Carbon Tax

The Carbon Tax Act Number 15 of 2019 published in Gazette #42483 dated 23 May 2019 took effect on 01 June 2019. The Act may be downloaded here.

South Africa relies on coal for most of its energy and green house gas emissions from power generation is a major contributor.

South Africa recognises the importance of reducing carbon emissions and foreseeing the benefits that a low carbon economy can bring. The South African government has committed to ambitious greenhouse gas emissions reductions of 34% by 2020 and 42% by 2025.  The purpose of a carbon tax is to change consumer behaviour and shift towards low carbon options. 

Taxpayers are liable for carbon tax should they conduct one of the activities in Schedule 2 of the Carbon Tax Act (Act No. 15 of 2019), above the threshold for that activity. Carbon tax will be levied on the sum of greenhouse gas emissions from fuel combustion, industrial processes, and fugitive emissions, determined in accordance with a reporting methodology approved by the Department of Environmental Affairs. 

Emitters will be required to license their activities liable for carbon tax, and payment of this environmental levy will be due in July of each year. A separate tax on emissions from petrol and diesel has been incorporated into the fuel levy system from 5 June 2019.

The tax will be phased in over a period of time to allow for smooth transition in adopting cleaner and more efficient technologies and behaviours. The first phase will run from implementation up to December 2022.

The initial marginal carbon tax rate will be R120 per tonne of CO2e (carbon dioxide equivalent).

Taking into account the thresholds mentioned in the Act, the effective tax rate is much lower and ranges between R6 and R48 per tonne.

Reference documents:

· CARBON TAX ACT 15 OF 2019

· GAZETTE #42483

This article is provided for information only and does not constitute the provision of professional advice of any kind.

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