Title: Draft Carbon Tax Bill [B – 2017]
Government Notice: Not applicable
Date of commencement: Not yet specified
Potentially affected controls: Annual budget, technological improvement of operational processes resulting in emissions, carbon footprints and GHG emission monitoring

The Draft Carbon Tax Bill aims to provide for the imposition of a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions. It must be noted that this Bill is not the introduction of carbon tax in South Africa, as carbon tax is already being imposed. Examples include emissions on new vehicles that are already subject to taxation and the fossil fuel electricity levy that was imposed approximately five years ago.

A person (or company) will be liable for carbon tax if that person conducts an activity as set out in Annexure 1 to the Notice issued by the Minister responsible for environmental affairs in respect of the declaration of greenhouse gases. It must be noted that this Notice is currently still in draft format, GN172 in GG 37421 of 14 March 2014. A formula to calculate the amount of tax payable is included in clause 6 of the Bill. The rate of the carbon tax must be an amount of R120 per tonne carbon dioxide equivalent of the greenhouse gas emissions of a taxpayer. The carbon tax will apply to all the sectors and activities except the Agriculture Forestry and Other Land Use (AFOLU) and waste sectors, which will be exempted during the first implementation phase (up to 2020), due to measurement difficulties. Revenues will be spent on a range of sustainable interventions e.g. providing support for free basic electricity providing tax relief for rooftop solar power or a reduction in the fossil fuel electricity levy.

Tax-free allowances are provided to entities during the first phase of the carbon tax regime to provide for a smooth transition to a low carbon economy and to take into account international competitiveness and carbon leakage concerns. The Bill includes the following thresholds and exemptions:
• A basic 60% tax-free threshold during the first phase.
• An additional 10% tax-free allowance for process emissions. An additional tax-free allowance for trade exposed sectors of up to 10%.
• An additional tax-free allowance of up to 5% as recognition for early actions and/or efforts to reduce emissions that beat the industry average.
• A carbon offsets tax-free allowance of between 5% and 10%.
• A phase one-specific additional 5% tax-free allowance for companies participating in the Department of Environmental Affairs carbon budgeting system in recognition of their participation and of the role of carbon budgets in the overall tax design.
• Phase one tax-free exemptions will range between 60% and 95% of total emissions, implying that the carbon tax will be imposed on 5% to 40% of actual emissions during the period.
• In phase one, an initial marginal carbon tax rate of R120 will be imposed per tonne of carbon dioxide equivalent (“tCO2e”), but the effective carbon tax rate will vary between R6 and R48/tCO2e with a comprehensive application of the system of tax-free allowances.

An explanatory note was issued with the Bill. Members of the public are invited to submit written comments to the Minister up until 15 December 2015.