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The National Treasury today publishes the Carbon Tax Policy Paper, Reducing greenhouse gas emissions and facilitating the transition to a green economy for public comment. This is the second and final round of comments requested on carbon tax policy, before government proceeds with the publication of draft legislation to give effect to carbon taxes later this year for implementation from 1 January 2015.

Climate change poses a major challenge to humankind, and one of the most significant ways to mitigate this risk is by reducing greenhouse gas emissions such as carbon dioxide. There is also a growing concern that climate change could slow or possibly even reverse progress on poverty reduction. South Africa’s strategy to make a contribution towards greenhouse gas mitigation and adaptation was adopted by government in 2011 when Cabinet approved the National Climate Change Response White Paper. This was after the commitment made by South Africa at the 2009 Copenhagen conference of parties (COP17) to undertake appropriate national actions to curb greenhouse gas (GHG) emissions by 34 per cent by 2020 and 42 per cent by 2025 below business as usual.

This Carbon Tax Policy Paper updates the 2010 discussion paper “Reducing Greenhouse Gas Emissions: The Carbon Tax Option and takes into account the public comments received. It takes account of the principles in both the 2010 paper as well as the 2006 Environmental Fiscal Reform Policy Paper, which provides a policy context and foundation for the use of taxes and incentives to support the attainment of environmental objectives in a cost efficient, socially equitable and fiscally effective manner.

The primary objective of implementing carbon taxes is to change future behaviour, rather than to raise revenue. It therefore starts with a relatively low carbon price, and then progressively rises significantly after five to ten years and beyond. This approach provides industry and other major emitters sufficient time to innovate and invest in greener technologies for the future. There are at least three ways in which a carbon tax will work to drive changes in producer and consumer behaviour and therefore address climate change:

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