6. Carbon Pricing
6.1. Workshop on Environmentally Related Taxes and Other Fiscal Instruments: Challenges and Opportunities.
- Carbon Tax Bill and Carbon Offset Regulations will be published for public consultation and tabled in Parliament by mid-2017.
- Carbon Budgets/Carbon Tax policy alignment – government expects to provide clarity on the alignment post-2020 by the end of the year.
On 29 and 30 March 2017, the Department of Environmental Affairs, National Treasury and OECD Workshop hosted a workshop on Environmentally Related Taxes and Other Fiscal Instruments: Challenges and Opportunities. The workshop was held at Kirstenbosch Botanical Gardens, Cape Town.
Below are summary notes taken at the workshop. The presentations have regrettably not been circulated yet.
Environmental Fiscal Reform in South Africa: Policy Rationale and overview of environmentally related tax policies. – National Treasury
Carbon Tax Bill and Carbon Offset Regulations will be published for public consultation and tabled in Parliament by mid-2017.
Carbon Budgets/Carbon Tax policy alignment – government expects to provide clarity on the alignment post-2020 by the end of the year.
Carbon Tax Policy Implementation scheduled for 2017.
[note: based on the processes and timing for public consultation and tabling in Parliament, it seems unlikely that the Bill will be tabled by mid-2017. In addition, given the design of the tax and the reporting periods, understanding is that the tax cannot be implemented in 2017, but only effective from 1 January 2018 at the earliest. Finally, no mention was made of the other regulations/notices required under the draft Bill]
High-level overview of the role for Environmental Fiscal Reform and AS’s environmental performance review. – OECD
SA Climate Change Policy is good, however, implementation at sub-national level is a challenge.
OECD recommend the introduction of a Carbon Tax to achieve a uniform cost of abatement across activities.Because there is VAT exemption on fuels and the low electricity tariffs, fossil fuel consumption is subsidised – OECD recommends the reduction or removal of subsidies.
Because there is VAT exemption on fuels and the low electricity tariffs, fossil fuel consumption is subsidised – OECD recommends the reduction or removal of subsidies.
Water is scarce and under-priced.
Water licencing needs to be addressed.
Municipal water and waste service are under-priced.
Recommend the establishment of a regulator to oversee pricing
[note: there was no mention of the South African Carbon Budget system in this presentation.] There are multiple environmental taxes that SA could implement in addition to, or instead of, the carbon tax. The Government can use the revenue raised to achieve its developmental goals.
Overview of key environmental priorities and policy interventions in South Africa.
Climate Change policy in SA is a complex policy landscape.
The DEA is initiating a process to develop a long-term low-carbon development strategy.
The Peak, Plateau and Decline (PPD) is still the basis for Climate Change Mitigation policy – [the presentation mentions a review of the PPD at intervals based on science etc.]
Policy alignment is very important – [also mentioned this in the NT presentation]
- Mitigation Potential Analysis (MPA) – 2018
- Carbon Budgets – 2016
- Mitigation Plans – 2018/19
- Reporting – 2021 – 2025
- Assess Compliance – 2026
The DEA is working with the Department of Science and Technology (DST) to review the uptake of technologies identified in the MPA (2014).
0-cost or less in the MPA will be the basis for the Sector Emissions Targets (SET).
A key outcome of the first phase of the carbon budget programme is to establish a workable system for phase 2 (post-2020).
There is currently consultation on the interface between carbon budgets and carbon tax for phase 2.
The Greenhouse Gas Technical Guidelines are currently out for comment.
The Pollution Prevention Plan Guidelines are being drafted.
All regulations, guidelines etc. will be aligned and included in the new Act (being drafted).
The National Employment Vulnerability Assessment (NEVA) being done in partnership with EDD is a key piece of work.
Energy Sector Mitigation is key – the IRP is currently being updated.
REIPP has been hugely successful.
NEES is currently being updated.
Although there has been more focus on mitigation to date, adaptation is equally, if not more important.
There is work being done to address the barriers to the implementation of the 0-cost measures identified in the MPA. The national cleaner production centre and World Bank are providing funding to unlock some of these barriers. The terms of reference have been drafted and the service providers have been appointed. Work will start in June 2017.
Effective Carbon Rates (ERC) in OECD and partner countries
- Emissions Trading Scheme
- Carbon Tax
- Other Taxes, i.e. Energy Taxes
SA has a high ERC on road transport. More than 50% of other emissions are priced, but at a very low rate.
Presentation on South Africa’s carbon tax design:
Carbon Tax is appropriate because 80% of emissions are in the energy sector.
Other emissions are concentrated in a few other sectors.
Broad-based economy-wide carbon tax will incentivise implementation of 0-cost/low-cost MPA activities.
Trade-exposure allowance will be sector-based, regulations will be published soon.
The allowance will be applied on a sliding scale, linked to thresholds – i.e. the sector must be over the threshold to qualify, and the allowance will be applied on a sliding scale up to 10%.
Combustion activities in AFOLU and Waste (including waste-to-energy) will be taxable – the rest of the emissions from these sectors will be exempt (at least in the first phase).
There will be a credit on Eskom’s carbon tax liability for the renewable energy premium (implicit price of carbon), NT is still finalising the methodology for this.
Work under the Partnership for Market Readiness (PMR) will be done looking at the design of the carbon tax, MRV, Offset System and others.
Carbon tax will increase at CPI+2 for phase 1 and by inflation post-2020.
Other countries applied a variety of carbon taxes, ETS, fuel and motor-vehicle taxes and congestion charges depending on the most urgent problem to address – i.e. climate change/air quality or both.
Examples from other countries on the reformation of fossil fuel subsidies.
Day 2 dealt with waste and water related taxes – these are not part of the mandate for either the ITTCC or EIUG, but all presentations will be circulated once received.