Further delays to the implementation of carbon taxes and the increase in the tax rate would ignore the socioeconomic effects of failing to mitigate climate change, shareholder activism organisation Just Share said.
It was responding to calls from businesses for further delays in the full implementation of carbon taxes in SA.
In a statement released on Tuesday and in presentations given at public hearings in parliament on Wednesday, companies such as Sasol and various organised business groupings said that the Treasury’s carbon tax proposals will come at a great cost to individual businesses and the economy.
But Just Share hit back in a statement saying that, as it stands, the proposed tax rate increase “remains far too small to create the necessary incentive to encourage a just transition to a low-carbon economy”.
The proposed carbon tax without allowances would render integrated oil and gas company Sasol unviable by 2029, group CFO Hanre Rossouw said Wednesday.
It would result in a potential tax liability of about R20bn-R30bn a year, nearly triple the company’s current SA income-tax payment and more than its pretax profits in five of the last 10 years.
This would require the premature closure of part or all of Sasol’s SA operations, Rossouw warned, adding that this had been confirmed by independent analysis.
Sasol’s view added to the chorus of opposition to the Treasury’s carbon tax proposals during public hearings by parliament’s finance committee on the draft Tax Laws Amendment Bill, which contains the proposals.
World Wildlife for Nature, together with Just Share, were the only voices urging the need for high carbon pricing to reduce carbon emissions.
Just Share argued in a statement that if carbon were priced correctly, so that it reflected the actual costs of emissions to society, that would be transformative in limiting the worst effects of the climate crisis.
“Failing to take more significant steps to reduce emissions in the short and medium term will require steeper and deeper emission reduction cuts in the future, with more severe consequences for our economy and the majority of people in SA,” the organisation said.
Business Unity SA, Sasol, Cement and Concrete SA, the Industry Task Team on Climate Change, Chemical & Allied Industries Association and ArcelorMittal SA all expressed opposition to the carbon tax increases, saying they were too steep.
This comes on top of the opposition expressed by the Energy Council of SA, Minerals Council SA, Business Leadership SA, Business Unity SA (Busa), the SA Petroleum Industry Association (Sapia) and Energy Intensive Users Group (EIUG), which have urged changes to the proposed carbon tax regime to make it less onerous, including an extension of the period of its phase-in.
Carbon tax rate
The Treasury has proposed the carbon tax rate be progressively increased by a minimum of $1 every year to reach $20 per tonne of CO2 equivalent by 2026. In the second phase from 2026 onwards, the carbon tax rate will have larger annual increases to reach at least $30 by 2030, accelerating to higher levels of about $120 beyond 2050.
The proposed tax rate increase, said Just Share, was still too small to serve as adequate incentive to inspire a change in company behaviour.
The World Bank recommends carbon prices of $50 to $100 by 2030 while the International Monetary Fund recommends lower carbon prices for developing countries of between $25 to $50 by 2030.
The World Wide Fund for Nature SA previously said in a report that a “meaningful” initial carbon tax rate for SA would be between R162 and R433 per tonne.
Organised business has proposed that the annual carbon tax increases continue to be based on the consumer price index plus 2% to allow for the reviewing and aligning of different policies. It is also are concerned that the draft bill does not retain the allowances to mitigate the impact of the rapidly increasing carbon tax proposals, saying these allowances have been instrumental in assisting business sectors requiring support, such as the mining, petrochemical, steel and cement.
Rossouw noted that Sasol was already on track to reduce its greenhouse emissions by 2030 by 30% and had a net zero target by 2050. It had already approved R15bn-R25bn to decarbonise its business with its renewables programme being one of the biggest private independent power producer programmes in SA. He believed the carbon tax should be integrated into broader climate change policy balancing people, planet and profit. There should also be incentives and allowances to re-industrialise a green economy.
“We believe that the carbon tax puts our base business and this transition at risk,” Rossouw said.
Cement and Concrete SA also warned that the proposed carbon tax increases would threaten the viability of the sector. Industry Task Team on Climate Change’s co vice-chair Andries Gous suggested that a study be conducted into the feasibility of introducing a sector-based carbon tax design as opposed to a general carbon tax, as well as a study into the effect of a carbon tax pass through by the electricity sector.
Busa CEO Cas Coovadia stressed that the carbon tax regime should not inhibit vitally needed investment and told MPs that such increases in the carbon tax as proposed by the Treasury only made sense after 2035.
Busa also opposed the fact that the increases were dollar-denominated, saying they should be rand-based. Busa head of climate change and environment Happy Khambule urged the need for allowances to offset the effects of the tax. A high local carbon tax would disadvantage local business in competition against cheap imports, he said.
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