Understanding Carbon Tax in South Africa

Businesses in the manufacturing industry are by now very aware of the new carbon tax act which was gazetted in May 2019, and which came into effect from 01 June 2019.

As with most new laws, there are pros and cons which people will no doubt be debating for years to come. 

We’d like to highlight the main points of the carbon tax act here in South Africa.

What is Carbon Tax?

Carbon tax is an additional tax paid by businesses that produce carbon dioxide as a by-product of their operations. 

The idea behind carbon tax is to encourage businesses to reduce their carbon emissions which would, in turn, make them more energy-efficient and lessen their impact on the global environment.

There is no doubt that climate change needs to be addressed by every country, and by extension, every business which contributes to the greenhouse gases which are impacting our environment. 

A news article from WWF says, “A carbon tax is a way for government to put a price on carbon emissions, and to shift the costs from society to those companies that are creating the emissions. The more a company emits, the more tax it must pay. The more action a company takes to reduce its emissions, or if it is by nature low-carbon, the lower its tax.”

Carbon Tax Basics

The World Economic Forum helps us to understand carbon tax  costs in simple terms. They say:

  • The carbon tax is being introduced at a much lower rate than needed in the longer term. The nominal amount of carbon tax that a company will pay is R120 per ton CO2-eq.
  • Multiple allowances, including a 60% “basic” tax-free allowance, means big emitting companies pay at most R48/ton. The tax is payable by companies which exceed the threshold of carbon emissions.
  • The tax will be paid by companies to the South African Revenue Services (SARS).

Our planet needs help, in any form it can get.

And if forcing the hand of the industries responsible for carbon emissions to reduce their footprint and to move to more energy efficient processes is going to help, then it’s a logical forward step.

The WWF article quoted above sums up our joint responsibility toward reducing carbon emissions – both as businesses and as individuals. “Re-orientate your lifestyle and the economy now. Choose energy-saving appliances; implement energy savings in your home and workplace; choose locally produced foods and proudly South African products; if you have a car, think about how to make your car trips more efficient by combining trips or sharing lifts.”