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This week's announcement that the Australian Senate has approved new legislation on carbon taxation has seen praise from many environmental groups, commending the country's efforts for attaining this milestone towards building a sustainable future. After the European Union, Australia has become the second major economy to pass carbon emission legislation. In the United States, California starts its scheme in 2013, while China and South Korea are also working on carbon trading programs, whilst India already has a coal tax. In South Africa, however, carbon tax is still a highly debated issue – pending the National Treasury's publication of revisions of the proposed carbon tax in December 2011, to be implemented during the first quarter of 2012.
 At a carbon tax debate held in Johannesburg last week, the dialogue centered around international benchmarking, the effects of carbon taxation and the impacts on individuals and the economy. Questions were raised on how proceeds from the tax should be spent – as well as how the tax will actually be applied; and whether the tax would be an effective and efficient instrument to meet carbon emission goals.
South Africa is a significant carbon emitter on the African continent, with estimated total emissions standing at about 500-million tonnes of CO2e (carbon dioxide equivalent) a year. The biggest emitter of CO2e in South Africa is Eskom, whose publicly reported CO2e emissions for the year ending March 2010 was 225-million tonnes, or 45% of the total. Essentially, the tax suggests the use of market-based policy measures, such as an escalating carbon tax, to reflect the cost of climate change in the price of goods and services. The irony is that government-owned power utility, Eskom, is the largest polluter – and the public concern is that the costs will merely be passed on by utilities providers, such as Eskom, to the consumer. Eskom has already confirmed that for every R2-billion increase in its cost, there would have to be a 1c per kilowatt hour (kwh) increase in the tariff, according to The Mail & Guardian.
The following image from the Mail & Guardian illustrates what large South African companies are likely to have to pay annually, if the SA Carbon Tax is passed:
Source: Mail & Guardian, 14 October 2011
When one looks to Australian, where the legislation was passed this week, according to Reuters, it will impact the entire economy; from miners and liquefied natural gas (LNG) producers - to airlines and steel makers. The tax is aimed at making firms more energy efficient and to push power generation toward gas and renewables. Australia accounts for just 1.5 percent of global emissions, but is the developed world's highest emitter per capita due to a reliance on coal to generate electricity. South Africa, according to miningmx, is responsible for even less emissions, at 1.1% of global emissions; but still falls within the top 20 emitters of CO2 in the world, due to a similarly high reliance on coal to generate power.
The Australian legislation is a fixed carbon tax of A$23 ($23.78/R191) a ton on the top 500 polluters from July 2012, then moving to an emissions trading scheme from July 2015. Consider this in relation to the R75-R200/tonne, depending on severity, proposed in South Africa's draft tax document. According to the Australian law, companies will need a permit for every tonne of carbon they emit, yet farmers will be exempt from the scheme. The laws are meant to give companies a financial incentive to curb pollution, and will help Australia reach its goal to cut emissions by 5 percent of year 2000 levels by 2020. Farmers too will be able to cash in by selling carbon offsets under separate laws. The government expects the scheme to spur a multi-billion dollar investment rush in new, cleaner energy sources, including natural gas and renewable power stations, to replace Australia's aging coal-fired plants.
Many people hope that the passing of the Australian bill will help re-ignite the push for a global agreement to curb emissions ahead of international COP17 talks in Durban in December. In terms of the Copenhagen Conference on climate change (COP15), South Africa undertook to reduce its carbon emissions by 34% by 2020 and up to 42% by 2025.
The South African carbon tax debate and conclusions are likely to be a focal point amidst COP17 happening in South Africa later this month. The key questions that remain, are what the true impacts will be on the average South African, and how the South African government will utilize the money collected through the carbon taxes.
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References:
Miningmx: Carbon tax inevitable for SA's polluters (http://www.miningmx.com/special_reports/green-book/green-book-2011/Carbon-tax-inevitable-for-SA-polluters.htm)
Reuters: Australia passed landmark laws on Tuesday to impose a price on carbon emissions in one of the biggest economic reforms in a decade and injecting new impetus into December's global climate talks in South Africa. http://www.reuters.com/article/2011/11/08/us-australia-carbon-idUSTRE7A60PO20111108?feedType=RSS&feedName=topNews&rpc=71
The Mail & Guardian: http://mg.co.za/article/2011-10-14-carbon-tax-debate-its-about-more-than-just-hot-air
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