The private sector in SA never fails to call the government out on its lack of leadership, yet it seems that when an opportunity presents itself for business to step up and lead the way it often snatches defeat from the jaws of victory.
Last week offered just such an occasion when a group led by Business Leadership SA (BLSA) and Business Unity SA (Busa) submitted a joint position by organised business on proposed “improvements” to the carbon tax under the Taxation Laws Amendment Bill.
Simply put, while remaining “firmly committed to reducing carbon emissions”, the group called on the state to kick the climate change can further down the road by asking for an extension of the toothless prescriptions of the Carbon Tax Act. The group would like to have the proposed rate increases under phase two of the carbon tax scrapped, and the current tax allowances system continued through to 2030, right about when the UN says it will be too late to deviate from climate chaos.
In its statement the group felt obliged to state how it is “supportive of carbon pricing, including the carbon tax and the development of tools and mechanisms that promote a just transition” and how it “commends the SA government’s commitment to decarbonise and sustainably grow low-carbon sectors of the economy”.
But this rings a little hollow when one bears in mind that as a result of current tax-free emission allowances, which range between 60% and 95% of companies’ carbon tax liabilities, the effective carbon tax rate works out to be R6-R48 per tonne of carbon. At this meagre rate it should come as no surprise that total revenue from the tax in the 2021/2022 financial year was a paltry R1.38bn.
This defeats the purpose of the carbon tax. In foundational research going all the way back to the conceptualisation of the tax, the Treasury argued that “the introduction of a carbon price will change the relative prices of goods and services, making emission-intensive goods more expensive relative to those that are less emissions intensive. This provides a powerful incentive for consumers and businesses to adjust their behaviour, resulting in a reduction of emissions”.
Little wonder, then, with all the exemptions and allowances accruing to SA’s two worst climate change culprits, Eskom and Sasol, that we have seen scant improvement in the energy sector. In fact, Eskom has actually increased its emissions intensity from 1.03kg CO2 equivalent per kilowatt hour to 1.08kg CO2e/kWh over the period of the carbon tax, while Sasol’s 2020 emissions were initially 3% lower than in 2017, but only 1% lower in 2021 relative to 2017 levels.
Given that the electricity and petrochemical production sectors combined account for 52% of our national emissions, it is clear that continuing down the existing path is not providing “the powerful incentive” to adjust behaviour and achieve the national emission reductions targets that the Treasury is seeking to achieve.
This goes a long way towards explaining why we have seen such slow progress on the integration of renewable energy into Eskom’s generation capacity, or why both Sasol and PetroSA have snubbed grant funding from the EU to trial production of sustainable aviation fuels through their Fischer-Tropsch facilities.
The BLSA and Busa joint position argues that a price of $30/tonne by 2030 is excessively onerous, but the high-level commission on carbon Prices at the IMF recommended that the carbon tax rate be $40-$80/tonne CO2e by 2020 already. Not only is the proposed increased carbon price path significantly behind a meaningful path that will deliver emission reductions, but the Treasury has made no concrete determinations on the removal of the basic tax‐free allowances, proposing only that they “will also be gradually reduced to strengthen the price signals under the carbon tax from January 1 2026 to December 31 2030”.
Honestly, Busa and BLSA doth protest too much.
• Maguire is carbon project manager at Climate Neutral Group SA. He writes in his personal capacity.
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