Carbon tax came into effect on 1 June 2019 as part of the government’s drive to reduce carbon emissions and comply with its promises and commitments on climate change. Phase 1 of the tax sees carbon emissions taxed at a rate of R120/t of CO2e (carbon dioxide equivalent), and with the various allowances considered, the effective tax rate is between R6 and R48/t of CO2e.
The initial rate will increase annually by CPI +2% until 31 December 2022 and by the CPI from 1 January 2023 onwards. The price for greenhouse gas emissions seems set and companies have to adopt to the reality of an additional operating cost, more reporting requirements and complying with carbon tax legislation. However, the deputy director-general at National Treasury, Ismail Momoniat, speaking at a seminar on 16 July 2019 indicated that the current carbon tax “…is pretty weak”, symbolic and primarily designed to change behaviour. Industry seems opposed to the implementation of carbon tax, but all factors indicate that carbon tax is a new reality which is here to stay. Therefore, companies must prepare for it and consider mitigating actions to ensure that carbon tax does not pose an undue burden on their operations.
The South African Energy Efficiency Confederation (SAEEC) is committed to assisting companies and the wider public as they transition to a greener future. Thus far, it has held workshops on carbon tax and measurement and verification (M&V); and further workshops are planned for the coming months to follow up on the previous workshops. Particular focus will be on the practical aspects of carbon tax reporting and compliance, and possible mitigating actions to reduce the carbon tax burden for companies eligible to pay the tax.
Among the possible mitigating actions to be addressed is energy efficiency. In a working paper on energy efficiency networks, the Organisation for Economic Co-operation and Development (OECD) and International Partnership for Energy Efficiency Cooperation (IPEEC) state that “energy efficiency is a crucial pillar of the global energy transition…” and go on state that “energy efficiency will need to contribute about 50% in energy-related carbon dioxide (CO2) emissions reductions for the world to be on track for the 2°C trajectory set out by the Paris Agreement adopted in December 2015.”
The SAEEC shares the above sentiment and will present speakers at its next workshop who will outline how energy efficiency fits into carbon tax mitigation in South Africa. Furthermore, Tito Mboweni, the minister of finance, announced that the section 12L tax incentive for energy efficiency will be extended by three years to align with the end of phase 1 of carbon tax. This further indicates how central energy efficiency will be to carbon tax and emissions reduction.
Other possible mitigation schemes that will be addressed include carbon neutralisation, carbon sequestration, the use of carbon offsets, and the generation of carbon offsets by entities which are not eligible to pay carbon tax.
Contact SAEE Confederation, Tel 063 235-8031, email@example.com
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Source: EE plublishers