The first piece of enacted legislation directly inspired by South Africa’s need to reduce carbon emissions, this act came into force on 1 June 2019. Evoking consternation on both sides of the fence, opponents say it will stifle business and harm the economy by driving up the costs of doing business. Climate activists say it won’t change our trajectory towards a lower carbon economy quickly enough. The tax rate is considered low by global standards, and the scope is fairly limited initially.
Eskom is exempt from taxation under this act during phase one, the rationale being that it is already paying via an electricity generation levy and a renewable energy premium for power purchased from independent power producers . Good news there for customers of the parastatal, who would no doubt end up footing the extra cost.
Much of the act is administrative and deals with the setting up of frameworks and the devising of appropriate plans at national, provincial and local government levels. These give us no quantifiable indication of what impact the eventual act will have on business. Chapter 5, however, , could well result in financial and operational implications.
A more generalised mechanism, the Carbon Budget, will operate in parallel to the target reduction system. Potentially a more immediate tool, carbon budgets will be allocated to all persons who emit beyond a certain threshold level. Here we see a potentially powerful limitation on those whose emissions are not consistent with the reduction trajectory. These entities will also have to submit greenhouse gas mitigation plans demonstrating their commitment to staying within their carbon budget.
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