Carbon Tax

South Africa’s Carbon Tax Bill

The cost of a green future

By Thandile Chinyavanhu

On Wednesday 20 February, Minister Tito Mboweni delivered his budget speech and announced the addition of a new Fuel Carbon tax which will see the price of petrol increasing by R0.29 cents and diesel by R0.10 cents per litre. A move that has left many South Africans feeling agonised. The idea of a Carbon tax has been discussed extensively over the past few years culminating in Parliament's standing committee approving the Carbon tax bill earlier this year on 5 February 2019. The fuel hike will coincide with the inception of the Carbon tax bill on 1 June 2019.

The tabling of this bill has been met with approval from the environmental community but what does the carbon tax mean for the average South African citizen?

A carbon tax is a fee imposed upon industries designed to mitigate greenhouse gas emissions and eventually curb the use of fossil fuels. By putting a price per ton of carbon dioxide equivalent (tCO2 e) released into the atmosphere, it places an incentive on industries to either consider greener solutions, such as trading the use of coal for renewable energy sources or paying for the pollution. It stimulates funds geared towards creating cleaner economic development thus fueling a lower carbon economy.

The move to adopt this bill is in line with South Africa’s commitment to reduce carbon emissions at the Paris Agreement held in December 2015; which seeks to achieve the overall goal of keeping global warming well below 2oC. The policy proposal has gained traction globally with over 50 countries adopting it to date and numerous others contemplating its implementation. The earliest to the party being Finland which adopted the policy in 1990, followed shortly by Switzerland. Countries across the globe direct the funds collected towards carbon reduction initiatives while others redistribute the funds amongst their citizens as a form of reverse income tax. Considering the South African government’s record of revenue mismanagement that has resulted in rising debt, increased debt repayments, and wastages across public sector institutions, the public will be very skeptical about the effective usage of carbon tax revenues.

South Africa is facing the seemingly insurmountable costs of climate change, which come in the form of natural disaster relief funding, crop failure and respiratory diseases attributed to air pollution, such as Asthma and Lung Cancer. Ultimately these costs are borne by the public; referred to by economists as "negative externalities"- meaning a cost suffered by a third party because of an economic transaction.

A report by the World Bank revealed that air pollution causes one in ten deaths worldwide. The effects of which are most impactful in developing countries such as China, India and South Africa that still rely heavily on coal as a fossil fuel. Eskom recently revealed that the utility is responsible for 333 premature deaths because of these emissions. These negative externalities cost the country R18 Billion a year. This alone is a clarion call to the masses that the carbon tax is a very necessary resort. The High-level Commission on Carbon prices proposes a carbon price of between US$40-US$80, by 2020, for the targets of the Paris agreement to be met. South Africa’s Carbon tax policy has proposed a price of R120 (US$8) per tCO2 e, reasonably below developed countries that have adopted the recommended rates.

The most recent Greenhouse gas emission inventory conducted by the Department of Environmental Affairs shows that industrial processing only makes up 8% of the greenhouse gas emissions in South Africa, with energy production making up 79% of emissions. From this it can be assumed that Eskom is responsible for a majority of the greenhouse gas emissions of the country. As such taxing the parastatal would inadvertently be passed on to the consumers. Considering the embattled parastatal’s R400 Billon debt and its recent application to increase electricity tariffs by 15% over the next three years, it can be expected the public will see a spike in electricity. Other prices increases should be expected on fuel as well as consumables, adding further pressure on the consumer.

outh Africa remains a bastion of excellence when it comes to policy creation, however, it has often failed at the implementation phase. For the carbon tax policy to succeed in South Africa, it will require related support such as infrastructure. Research on human behaviour shows that taxing of carbon-intensive products is not enough to incentivize consumers to change their lifestyles, especially when there are no reliable and readily available alternatives.

The South African public will continue to rely on private transport, which includes individual automobiles and the large privately owned mini-bus sector; until an equally robust alternative is provided. Despite the radical changes that are expected to be made by Eskom’s unbundling, coal produced energy is likely to be the main source of energy for business and households. Thus, it makes no sense to tax the public when alternatives remain inaccessible, expensive, dangerous and unreliable. South Africa may want to consider taking a more conservative approach before overwhelming the public with a fuel carbon tax. The government needs to invest in greener solutions including greener, reliable transport systems rather than simply passing the cost on to the citizens of South Africa.

Thandile Chinyavanhu is an independent Sustainability Consultant and an IEMA accredited Carbon Footprint Analyst

Read more about Thandile and her view on being a futurist.

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