Reflecting on the Treasury’s latest carbon tax proposals
The Minister of Finance on Wednesday reiterated in his budget speech that the need for carbon pricing in South Africa is accepted. This should not have surprised anyone – the fact that a carbon tax was on the cards was clearly signalled in last year’s budget and a discussion paper dealing with carbon taxes in South Africa was released in December 2010. What was more surprising, however, was that the implementation date for a carbon tax, its proposed design features, and its suggested levels were included in the Budget Review.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
SA needs to find a shared vision on carbon tax
The release of National Treasury’s carbon tax discussion document late last year raised carbon pricing higher on the economic agenda. The private sector is against a carbon tax, calling for an emissions trading scheme instead.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
Carbon tax on cars off to a bumpy start
The release of National Treasury’s carbon tax discussion document late last year raised carbon pricing higher on the economic agenda. The private sector is against a carbon tax, calling for an emissions trading scheme instead.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
South Africa’s new CO2 emissions tax aims to encourage the purchase of fuel-efficient vehicles. The tax applies to domestic sales of new passenger cars and is levied at R75 (before VAT) for every gram of CO2 emitted per kilometre driven (g/km) above a threshold of 120g/km. The tax will be extended to double-cabs in March 2011 (at R100 a g/km above 175g/km) and other light commercial vehicles will follow. Minibus taxis may be included in future. The National Treasury is also considering the use of annual vehicle licence fees, differentiated by emissions levels, and higher fuel levies to incentivise people to switch from their current cars to more fuel-efficient alternatives.