SA carbon tax likely in 2013

Submitted by: Margaret McKenzie, Friday, March 2, 2012

Finance minister Pravin Gordhan’s 2012 Budget Speech on 22nd February provided detail on a likely South African carbon tax to come into effect in the 2013/2014 tax year.    The minister indicated that there will be a further opportunity for comment on the tax proposals when National Treasury releases a further discussion document later this year.  However, the detail provided by SARS with the budget speech provides an opportunity to understand some of the financial implications of the proposed tax.

 

The current proposals indicate that a tax of R120 per tonne of CO2 equivalent emissions will be levied in 2013/2014.  This tax will be escalated 10% annually until the 2019/2020 tax year.   However, a basic tax-free threshold of 60% (with additional concessions for some sectors) is also proposed.   The proposals also provide for a performance adjustment to the tax free threshold using a carbon emissions intensity factor for output compared to an agreed sector benchmark for carbon intensity.   In addition companies in some sectors may offset between 5% to 10% of their emissions to reduce their carbon tax burden.

Based on these preliminary proposals regarding the carbon tax it is possible to calculate the likely tax of some of the top carbon emitters in South Africa.   The graph below summarises the taxes that would be paid by the top emitters based on their emissions as reported in the 2011 Carbon Disclosure South Africa JSE 100 Report   It should be noted that the methodology for calculating CO2 equivalent emissions has not been defined yet for this tax and this could have an effect on the taxes that are ultimately paid.  In addition these figures exclude potential adjustments resulting from purchasing offsets and performance against the carbon emissions intensity factor per sector.  The table below the graph shows how the calculations were made.

 

Company Scope One GHG emissions in tonnes of CO2e Maximum tax free threshold Taxable Emissions Tax rate per tonne Potential tax in millions of rand
Eskom

230,300,000

60%

92,120,000

R120

R 11,054

Sasol

61,200,000

70%

18,360,000

R120

R 2,203

Arcelor Mittal SA

11,900,000

80%

2,380,000

R120

R 286

Pretoria Portland Cement Co

4,800,000

80%

960,000

R120

R 115

BHP Billiton

3,100,000

80%

620,000

R120

R 74

Evraz Highveld Steel and Vanadium

2,800,000

80%

560,000

R120

R 67

 
 

Margaret McKenzie