The Energy Council of South Africa and other business representatives have jointly proposed recommendations to South African government for the country’s carbon tax scheme under the draft Taxation Laws Amendment Bill.
The proposal aims to revise the implementation timelines of carbon price increase and prevent consequences of energy transition.
The businesses group, including Business Leadership South Africa (BLSA), Business Unity South Africa (BUSA), the South African Petroleum Industry Association (SAPIA) and Energy Intensive Users Group (EIUG), said that there are key areas of the carbon tax scheme that can be improved to prevent identified untended consequences.
Business is exchanging recommendations to prevent transition impacts earlier than expected and prevent unintended or adverse consequences to an already fragile economy. “Business’ priority is to positivity fulfil our role for a decarbonized and sustainable South African economy,” said the council.
The business group has listed six proposed changes for carbon tax.
The businesses group recommends the government follow the current Consumer Price Index (CPI) of +2% structure for annual carbon tax increases until at least 2030 to allow for reviewing and aligning different policies, saying that the country’s economy is not storing enough to accommodate the fast-growing tax.
This goes against the National Treasury’s proposal to increase the carbon tax rate by a minimum of US$1 from 2023 to 2025 and increase it gradually to US$20 in 2026, then US$30 in 2030.
With concern overing the draft bill under which no allowances are given to mitigate the impact of increasing carbon tax proposals, the group called for incentives or financial aid for taxpayers transitioning to greener technologies.
The group proposes that a higher carbon price should only be considered post-2035, saying that the exact date of which should be informed by an in-depth analysis of viable mitigation and socio-economic considerations.
The current timeline of carbon price increases is unaffordable for businesses, added the group.
Regarding hard-to-abate and vulnerable sectors, the business group proposes that a detailed bottom-up analysis be conducted.
“Different sectors have different carbon pricing signals against which they will switch to low-carbon energy and feedstock options and will require varying lengths of time to transition,” they said.
The group pointed out that the end date of 31 December 2025 for the extension for electricity generators to include the environmental levy could pose a significant financial risk.
The group suggests that the government conduct a detailed study to evaluate the financial impacts of a carbon tax pass-through from electricity generators and other industries that cannot pass through a carbon tax to customers.
Businesses groups emphasis that the government must provide the current industry more space to shift to low-carbon energy while help facilitate the transition of suppliers, workers, and skills to the new system.