Earlier this week we received news that the Carbon Tax Bill had been formally introduced into Parliament.
The bill seeks to introduce a tax on greenhouse gas emissions. The full bill can be found here [PDF].
To find out more about how this bill will affect both citizens and business we spoke to Teresa Legg, co-founder of carbon consulting firm The Carbon Report.
With South African’s feeling the economic pinch quite literally at the moment what with a technical recession, turbulent currency and unstable fuel pricing, we asked Legg why South Africa needs a Carbon Tax.
“We need carbon pricing across the world, and carbon tax is a form of carbon pricing. Pricing provides a financial mechanism to facilitate a transition to a low-carbon economy. By lifting the price of carbon intensive activities we encourage efficiencies as well as allow low-carbon alternatives a more level playing ground to compete,” Legg tells Hypertext.
A number of countries have implemented carbon pricing / carbon tax with varying degrees of success. Earlier this year Franziska Funke and Linus Mattauch co-authored a piece on Our World in Data which places emphasis on the fact that there is no “one-size fits all” solution when it comes to implementing carbon pricing / carbon tax.
In South Africa, there will be a number of tax-free allowances during the first phase (which runs until 2022) of the Carbon Tax bill’s introduction which will be capped at 95 percent. This is being done to reduce the initial monetary impact of the tax.
However, once the tax-free allowances expire the impact of the bill will be felt. The idea then is for firms to implement alternative technologies and for people to adapt their behaviour so that we use less carbon. Use less carbon, pay less tax.
Where’s the fence?
That having been said, Legg appears concerned that government has not committed to ring fencing money garnered from the tax for low-carbon capital infrastructure.
“The government have not committed to ring fence the funds, however it has stated that the tax will be funneled to tax incentives and recycling measures to lessen the financial impact on the economy,” Legg explains.
“This is a significant concern as any carbon tax should be used to reinvest in low-carbon capital infrastructure. Without ring fencing funds the carbon tax will only play a part is raising carbon intensive pricing and not be leveraged to its full by rebuilding our energy economy,” she adds.
The co-founder goes on to say that despite this lack of ring-fencing, government should be lauded for taking the action it is.
What does this mean for me?
For the average person in the street, your life isn’t going to change drastically.
“The tax will be pretty seemless to the man in the street, but will be reflected in price increases. For example the tax on fuel will be built into the fuel levy, so you will see a fuel price increase. In terms of stationary fuel combustion activities, the tax is targeted at large emitters and users of fuel,” Legg tells Hypertext.
Carbon intensive sectors however, will feel the pinch.
As outlined by Business Day, at the outset of the Carbon Tax Bill, a tax rate of R120 per tonne of carbon dioxide equivalent will apply but together with tax-free allowances that rate could drop to R6 – R48 per tonne.
According to Legg, a green economy also has significant job creation potential.
“South Africa should take heed from other developing economies like China and India that are investing significantly in this space. There is an enormous opportunity here to provide economic stimulus in our economy and through proper revenue recycling this does not have to impact the less fortunate in our society,” she explains.
But more than that, using less carbon is better for the environment. The Intergovernmental Panel of Climate Change recently indicated that humanity has just 12 years to keep the global warming below 1.5 degrees Celsius or risk watching our global climate spin out of control.
The Carbon Tax Bill is expected to take effect from 1st June 2019 but it must first be voted on which is not expected to happen by the time Parliament rises in December.[Image – CC 0 Pixabay]