The design features of a proposed carbon tax, as well as a schedule for its possible introduction, would be unveiled in the 2012 Budget, the National Treasury said in its 2011 Budget review.

However, Finance Minister Pravin Gordhan did confirm that the existing levy on electricity generated from nonrenewable and nuclear energy sources would increase by 0,5c/kWh to 2,5c/kWh from April 2011.

But he said that the increase should not impact on electricity tariffs, as it had already been taken into account in the National Energy Regulator of South Africa’s approved tariff structure for the period 2010 to 2013. Power prices in South Africa are set to rise by an average of 25% a year over the period.

The National Treasury released a discussion paper in December outlining three possible carbon tax models as part of government’s response to climate change and to commitments made internationally to reduce greenhouse gas (GHG) emissions.

At the United Nations Framework Convention on Climate Change negotiations in Copenhagen, Denmark, in 2009, South Africa offered to reduce its GHG emissions by 34% by 2020 and by 42% by 2015, when compared with a trajectory that involve no interventions. The country is also due to host the next round of climate negotiations, or the 17th Conference of the Parties, in Durban from November 28 to December 9.

Comments on the National Treasury’s proposed options, one of which includes a suggested R75/t tax on carbon dioxide (CO₂), rising to R200/t, at 2005 prices, are expected by the end of February.

“Inclusive growth also means addressing the climate change challenges that confront the long-term global outlook. Mitigation initiatives are not just about reducing the dangers associated with a hotter future, but they also offer significant opportunities to create jobs and reduce costs in our economy,” Gordhan said.

Large energy users have already warned that the introduction of such a tax could have implications for their future growth, which could, in turn, reduce their economic and job creating potential in the South African economy.

It has also been stated that any tax on power utility Eskom, which is South Africa’s larges C0₂ emitter, would be passed onto consumers and contribute further to what are already steeply rising electricity prices.

Meanwhile, government also proposes to increase the general fuel levy by 10c/l on both petrol and diesel effective from April 6, increasing the levy on petrol to 177,5c/l and to 162,5c/l on diesel. It will also increase the Road Accident Fund levy by 8c/l to 80c/l on the same date. In total, fuel taxes on petrol will rise to 261,5 c/l and to 246,51 c/l on diesel.