SA Treasury publishes second carbon tax draft bill

National Treasury has published the second draft of the Carbon Tax Bill for it to be introduced in Parliament and for public comment.

Parliament will host public hearings on the bill in early 2018.

“Following that process, a revised bill will be formally tabled in Parliament, which is expected to be by mid-2018,” said Treasury on Thursday.

The publication of the bill follows the announcement made in the 2017 Medium Term Budget Policy Statement (MTBPS) by Finance Minister Malusi Gigaba, which gives effect to the announcement made in the 2017 Budget in February.

The first draft Carbon Tax Bill was published for public comment in November 2015.

The bill will enable South Africa to meet its nationally-determined contribution (NDC) commitments in terms of the 2015 Paris Agreement on Climate Change, and to reduce the country’s greenhouse gas emissions in line with the National Climate Change Response Policy and National Development Plan.

Cabinet approved the submission of the draft bill to Parliament on 16 August 2017 and noted carbon tax as an integral part of the system for implementing government policy on climate change.

South Africa ratified the Paris Agreement in November 2016 and endorsed its NDC, which requires that its greenhouse gas (GHG) emissions peak in 2020 to 2025, plateau for a ten-year period from 2025 to 2035 and decline from 2036 onwards.

“The Paris Agreement comes into operation in 2020, which means that efforts to reduce our GHG emissions and meet our commitments cannot be further delayed. The NDC noted that carbon tax is an important part of the package of measures to reduce emissions, complemented by appropriate regulations and incentives,” said Treasury.

Implementation of carbon tax

Meanwhile, Treasury said the actual date of implementation of the carbon tax will be determined through a separate and later process. Minister Gigaba is expected to make an announcement next year or at the 2019 Budget, taking into account the state of the economy.

“This announcement on the implementation date of the 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,” said Treasury.

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.

Further, in order 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.

Some revenue recycling measures have already been introduced, such as the energy efficiency savings tax incentive, introduced in 2013, to help with the transition to a lower carbon economy.

The effective recycling of revenues to be collected will mitigate any possible short-term negative impacts on the economy and jobs.

“Beyond the first phase, a review of the impact of the tax after at least three years’ implementation will be conducted. The review will take into account the progress made to reduce GHG emissions, in line with our NDC commitments.

“Future changes to rates and tax-free thresholds in the carbon tax will only follow after the review, and be subject to the same transparent and consultative processes for all tax legislation, after any appropriate Budget announcements by the Minister,” said Treasury.

The draft bill is the culmination of an extensive consultative process on carbon tax policy since the publication of the Carbon Tax Discussion Paper in 2010, the 2013 Carbon Tax Policy Paper, and the 2014 Carbon Offsets Paper.

The bill has been revised to take into account the substantive comments received in writing, and from meetings and workshops with a wide range of stakeholders, including business, non-governmental organisations civil society and labour among others.

Comments received

Among the comments received on the first draft of the bill that was released in November 2015 led to revisions relating to carbon offset and performance allowances as well as electricity prices, electricity generation levy and renewable energy premium among others.

Due date for comments

Treasury invited stakeholders to submit written comments on the draft bill by close of business on 9 March 2018 to carbontaxbillcomments@treasury.gov.za. Queries can be emailed to Sharlin Hemraj at sharlin.hemraj@treasury.gov.za or Dr Memory Machingambi at memory.machingambi@treasury.gov.za.

- SAnews.gov.za