discussion paper entitled “Reducing Greenhouse Gas Emissions: The Carbon Tax Option” was published for comment in 2010.

The latest version stresses that the intention behind carbon taxes is to change behaviour rather than to raise additional revenue.

Carbon taxes will be implemented in a phased manner.

“The first phase (introductory) will be for five years, effective from 1 January 2015 to 31 December 2019 followed by Phase 2 of another five years, from 2020 to 2025. Follow up phases can be explored at a later stage”.

Initially a tax rate of R120 per ton of CO2e will be implemented.

This will increase at 10 per cent per annum.

60% of actual emissions will not be taxed in the beginning to help soften the blow.

This will mean that the effective tax rate will range between R12 and R48 per ton of CO2e during the initial phase.

During the first phase the agricultural and waste sectors will be exempt.

A tax free threshold of up to 70% will also apply in the electricity sector.

According to treasury, the plan is to have draft legislation in place by early next year.

The challenge is to change future behaviour and thereby reduce greenhouse emissions in the interests of sustainable development.

South Africa could face possible import tariffs in future for its exports if steps are not taken to reduce emissions in the interim.

Treasury holds the view that a carbon tax is an effective mechanism to achieve this.

It stressed that the carbon tax rate was likely to increase dramatically after the initial ten year period.

Treasury also pointed out that South Africa could play a leadership role in the developing world in terms of driving the carbon tax response.

The committee’s chairperson expressed an interest in discussing the proposed tax with the energy and environmental affairs committees in the near future.

Sabinet Cape Town Office

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