Lawmaker flags more delays to S.Africa CO2 tax, but legal experts say expect 2017 launch

Published 17:25 on April 25, 2016  /  Last updated at 17:27 on April 25, 2016  /  Africa, Carbon Taxes, EMEA

South Africa’s long-delayed carbon tax may be pushed further down the road, local media reported, but legal experts are telling emitters to continue to expect a Jan. 2017 launch.

South Africa’s long-delayed carbon tax may be pushed further down the road, local media reported, but legal experts are telling emitters to continue to expect a Jan. 2017 launch.

Yunus Carrim, chairman of the national parliament’s Standing Committee on Finance, told South African Treasury officials last week that the carbon tax could be delayed due to the committee’s existing heavy workload, Business Day reported.

However, according to the paper the Treasury wants the draft bill, which was tabled last November and is being revised to account for submissions received during a recent consultation period, to be promulgated sooner rather than later.

Carrim said he and the chairman of the National Council of Provinces’ Select Committee on Finance Charel de Beer will raise the matter with South African Finance Minister Pravin Gordhan when they meet this week.

Treasury Deputy Director-General Ismail Momoniat stressed industry and other heavy emitters’ need for clarity over the carbon tax regime, telling Business Day “the longer this matter hangs, it generates uncertainty.

“Given the economic outlook, the carbon tax has been designed to ensure that its overall impact will be revenue neutral up to 2020 … It is nowhere as onerous as people want to make it out to be. Now is the time to be bold,” he added.

Under the proposed legislation, emitters are to receive exemptions of up to 95% of the tax and be allowed to use carbon offsets.

The bill calls for all sectors of the economy to be covered except waste management and forestry and land-use, which the government said should be exempt for the first phase due to “measurement difficulties”.

“For those who might still be of the view that the carbon tax will not materialise, Treasury’s message is very clear: the carbon tax is coming and the timeframe for commencement, including progressing through the Parliamentary process, remains January 2017,” said lawfirm ENSafrica in an Apr. 21 blog post that addressed Carrim’s comments.

“A slight further delay in implementing the carbon tax occasioned by Parliament’s limited time in 2016 will simply be a short breathing-space … Treasury expects to release draft offsets regulations by the end of May 2016, and a second draft bill thereafter, both of which will be subject to further stakeholder consultation,” it added.

South Africa’s parliament will go into recess from the end of May, ahead of local government elections in August.

Earlier this month, the Treasury held a series of stakeholder engagements to allow it to collect feedback during the bill’s consultation period.

ENSafrica summarised a number of clarifications that emerged from these events, including:

  • The Treasury confirmed that the bill’s reference to a calendar year, as opposed to a financial year, will remain in order to align the timing of carbon tax reporting with that for the country’s GHG reporting. “The intention is that the first round of carbon tax reporting will be in Mar. 2018,” it added.
  • The anticipated impact of the carbon tax on the electricity price will be neutralised during the tax’s first phase (expected to be in 2017-2020) through the phasing out of the country’s renewable energy levy, which is currently imposed on fossil fuel generated electricity.
  • There is also an intention to have the tax apply only to facilities with thermal capacity at or above 10 MW, a threshold that translates roughly to emissions of 30,000 tonnes of CO2e.  “The point of this threshold is that it is high enough to exclude households and other non-industrial activities from the carbon tax, but low enough to make it applicable to the majority of emitting industries in the country,” ENSafrica said.

By Mike Szabo –