South Africa’s Electricity and Energy Minister, Kgosientsho Ramokgopa, is suggesting to suspend the country’s carbon tax. This proposal comes after pressure from fossil fuel lobbies who argue that the tax harms economic growth.
The carbon tax, established under the Carbon Tax Act, is designed to make polluters pay for their emissions. When the law was first implemented in 2019, companies were taxed R120 (around US$7.50) for each tonne of CO2. However, some managed to reduce their tax burden to as low as R6-R48 (US$0.37-2.50) per tonne through various exemptions.
This year, the tax rate is scheduled to increase as the policy enters its second phase. It’s estimated that the tax will generate R1.5 billion (around US$93 million) annually, which is equivalent to expenditures on early childhood grants in 2023.
The Carbon Tax Act wasn’t established overnight; it took over a decade of discussion among various groups—government, businesses, and activists. Major polluters dislike the tax, fearing it will damage the economy and cost jobs in high-emission sectors. However, globally, over 20% of emissions are already taxed, showing that such policies can drive change.
Experts argue that keeping the carbon tax is vital for environmental justice. A suspension would help a few large emitters in the short term but hurt many others in the long run. The rule of law—which holds democracy together—could be compromised if the Minister’s proposal goes through.
The Carbon Tax Act aligns with South Africa’s Nationally Determined Contributions aimed at reducing emissions. The country is committed to the Paris Agreement, which encourages countries to actively decrease their emissions and update their climate strategies every five years.
South Africa has a strong position in global climate talks, advocating for equitable solutions. However, suspending the tax could damage its credibility. Promises of international funds for transitioning from coal to clean energy hinge on fulfilling climate commitments outlined in the Just Energy Transition Partnership.
Interestingly, high-emission companies will still face costs even if the carbon tax is suspended. They’ll be liable for taxes on exports to countries with carbon pricing, like the EU’s Carbon Border Adjustment Mechanism. This means they can’t escape financial implications of their emissions, and local industries might face challenges.
Moreover, carbon taxes can spark innovation by encouraging companies to invest in cleaner production methods. Historically, well-designed taxes have drawn investment, aiding long-term job growth. This financial strategy can also help reduce social disparities by redistributing tax revenue to support underprivileged communities.
Opponents of the tax frequently claim it will hike energy prices. However, the tax revenue can facilitate broader access to clean energy, potentially lowering costs for low-income households.
Inaction on emissions has lasting consequences. Research suggests that climate change could shrink South Africa’s economy by up to 3.6% over the next few decades. If no carbon tax is implemented, about R259 billion (around US$16.1 billion) in economic losses could occur due to damage from climate inaction.
Ultimately, the call to maintain the Carbon Tax Act aligns with the constitutional right to a healthy environment. Future generations deserve protection against pollution, and meaningful actions toward cleaner practices must continue.
