As part of South Africa’s ongoing efforts to move towards a low carbon economy and to meet South Africa’s INDC targets, National Treasury has proposed a tax on local carbon emissions.

On 14 December 2017, the South African National Treasury published a second Draft Carbon Tax Bill for public comment. The new draft mostly retains the design of the first version, published in 2015, but includes a number of high-level refinements and clarifications described briefly, below:

Implementation date

The actual date of implementation of the carbon tax will be determined through a separate process by the Minister of Finance and will be announced either during the course of 2018 or at the National Budget 2019, taking into account the state of the economy.

Tax incentives and revenue recycling measures

The implementation of carbon tax will be complemented by a package of tax incentives and revenue recycling measures to minimise the impact in the first phase of the policy (up to 2022) on the price of electricity and energy intensive sectors such as mining, iron and steel.

Revenue neutral

The impact of the tax in the first phase is designed to be revenue-neutral in terms of its aggregated impact, when assessed together with the complementary tax incentives and revenue recycling measures.

Electricity price

To ensure a minimal impact on the price of electricity in the initial phase, a credit for – or reduction in – the electricity generation levy and the renewable electricity premium, built into the current price of electricity, will also be introduced.

Tax structure

The new bill still sets the tax at R120 per tonne of carbon dioxide – and still provides allowances which, in effect, pit the tax at R48 per tonne at most, and at R6 per tonne at least. A combination of inflation and revisions has resulted in a carbon tax that will be far lower than initially planned when a carbon tax policy was first published in 2013.