A revised carbon tax policy paper will be published during the course of 2012, Finance Minister Pravin Gordhan told lawmakers, in Cape Town, on Wednesday.

The initial document was released at the tail-end of 2010 and the second document was initially anticipated by the end of 2011, with some even anticipating an announcement on the tax's implementation in 2012.

However, the initial document attracted much feedback and a second round of public comment and consultation would follow on from the publication of the revised policy paper.

Gordhan said that government had agreed on the need to price carbon emissions and on the phasing in of a tax instrument for this purpose.

Business Unity South Africa said it was pleased to learn that government would engage further before implementing a proposed carbon tax, especially given recent electricity price hikes.

Similarly, the Manufacturing Circle said it welcomed the opportunity for engagement, while warning that the introduction of such an instrument, especially if not part of a suite of tools to put South Africa on a lower emissions trajectory, would hurt manufacturing and jobs.

Proponents of the tax, including the National Treasury, argue that a “modest tax” would create incentives for changes in behaviour and encourage the uptake of cleaner-energy technologies, energy-efficiency measures, and research and development of low-carbon options.

A sidebar in the Budget Review indicated that the possible tax would apply to carbon dioxide equivalent (CO₂e) emissions calculated using agreed methods.

A carbon tax of R120/t of CO₂e above suggested thresholds was being proposed, the blurb added, and the first phase could take effect during 2013/14, with yearly increases of 10% until 2019/20.

It also offered a glimpse into the possible design features of the tax, including:

• A percentage-based rather than absolute emissions thresholds, below which the tax will not be payable.
• A higher tax-free threshold for process emissions, with consideration given to the limitations of the cement, iron and steel, aluminium and glass sectors to mitigate emissions over the near term.
• Additional relief for trade-exposed sectors.
• The use of offsets by companies to reduce their carbon tax liability.
• And a phased implementation.

A basic tax-free threshold of 60% (with additional concession for process emissions and for trade-exposed sectors) and maximum offset percentages of 5% or 10% until 2019/20 was proposed. Additional relief could also be considered for firms that reduce their carbon intensity during this first phase.

The reduction in carbon intensity would be measured with reference to a base year, or industry benchmark and tax-free thresholds would be reduced during the second phase, from 2020 to 2025, and might be replaced with absolute emission thresholds thereafter.

“Revenues from the tax will not be earmarked, but consideration will be given to spending to address environmental concerns.”

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