REPUBLIC OF SOUTH AFRICA
DRAFT CARBON TAX BILL: DRAFT REGULATIONS MADE IN TERMS OF CLAUSE 19(c) OF THE DRAFT CARBON TAX BILL
EXPLANATORY NOTE FOR THE DRAFT REGULATION ON THE CARBON OFFSET
Government published the Draft Carbon Tax Bill for public comments and further consultation on the 14th of December 2017. The Draft Carbon Tax Bill includes the detailed and revised carbon tax design features as per the 2015 Draft Carbon Tax Bill, the Carbon Tax Policy Paper of 2013, announcements in Budget 2014 and the Carbon Offsets Paper of 2014 and takes into account public comments received following extensive stakeholder consultations since 2011.
The overarching design of the carbon tax is informed by the administrative feasibility and practicality of covering most greenhouse gas (GHG) emissions and takes into account the need for a long and smooth transition to a low carbon economy in a sustainable manner. The significantly high level of tax-free allowances, recycling of revenues through a reduction in the electricity generation levy and energy efficiency savings tax incentive, and phased approach to the introduction of the tax will ensure that South Africa’s competitiveness is not compromised and vulnerable households are protected.
The Draft Carbon Tax Bill gives effect to the design features of the carbon tax as outlined below, including the carbon offset allowance:
• A fossil fuel combustion tax-free allowance of 60 per cent;
• An additional tax-free allowance of 10 per cent for process emissions;
• An additional tax-free allowance of 10 per cent for fugitive emissions;
• A variable tax-free allowance for trade-exposed sectors (up to a 10 per cent maximum);
• A maximum tax-free allowance of 5 per cent for above-average performance;
• A 5 per cent tax-free allowance for companies allocated and complying with a Carbon Budget;
• A carbon offset allowance of either 5 per cent or 10 per cent.
The combined effect of the above tax-free allowances during the first phase of the carbon tax will be capped at 95 per cent. An initial headline tax rate of R120 per ton carbon dioxide equivalent (CO2e) and various tax-free allowances will thus result in an effective tax rate that will vary between R6.00 and R48.00 per ton of CO2e.
An initial Draft Regulation on the Carbon Offsets was developed in terms of Section 19(c) of the 2015 Draft Carbon Tax Bill and published for public comment on 20 June 2016. The Draft Regulation on the Carbon Offset outlined the eligibility criteria, administration and technical details on the framework for the implementation of the carbon offsetting scheme under the proposed carbon tax. Sixty-six sets of
written submissions on the Draft Regulation on the Carbon Offset were received from a wide range of stakeholders. The comments focused on the general design of the carbon tax including the role of the carbon offset, cap on the allowance, scope and eligibility criteria of the offsets, and specific comments on the technical, legal and administrative aspects of the regulation.
Following extensive stakeholder consultations, substantial changes were made to the initial Draft Regulation on the Carbon Offset to take into account stakeholder comments. This includes a revision of some sections whilst providing more details and further clarity on the administration of the offsets. The Draft Regulation on the Carbon Offset is hereby published for public comment.
Please see the documents below for full details: