South Africa proposed a national carbon tax as part of the country’s national budget at the end of last week, becoming the latest major economy to move toward charging for emissions. But, a large swath of emissions would be exempt until 2020.
The carbon tax was included in the country’s 2012/2013 budget, and would charge emissions from all sectors, including carbon-intensive industries like electricity, petroleum, iron, steel, and aluminum.
However, the proposal includes a 60 percent tax-free threshold for all large emitters “to minimize adverse impacts on industry competitiveness and effectively manage the transition to a low-carbon economy,” said the budget. All sectors except the electricity industry would also be able to claim an additional 10 percent in relief.
If enacted, the tax would go into effect in 2013/2014, and impose a fee of 120 rand (roughly $16 US dollars) for all emissions above the 60 percent threshold. That starting rate would increase by 10 percent every year until 2020. The South African Treasury Department expects to publish the draft policy later this year.
South Africa’s carbon tax proposal propels it into a growing number of major economies (and major emitters) taking action to limit emissions. China recently announced it would start taxing carbon emitted by its largest energy-consuming companies in 2015 at around $1.60 US dollars per ton with gradual increasing rates. Australia last year passed a law that will force its 500 largest companies to pay for their emissions starting at $23 this July, with gradual increases until a cap-and-trade system begins operation in 2015.
While the large exemptions seem a blatant loophole, consider that South Africa is the largest polluter in Africa and one of the 20 biggest greenhouse gas emitters worldwide. The country generates almost all its electricity from coal-fired power plants run by state-owned utility Eskom, which is building two of the world’s largest coal-fired power plants. Eskom’s CEO has said coal plants are “central to the whole of Southern Africa’s energy security.”
Taxing just 40 percent of its industrial carbon emissions should be seen in the greater context of the current level of approximately zero percent of taxed emissions. So the question stands to be asked: if one of the most coal-dependent countries can join two of the other most fossil-fuel reliant economies in taxing emissions, what’s holding back action in America?
Image courtesy of BootKidz UK