Over a year has passed since the adoption of the Paris Agreement. What has happened since, what are some of the developments to look out for, how real is the possibility of a Carbon Tax in South Africa, and what the impact is of such legislation on the local private sector?
In December 2015, representatives of 195 countries gathered in the French capital for the adoption of the Paris Agreement. Four months later, on World Earth Day in April last year, the first-ever universal, legally binding global climate deal was opened for signature. So far, 194 countries have signed the document, of which 122 also ratified it. South Africa is one of them.
Whilst the Paris Agreement puts a strong emphasis on the role of participating governments in curbing global greenhouse gas emissions, the private sector has a definite role to play, too.
Paris and private business
“The climate deal will first and foremost result in new regional and local climate and carbon reduction legislation, to which members of the private sector will be bound,” says Franz Rentel, director of Climate Neutral Group South Africa.
“South Africa has one of the largest carbon footprints in the world, mainly because most of its electricity is generated from coal. It is also one of the countries that is working hard towards various regulatory measures, such as a Carbon Tax.”
Rentel refers to the Draft Carbon Tax Bill, which was published by the National Treasury published in November 2015. Whilst the Finance Minister didn’t refer to the proposed legislation in his 2016 Budget Speech, the most recent Budget Review did. “Given the economic outlook, the carbon tax has been designed to ensure that its overall impact will be revenue neutral up to 2020,” the review said, adding that comments will be used in the fine-tuning process. The second Draft Carbon Tax Bill is expected to be released this year.
Making Carbon Tax work
Another corporate tax doesn’t have to be all bad for business, Rentel says. “A carbon tax will make companies in South Africa rethink how to reduce their carbon emissions from fossil fuel burning, or from certain industrial processes like cement production, in order to pay less in carbon tax,” he says, noting that besides reducing these emissions, companies can choose to offset a percentage of their carbon tax liable emissions through a number of innovative offset projects like the Wonderbag, a portable, non-electric, low-cost cooker that continues to cook food that was brought to a boil, but without using extra energy. “These will further reduce the amount of carbon tax one has to pay, up to 20%.”
”Looking at it from that perspective, shrinking your carbon footprint as a business can save you tens of thousands of rands per year in operational costs compared to businesses who don’t, on top of having to pay less in carbon taxes. In the meantime, you are helping curb climate change, which on its very thorough impact on the economy and business.”
Climate Neutral Group is based in Cape Town and assists businesses with operations in South Africa to become low-carbon and carbon neutral entities by managing and offsetting their emissions.
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