Legislation: Carbon Tax Bill to be tabled this year?

Having been refined in keeping with some recommendations from key stakeholders and members of the public, the Carbon Tax Bill is expected to be ready for Cabinet approval in April – in anticipation of its introduction in the National Assembly. reports Pam Saxby for Legalbrief Policy Watch. This emerged last week during a joint meeting of the National Assembly's Standing Committee on Finance, the NCOP’s Select Committee on Finance, and the  National Assembly's Environmental Affairs Committee at which National Treasury and Department of Environmental Affairs representatives briefed MPs on a revised draft Bill released in December for comment. Against that backdrop, according to National Treasury Deputy Director-General Ismael Momoniat, a carbon tax implementation date will be announced either in this or next year’s Budget. Greenhouse gas emission regulations in force since September as part of an improved reporting system will inform South African Revenue Service calculations of entity-specific carbon tax obligations.

As Legalbrief Today has already reported, the overarching purpose of the revised draft Bill is to incentivise medium-to-long term behaviour change on the part of producers and consumers alike. It is the culmination of an environmental fiscal reform process begun in 2006, underpinned by policy principles articulated in government’s climate change response White Paper. Interestingly, however, the thrust of the briefing was that – once in force – the proposed new piece of legislation will introduce emissions reduction measures that may otherwise eventually be imposed in one form or another by the international community. The carbon footprint of South African exports and the requirements of ‘insuring for coal mines’ were just two examples provided of international developments with which SA must try to keep pace.

According to a Treasury presentation document circulated at the meeting, once in effect the measures envisaged ‘will change the relative price of goods and services, making (those that are) emission-intensive more expensive relative to those that are less (so)’. This is expected to be a ‘powerful’ emissions-related behaviour adjustment incentive. Explaining the rationale behind choosing carbon tax as opposed to carbon trading or command and control measures, the document provides useful insights into the draft Bill’s proposals for: tax-free allowances; carbon offsetting; energy efficiency savings; and the ‘recycling’ of any ‘revenue left over’ to ‘budget support for pro-poor programmes in (the) energy and transport sectors’. It also notes that – unlike the electricity sector’s regulatory framework, which apparently allows producers to ‘pass on the carbon tax to final consumers’ – the prevailing framework for determining liquid fuel prices does not. ‘Some consideration’ is therefore being given to an appropriate ‘pass-through mechanism’ for the liquid fuels sector, as an incentive to sustained changes in production and consumption patterns.