To incentivise or penalise: an analysis of the proposed carbon tax in South Africa

Lee-Ann Steenkamp

Chapter 4 in The Green Market Transition, 2017, pp 47-63 from Edward Elgar Publishing

Abstract: According to the International Energy Agency's World Energy Outlook 2015, South Africa accounted for more than one-third of the total energy-related carbon dioxide (CO2) emissions on the African continent. The same report states that emissions in South Africa are projected to follow a 'peak, plateau and decline' trajectory, largely due to improved energy efficiency and a turn towards renewable energy and nuclear energy. The South African government acknowledges that climate change is a reality and is caused largely by greenhouse gas (GHG) emissions and concentrations in the atmosphere that are anthropogenic. Consequently, towards the end of 2015, the South African National Treasury, after years of public consultation, has proposed a pollution tax, known as the carbon tax. The planned carbon tax is aimed at achieving South Africa's ambitious commitments to reduce GHG emissions by 34 per cent by 2020 and 42 per cent by 2025. It is anticipated that the carbon tax will come into effect in a phased manner, commencing on 1 January 2017 at a marginal rate of R120 per ton of CO2-e. Persons who conduct various activities in the manufacturing, construction, mining and transport sectors will be affected. The carbon tax is intended to serve mainly as an environmental tax that internalises the external damage costs of GHG emissions and contributes to behavioural change. It will likely be implemented with complementary measures, for example a reduction in the electricity levy, as well as other measures to recycle revenue, thereby lessening the impact on businesses. Although this chapter advocates an emphasis on carbon taxation as a key element of any fiscal policy mix to address climate change, there are a number of concerns in respect of the detail of the South African carbon tax provisions that have to be addressed. The main objective of this chapter is to analyse the South African carbon tax proposals. First, the chapter provides a brief background to South Africa's climate change policy. Next, the chapter offers an overview of fiscal incentives aimed at enhancing the uptake of renewable energy in South Africa. Thereafter, the design of the proposed carbon tax is explored, analysing arguments for and against its introduction in South Africa. The chapter concludes with a number of practical considerations.

Keywords: Economics and Finance; Environment; Law - Academic; Politics and Public Policy (search for similar items in EconPapers)
Date: 2017
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