South Africa: Draft Carbon Tax Bill Published For Comment

Last Updated: 9 November 2015
Article by Mansoor Parker and Andrew Gilder

Most Read Contributor in South Africa, November 2017

On Monday, 2 November 2015, the South African National Treasury published a Draft Carbon Tax Bill (the "Bill") for public comment, with the comment period commencing immediately and continuing until 15 December 2015. At first glance, the Bill does not stray too far from the carbon tax design that Treasury has been proposing since 2010 in various discussion papers, national budget speeches and their associated explanatory memoranda and responses to stakeholder commentary on the design. The Bill does not change the essentials, but it does progress certain of the detail while providing only a tantalising glimpse of some of the more interesting aspects of the design. While the proposed tax is vaunted as the carbon tax, this is not the only or the first carbon tax imposed in South Africa. Emissions on new vehicles are subject to emissions taxation and approximately five years ago, the fossil fuel electricity levy was introduced. These are both taxes on greenhouse gas emissions, as is the proposed carbon tax.

The following high-level points are important to note in relation to the Bill:

  • The essential carbon tax design that has been discussed since 2010 is unchanged, although the Bill provides greater detail on particular architectural elements while providing only glimpses of others, e.g. the proposed use of carbon offsets against a carbon tax liability, the detail of which will be provided in regulation that is expected to be published for comment in early 2016.
  • The Bill proposes that carbon tax be paid in respect of every "tax period" and that the first tax period will commence on 1 January 2017 and end on 31 December 2017. Note the distinction between "tax period" and the "phase" of carbon tax implementation, discussed below.
  • In an evolution of Treasury's previous stance that carbon tax revenues will simply go into the general revenue pool, the Bill proposes that revenues will be spent on a range of sustainable interventions, e.g. providing tax relief for rooftop solar power, a reduction in the fossil fuel electricity levy or providing support for free basic electricity. While this represents a welcome softening of Treasury's position, it is unlikely that Treasury will irrevocably commit itself to these applications of carbon tax revenue due to the need to retain fiscal flexibility in the national budgeting process.
  • While the Bill provides some insight into the proposed design up to 2020, including emissions thresholds and exemption, it is silent on the post-2020 period, which is unhelpful for predicting the longer-term implications of the carbon tax. It is probably safe to assume that the tax will gradually be ramped-up after 2020, including the lowering of thresholds and the removal of exemptions.
  • The carbon tax will be introduced in a phased manner. The first phase of the tax will run from the commencement of the regime until 2020, during which time the tax is intended to be neutral to revenue and to electricity prices (once revenue recycling measures are taken into account), although a press statement accompanying the Bill states rather obliquely, that while "the tax and revenue recycling measures are designed to be revenue neutral from a macroeconomic perspective [they] will not necessarily be neutral for companies with significant emissions". This is a warning to large emitters of scope one emissions that the carbon tax will have financial consequences for them from its commencement.
  • The six greenhouse gasses originally targeted in the Kyoto Protocol (carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and sulphur hexafluoride) will be the focus of the carbon tax, but the seventh Kyoto gas (nitrogen trifluoride) is excluded due to the absence of this gas from South African industrial emissions.
  • The Bill includes the following thresholds and exemptions (which are more numerous and complex than before, particularly their inter-relationship):
    • A basic 60% tax-free threshold during the first phase.
    • An additional 10% tax-free allowance for process emissions.
    • An additional tax-free allowance for trade exposed sectors of up to 10%.
    • An additional tax-free allowance of up to 5% as recognition for early actions and/or efforts to reduce emissions that beat the industry average.
    • A carbon offsets tax-free allowance of between 5% and 10%.
    • A phase one-specific additional 5% tax-free allowance for companies participating in the Department of Environmental Affairs carbon budgeting system in recognition of their participation and of the role of carbon budgets in the overall tax design.
    • Phase one tax-free exemptions will range between 60% and 95% of total emissions, implying that the carbon tax will be imposed on 5% to 40% of actual emissions during the period.
    • In phase one, an initial marginal carbon tax rate of R120 will be imposed per tonne of carbon dioxide equivalent ("tCO2e"), but the effective carbon tax rate will vary between R6 and R48/tCO2e with a comprehensive application of the system of tax-free allowances.

In relation to the potential economic consequences of the carbon tax, the accompanying explanatory memorandum indicates that a 2012 economic modelling exercise initiated by the National Treasury found that "...a carbon tax with broad sector coverage implemented gradually and complemented by effective and efficient revenue recycling will contribute towards significant greenhouse gas emission reductions, and have only a marginal negative impact on economic growth over the short-term". There are at least two considerations that arise from this statement:

  • Firstly, the idea that the carbon tax will have only a marginal negative economic effect over the short-term is unlikely to be of any comfort to those industries and their customer bases that will feel the negative impact. In any event, the economic modelling that has been released to date on the carbon tax is relatively superficial and the conclusions have been challenged. One of the imperatives going forward must be a comprehensive economic modelling of the anticipated impact of the carbon tax as input to public and private sector strategic decision-making around the tax.
  • Secondly, by its reference to the carbon tax's potential to contribute to greenhouse gas emissions reduction, the statement locates the carbon tax within the national and international political landscape of the climate change negotiations and the explanatory memorandum describes the carbon tax as "integral" to domestic climate change policy. In fact, the carbon tax is relevant to a number of macro-economic concerns, not least of which is power generation and the future energy mix. For example, the explanatory memorandum indicates that the carbon tax aims to change the behaviour of firms, incentivising them to shift towards cleaner technology when replacing/renewing machinery, technology or processes. While the carbon tax may drive the market in this direction, it is also true that, in the absence of a systemic change in our power sector, the carbon tax will not drive the significant opportunity for greenhouse gas emissions reduction, namely a shift to less emissions-intensive forms of electricity generation. This is because the energy mix is not determined by market forces, but by the Integrated Resources Plan, 2030 ("IRP") which does not offer energy-sources alternatives for energy-consumers other than Eskom's emissions-abundant power. The pending revision of the IRP might introduce some flexibility which would tend to support the effectiveness of the carbon tax as a driver towards a less emissions-intensive electricity sector, but this remains to be seen.

It is only with an appreciation of where and how it fits into broader macro-economic concerns that a proper understanding of the carbon tax can be formulated. Due to the complexity of the proposed tax design and the myriad of strategic and operational implications that the imposition of the tax will have for industry, this article is the first of a series that will examine the context for and various features of the proposed carbon tax. Future articles in this series will explore the policy, legal and strategic positioning of the carbon tax, with a view to inform this understanding.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions