Carbon Tax – Are You Aware How This Might Affect Your Company?

  • By RussellStone Group
  • 31 May 2017

The Carbon Tax Draft Bill was first opened for comment in 2015. The reasoning behind the tax is for South Africa to realise a green, sustainable economy. Short term targets include reducing carbon emissions by 34% by 2020 and 42% by 2025. It was expected to be officially implemented on 1 January 2017, but this never materialised and delays will continue. But eventually this Act will be instated and it is worth identifying whether it will affect your company. If so, what will the implications be?

If fossil fuels are a key input of production in your company’s operations, then yes, you will be affected by the tax. And don’t be fooled. Even if your business isn’t reliant on fossil fuel combustion, take note of the rest of your value chain. The tax will inflate their operational costs, which will come back to you.

The carbon tax will be phased in slowly to allow for the progressive adaption toward environmentally friendly technology that reduces carbon emissions. The first phase will run until 2020. The marginal carbon tax will be R120 per ton of carbon released, however, should producers choose carbon reducing technology and keep emissions within certain thresholds, they will be eligible for tax allowances.

All that can be done for now is to mitigate future risk. Make contact with carbon consultant specialists to see whether you are within the tax’s firing line. And then plan, plan, plan. What steps can be taken to limit exposure to the tax? One option is to look into carbon trading, where you can purchase carbon credits below the marginal tax rate from companies / organisations that have carbon absorbing assets and in turn generate a carbon deficit. The other is to make sure that the carbon tax is accounted for in all business decisions moving forward. Progressive technology should be integrated into operations with the view that this will make financial sense in the long term, even though it may seem excessively expensive in the short term.

B. de Jager – RSG