Proposed South African carbon tax law opposed by energy firms in the Country

Top energy firms in South Africa oppose the 2019 enactment of the countries long-delayed carbon tax laws, arguing that the levies are unaffordable and should be scrapped or delayed.

In 2015, South Africa’s National Treasury drafted a carbon tax bill as part of its commitment to reduce greenhouse gas (GHG) emissions below business as usual by 34 per cent by 2020 and 42 per cent by 2025.

South African National Treasury said the Tax bill includes staggered increases and tax breaks in the early years and was developed in line with the polluter pays principle that allows companies to pay 6-48 rand per tonne in the first phase

The carbon tax which is expected to be implemented with complementary measures; the reduction in the electricity levy and a recycle revenue has been delayed so many times since first being mooted in 2010.

Energy firms like Sibanye-Stillwater, ArcelorMittal’s local unit, steel firms, mining firms and state-owned power utility ESkom Holdings SOC Ltd said it would erode profits and push up electricity prices and has since opposed the law.

ArcelorMittal’s South African unit opposed the carbon tax bill on the grounds that it would hurt the steel firm’s competitiveness at a time when it was struggling with cheaper imports and weak demand.

According to the group manager at ArcelorMittal’s local unit, Siegfried Spanig, while speaking at the hearing said, “when considering 2016 and 2017 financial figures, the estimated carbon tax payable would have affected EBITDA figures by 57 to 100 percent, which should be cause for concern.” Noting that the company’s estimated carbon tax liability would be in the region of 100 million rand a year and changes to protect struggling companies needed to be made.

The new law would affect about 1,000-1,500 companies and 75 percent of national emissions. It proposes a tax rate of 120 rand ($10) per tonne of carbon dioxide equivalent and states that total tax-free allowances during the first phase until 2022 can be as high as 95 percent.

South Africa ratified the Paris climate change pact two years ago and has pledged to cut emissions by almost half by 2030, when they are seen peaking between 398 and 614 million tonnes of carbon dioxide equivalent.