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South Africa will extend the first phase of its carbon tax plan by three years, which could delay an increase in rates for companies including its coal-reliant state power utility.
Eskom Holdings SOC Ltd. has estimated an annual carbon-tax bill of around 11.5 billion rand ($763 million) when exemptions run out at what was supposed to be the start of the program’s planned second phase in 2023. The initial period will now be extended to the end of 2025, according to the budget review presented by Finance Minister Enoch Godongwana on Wednesday.
“The transitional support measures afforded to companies in the first phase, such as significant tax-free allowances” will continue, the National Treasury said in the budget document. Those will be gradually reduced through the four years from 2026.
The delay in implementing higher charges jars with South Africa’s adoption of a significantly lower carbon emission target ahead of last year’s COP26 climate conference and its ambition to reach net-zero status by 2050. Still, it may lead to a reduction in Eskom’s proposed increase in power prices, which could curb inflation.
The projected cost of the carbon tax accounted for a significant share of Eskom’s proposed 21% tariff increase for 2022-2023, according to a recent presentation by the company. The company didn’t immediately respond to a request for comment. Eskom accounts for about two fifths of South Africa’s emissions of climate-warming gases and the country is the world’s 12th biggest emitter.
Carbon Price
The government proposed an increase in the carbon price of at least $1 every year to reach $20 per ton of carbon dioxide equivalent by 2026, with costs to climb more rapidly thereafter. By 2030 it is expected to be $30 per ton and as much as $120 after 2050.
The National Treasury also made the following proposals:
- A carbon budgeting system will become mandatory from Jan. 1 and emissions that exceed the budget will be penalized
- A carbon offset allowance will be increased by 5% from January 2026 to encourage investments in such projects
- A plastic bag levy to be increased by 12% and the government will investigate plastic tax and a duty on single‐use plastics
- A vehicle-emissions tax rate and levy on incandescent light bulbs will be increased
- Measures to regulate electricity-intensive crypto mining, which is environmentally harmful, are being considered
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