Bloomberg News

South African Treasury Backs Carbon Tax to Cut Emissions

October 19, 2011

(Updates with Treasury comments from second paragraph.)

Oct. 19 (Bloomberg) -- South Africa’s National Treasury said its proposed carbon taxes are an appropriate tool to cut emissions, rejecting opposition to the levy from steelmaker ArcelorMittal South Africa Ltd. and other companies.

“Carbon taxes afford firms the flexibility to undertake emissions reductions according to their specific processes and provide the long-term price certainty which is essential for investment decisions,” said Cecil Morden, chief director of tax policy at the Treasury. “A carbon tax at an appropriate level, and phased in over a specific time period,” will help alter consumer and producer behavior, he said.

The government yesterday published its new climate policy, which envisions a “range of economic instruments” being employed to support the emission-reduction goals, including the possible use of offsets and emissions-trading mechanisms.

A discussion document released last December by the Treasury proposed three alternate ways of taxing emissions: a direct tax on greenhouse gases emitted from industrial sources; a tax based on the carbon content of fuels; and a tax applied to emitters where fuel is burned. Revised proposals are due to be published next month.

Emissions Trading Not Viable

The Treasury’s initial preference is for an input tax, based on the carbon content of fuel, which would be easiest to measure and collect, Morden said in a presentation to lawmakers in Cape Town today. An emission-trading system wasn’t considered a viable medium-term alternative to a carbon tax, he said.

South Africa is weighing a charge of 75 rand to 200 rand ($9 to $25) per metric ton of carbon emitted, the Treasury said in May 2010.

Those numbers were “indicative” and it was too early to speculate what the final charge would be, or when it would be phased in, Ismail Momoniat, head of financial sector policy in the Treasury, said in an interview in Cape Town.

Australia, the developed world’s biggest per-capita polluter, plans to make about 500 companies pay A$23 ($22.74) a ton for their carbon emissions starting in July 2012, before switching to a cap-and-trade system three years later.

ArcelorMittal, Africa’s largest steel-maker, said in a July 27 regulatory filing that South Africa’s proposed carbon taxes were “a concern as they will have a severe impact on cost of steel produced.”

Sasol Ltd., the largest producer of motor fuel from coal, said in a June 14 regulatory filing that “South Africa must make the transition to a lower-carbon economy while remaining sensitive to the urgent developmental needs of the country.”

South Africa’s government agreed in 2009 to reduce its emissions by 34 percent compared with “business as usual levels” by 2020, and by 42 percent by 2025, on the condition that developed countries provide assistance in the form of money and technical expertise. Total carbon emissions in the country are seen peaking at 614 million metric tons by 2025 and falling to a maximum 428 million tons by 2050.

--Editors: Alessandro Vitelli, Randall Hackley.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editor responsible for this story: Andrew Barden at barden@bloomberg.net


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