Govt working on environmental fiscal reform paper, as carbon tax increases 5.6% Govt working on environmental fiscal reform paper, as carbon tax increases 5.6% 26th February 2020 BY: SIMONE LIEDTKE WRITER
The National Treasury on Wednesday confirmed that government was preparing to publish an environmental fiscal reform review paper.
The paper will explore the potential for new environmental taxes and reforms to existing instruments, such as restructuring the general fuel levy to include a local air pollution emissions component. ADVERTISEMENT
Other instruments included in the review paper will look at alleviating traffic congestion through road pricing charges and design options for a yearly carbon dioxide tax on vehicles, in collaboration with the Department of Transport and provincial governments.
Fossil fuel subsidies will also be reviewed, including the value-added tax (VAT) zero-rating of transport fuels; a consideration on product taxes on electrical and electronic waste as well as a revision of the tax treatment of company cars to incentivize the use of more fuel-efficient vehicles. ADVERTISEMENT
Additionally, as part of South Africa’s commitment to meet the objectives of the Paris Agreement to limit global warming to below 1.5 °C, the National Treasury on Wednesday announced that the carbon tax rate would increase by 5.6% for the 2020 calendar year.
The carbon tax and other measures will help the green economy and will bring in R1.75-billion over the next few months, according to Finance Minister *Tito Mboweni*.
“This will be complemented by more focused spending on climate change mitigation,” he said.
In the National Budget, released on February 26, Mboweni indicated that the carbon tax increase includes a yearly inflation rate of about 3.6%, plus two percentage points, in line with the Carbon Tax Act of 2019.
Accordingly, the carbon tax rate will increase from R120/t of carbon dioxide equivalent to R127/t of carbon dioxide equivalent.
In line with global vehicle emission standards and the shift to low-carbon and fuel-efficient vehicles, government also proposed to increase the vehicle emissions tax rate for passengers to R120/g of carbon dioxide emissions per kilometre (gCO2/km) and R160 gCO2/km for double cabs.
The threshold will be adjusted from 120 gCO2/km to 95 gCO2/km for passenger vehicles to align with the Euro 6 emission standards.
These amendments will take effect from April 1, 2020.
The incandescent light bulb levy will also increase by R2, from R8 to R10, from this date, to encourage the uptake of more energy-efficient light bulbs.
South Africa introduced a carbon tax in June 2019 as part of government’s broader climate change mitigation policy.
The National Treasury and the Department of Environment, Forestry and Fisheries will jointly consult stakeholders on future mitigation policies, including the integration of the carbon tax and mandatory carbon budgeting for the private sector to provide policy certainty and promote transparency.
In his Budget speech on Wednesday, Mboweni said that government would also continue to monitor developments under Article 6 of the Paris Agreement and the implications for the design of the carbon tax after it has been in operation for at least three years.
This is to ensure that the measure is contributing appropriately to cost-effective emissions reduction.
Plastic bags, however, still remain a concern throughout the country, and in this regard, the National Treasury has increased the plastic bag levy to 25c.

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