Proposed domestic carbon tax – What a song!

Posted on July 04, 2018

During a concert in 1983, Bono, the lead singer of U2 and well-known humanitarian, said the following: ‘There's been a lot of talk about this next song. Maybe too much talk.’ This is how I feel about the proposed domestic carbon tax. It has been a long process. Let me explain.

The South African Cabinet approved the National Climate Change Response White Paper in 2011. The first draft of the Carbon Tax Bill was published for public comment in November 2015. And the latest documentation states the ‘actual date of implementation of the carbon tax will be determined through a separate and later process by the Minister of Finance through an announcement during 2018, or at the Budget 2019, taking into account the state of the economy’.

Looking at these timelines, I cannot help but think of the Rolling Stones’ 'Time is on my side, yes it is' lyrics. But is it? We are seeing more and more extreme weather events and most scientists will agree that pure greenhouse gas (GHG) mitigation action did not result in the desired reductions and that we have to brace ourselves for adaptation measures. The intention of the proposed domestic carbon tax is in line with international thinking and that is the polluter pays principle, quoting, ‘Those responsible for harming the environment must pay the costs of remedying pollution and environmental degradation and supporting any consequent adaptive response that may be required.’

In its simplest form, GHG pollution can be divided into three scopes: Scope 1 is GHG emissions that one emits directly to the atmosphere. This could typically include diesel combustion in generators that one owns and controls. Scope 2 emissions are frequently electricity sourced from Eskom or other forms of ‘bought in energy’. Scope 3 emission, for a lack of a better definition, could be everything else, like paper consumption and business travel.

One entity’s Scope 1 emissions could be the Scope 2 emissions of another entity. So, Eskom combusts coal, which is a Scope 1 emission and we buy the electricity, which is then our Scope 2 emissions. The resulting pollution is the responsibility of the polluter, but we use the electricity, which implies we are also responsible. In the words of Lionel Ritchie, ‘Say you, say me, say it together. Naturally.’

The tax is developed in such a way that only Scope 1 (direct) emissions will be liable for tax. Furthermore, there are some exclusions and tax-free allocations. In brief, most organisations that will be tax liable will have Scope 1 emission exemptions of 60%- 90%, depending on the type of industry and international trade exposure.

Let me explain one possible application of the tax using the example of buying a box of standard printing paper. As consumer I do not manufacture paper, so it will be part of my Scope 3 GHG emissions, but the manufacturer of the paper will have Scope 1 emissions that they most probably need to recover from me by increasing the price.

A box of paper typically weighs 12.5 kg, and the GHG pollution associated with the manufacturing process results in about 25 kgCO2e being emitted to atmosphere. If we assume that half of the emissions will be Scope 1 emissions, then the maximum tax liability will be on 12.5 kg. Let us further assume that the manufacturing process gets the minimum tax deduction of 60% then a box of paper could be taxed on 5.0 kgCO2e and at an initial tax rate of R120/tCO2e this equates to R0.60. (Please note, this calculation is only for illustrative purposes and that the application of the tax is a little bit more complicated.)

That box of paper before the tax would cost about R180 so the tax, in this illustrative example, will not have a massive impact on cost. Obviously this will not be the case for all taxed events.

It is proposed that the carbon tax will be escalated as follows:


  2018 2019 2020 2021 2022

Nominal Tax rate

(R/ton C02 equivalent)

120 129 139 150 161

No single government entity will solely be responsible for the proposed domestic carbon tax. Yes, you guessed it, ‘Wake me up before you go go, ’cause I'm not planning on going solo’ (Wham!). The Department of Environmental Affairs (DEA) will be responsible for the monitoring, reporting and verification (MRV) that will be incorporated in the South African National Atmospheric Emissions Inventory System (NAEIS), which is again part of the South African Air Quality Information System (SAAQIS). The DEA will work with the Department of Energy (DoE) as it hosts the Designated National Authority (DNA) that will be responsible for administering the carbon offsets. Phew!

The Minister of Finance announced during the South African National Budget Speech, held on 21 February 2018, that the proposed domestic carbon tax will come into effect in early 2019. There is hence not a lot of time to get versed (pun intended) in carbon footprint and carbon tax procedures and developments.

With this in mind the carbon footprinting short course, Carbon Footprinting: From Strategy to Practical Tool, was developed and is presented in collaboration with Enterprises University of Pretoria (Enterprises UP). This course will assist the course participants to calculate a carbon footprint, but also assist to be tax complaint and reduce the GHG pollution through active management.

Imagine telling someone in the mid-90s that one will one day go to a grocer, buy food and then pay for a plastic bag. Pay for a plastic bag?! Few people would have believed you. Now imagine a world in which every item in that grocery bag has some form of pollution tax associated with it. It is time that we get ready for such a world.

Dr Marco Lotz is a presenter on the Carbon Footprinting: From Strategy to Practical Tool short course offered by Enterprises UP and has a PhD in Sustainability Studies from the University of Pretoria.

Click on the links here for more information about our wide range of Environmental Management and Geophysics or Engineering and Technology Management short courses. Also see more on our collaborative research and advisory services in these areas.


- Author Dr Marco Lotz

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