All you need to know about the Carbon Tax Bill

Company carbon tax industrial hand reaching out in the smog

One the 1st of June 2019, South African President Cyril Ramaphosa signed the Carbon Tax Bill. The contentious SA Carbon Tax Bill was passed in parliament on 19 February this year, following an almost decade-long debate and consultation process. It was first put on the table in 2010 with the Carbon Tax Discussion Paper, which was followed by the 2013 Carbon Tax Policy Paper, the 2014 Carbon Offsets Paper and then, in 2015, the original 2015 Carbon Tax Bill. Comments were submitted by business, non-government organisations, civil society, labour, state-owned entities and government line departments; with opposition met, not surprisingly from those representing the heavy emitters.

The Carbon Tax Act states that any person – a partnership, trust, community, municipal entity or public listed entity – who conducts an activity which results in the emission of greenhouse gases above the allowed threshold, will have to pay the initial phase carbon tax of R120 per ton. In its current state, the tax provides for exemptions and rebates which might mean that emitters may end up paying only R6 to R36 per ton emitted – criticised as being far too “watered down” to effect any real change in keeping global warming well below 2°C. The tax will increase at a rate of inflation +2% and is in addition to corporate tax. When the second phase kicks in, at the beginning of 2023, the plan is to push the rate up to R600 a ton.

According to the Act, the thresholds have mostly been set for the energy, manufacturing, construction and transportation sectors, this includes heat and electricity recovery from waste. But will exclude the waste sector and Agriculture, Forest and other land use sectors.

Does carbon tax apply to your company?

In order to get a holistic understanding of the Act’s legal and fiscal implication, it is suggested that companies should perform their own assessments:

  1. Applicability: Does the act apply to the company’s operations? Practical implications of the Carbon Tax Act or the effect of the Act on a company’s operations should be set. If the Act actually applies to a company then the business needs to proceed to the next step which relates to establishing the fiscal or financial implication of the Act.

  2. Quantum: Companies should determine and establish how much carbon tax will be levied in respect of the business’ total greenhouse gas emissions.

  3. Financial Ramifications: A company will require someone with tax, customs and commercial expertise to conduct a financial audit in regards to the impact the carbon tax levied is concerned. The reason is that the South African Revenue Services (SARS) will collect the carbon tax and administered through the Customs and Excise Act, 1964.

Four of South Africa’s metros – Tshwane (SA’s “green” capital), Johannesburg, Cape Town and eThekweni – are working towards zero-carbon buildings in development by 2050, according to the C40 Cities Climate Leadership Group and Sustainable Energy Africa (SEA); there is no doubt that the mindset is, and has to, move away from a reliance on fossil fuels, towards suitable energy source alternatives. With plenty of sunshine and an abundance of suitable wind conditions in some regions of South Africa, it is little wonder that solar renewable energy alternatives are taking centre stage. According to a 2017 report of the International Renewable Energy Agency, solar power has fallen in price by three-quarters since 2010, while wind turbine prices have dropped by half.

Ultimately, as Finance Minister Tito Mboweni declared during the tabling of the Carbon Tax Bill in parliament in November 2018, “climate change poses the greatest threat facing humankind”, and, in order for South Africa to play its role in the global effort, we can no longer cling to habitual behaviour, but rather need to assess how we can adapt to ensure resilience in a low-carbon economy.

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