Carbon Tax and Energy |
Carbon tax
It is proposed that a carbon tax will be implemented in 2013/2014 at a rate of R120 per ton of carbon dioxide equivalent (CO2e) on direct emissions. This is in line with in the Climate Change Response White Paper approved by Cabinet in 2011.
The proposed carbon tax will have the following design features:
- Percentage-based rather than absolute emissions thresholds, below which a carbon tax will not be payable;
- A higher tax-free threshold for process emissions;
- Additional relief for trade-exposed sectors;
- The use of offsets by companies to reduce their carbon tax liability;
- A phased implementation;
- The tax will increase by 10% per annum until 2020;
- The revenues received from the tax will not be earmarked for climate change initiatives; and
- The CO2e emissions will be calculated using agreed methods.
A basic tax-free threshold of 60% will apply during the first period of the tax (2013-2019). Further relief for trade exposed industries and process emissions will be allowed.
The proposed tax-free threshold per industry is as follows:
| Sector | Basic Tax free threshold (%) below which no carbon tax will be payable during the first phase (2013 to 2019) | Maximum Additional allowance trade exposure | Additional allowance for “process” emissions | Total | Maximum offset percentage |
| Electricity |
60% |
-
|
-
|
60% |
10% |
| Petroleum (coal to liquid) |
60% |
10% |
-
|
70% |
10% |
| Petroleum – oil refinery |
60% |
10% |
-
|
70%
|
10% |
| Iron and steel |
60% |
10% |
10%
|
80%
|
5%
|
| Aluminium |
60% |
10% |
10%
|
80%
|
5%
|
| Cement |
60% |
10% |
10%
|
80%
|
5%
|
| Class & ceramics |
60% |
10% |
10%
|
80%
|
5%
|
| Chemicals |
60% |
10% |
10%
|
80%
|
5% |
| Pulp & paper |
60% |
10% |
-
|
70%
|
10% |
| Sugar |
60% |
10% |
-
|
70%
|
10% |
| Agriculture, forestry and land use |
60% |
-
|
40%
|
100%
|
-
|
| Waste |
60% |
-
|
40%
|
100%
|
-
|
| Fugitive emissions: coal |
60% |
10% |
10%
|
80%
|
5% |
| Other |
60% |
10% |
-
|
70%
|
10% |
Companies will be encouraged to reduce the carbon intensity of their products. A comparison based on industry emissions will be used to either reduce or increase the tax-free threshold. Companies whose carbon intensity of products is higher than the industry standard will be penalised by reducing the 60% threshold. Likewise, companies whose carbon intensity of products is lower than the industry standard will receive a higher tax-free threshold, capped at 90%.
A carbon tax at a rate of R120 per ton CO2e is seen as modest per the budget documents. It is hoped that a carbon tax will place a price on emissions, and will be incorporated into production cost and consumer prices. The tax seemingly will be passed on to consumers.
The tax will result in the following tax liabilities for South Africa’s largest emitters based on disclosures made in the Carbon Disclosure Project South Africa JSE 100 Report 2011:
|
Rank # |
Company |
Scope One Emissions |
Tax-free threshold |
Tax rate per ton CO2e |
Potential Tax Liability |
|
1 |
Eskom |
230 300 000 |
60% |
120 |
11 054 400 000 |
|
2 |
Sasol |
61 200 000 |
70% |
120 |
2 203 200 000 |
|
3 |
Arcelor Mittal |
11 900 000 |
80% |
120 |
285 600 000 |
|
4 |
PPC |
4 800 000 |
80% |
120 |
115 200 000 |
|
5 |
BHP Billiton |
3 100 000 |
80% |
120 |
74 400 000 |
| Total |
13 732 800 000 |
Notes
- Scope One emissions are emissions directly generated by a company;
- It is assumed that the emissions reported all relate to South African-based operations; and
- No reductions or increases are allowed for the carbon intensity of the companies’ products.
A draft policy paper on carbon tax for public comment will be released later in the year. However, given the amount detail of the proposed carbon tax in the budget documents, it seems that decisions on the tax and the manner in which the tax will be levied have already been determined.
Electricity levy
The levy on electricity generated from non-renewable sources will increase by 1c/kWh, effectively levying a 35c per ton carbon tax on electricity as from 1 July 2012 and will replace the current funding mechanism for energy efficiency initiatives, such as the solar water geyser programme. There should be little overall impact on electricity tariffs.
Supporting structure for energy projects
Energy projects such as wind, solar and hydroelectric facilities are eligible for accelerated depreciation on a 50:30:20 basis. Foundations and supporting structures associated with these energy projects will qualify for accelerated depreciation.
