South Africa Finally Enacts Carbon Tax

After nearly a decade of delays, South Africa has just joined some 40 countries that have enacted national carbon tax policies, aiming to curb the rise in carbon emissions to meet global climate change targets.

South Africa’s President Cyril Ramaphosa signed on Sunday the carbon tax act that will introduce a carbon tax on June 1 in one of Africa’s worst polluters. In the first phase of the tax implementation—June 2019 through December 2022—the tax rate will be equal to US$8.32 (120 South African rand) per one ton of carbon dioxide equivalent.  

The second phase of the carbon tax will be between 2023 and 2030, according to a statement of South Africa’s National Treasury.

In the first phase, allowable tax breaks will effectively slash the carbon tax to between US$0.42 (6 rand) and US$3.33 (48 rand) per ton of CO2 equivalent, according to the treasury.

“A review of the impact of the tax will be conducted before the second phase and will take into account the progress made to reduce GHG [greenhouse gas] emissions in line with our National Determined Contribution,” the treasury said in a statement, carried by Reuters.

South Africa, which continues to rely heavily on coal, has been considering introducing a carbon tax since 2010, but has delayed the implementation at least three times because state utility Eskom and mining companies have argued that a carbon tax would raise electricity prices while it would erode providers’ profits.

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Eskom generates 90 percent of its electricity from coal, according to Global Risk Insights. South Africa aims to diversify its energy mix toward cleaner energies, sourcing 42 percent of its energy demand from renewable sources by 2030. Labor unions, however, oppose a significant scale-down in coal dependency, fearing massive job losses in the coal industry amid high unemployment in the country, Global Risk Insights says.

By enacting the carbon tax, South Africa joins some 40 countries and more than 20 cities, states, and provinces that already have carbon pricing mechanisms, World Bank data shows.

Still, climate activists say South Africa’s commitments are far from compatible with keeping global warming in check. According to Carbon Action Tracker, South Africa’s commitments fall in the “highly insufficient” category, meaning that if all government targets were in this range, global warming would reach between 3 and 4 degrees Celsius.  

By Tsvetana Paraskova for Oilprice.com

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