Carbon tax delayed to 2016

26 February 2014 - 16:42 By Reuters

South Africa will delay the introduction of a carbon tax by one year to 2016, tweaking its policies to better protect industry from a proposed tax price of 120 rand per ton of carbon equivalent, finance minister Pravin Gordhan said.

The postponement is likely to be welcomed by mining and other carbon-intensive companies, such as steel giant ArcelorMittal and petrochemical group Sasol, who have said the new tax will erode profits against a backdrop of rising electricity tariffs and sluggish economic growth.

"To allow for further consultation, implementation of the carbon tax is postponed by a year to 2016," Gordhan said during his budget speech to parliament. The tax was due to start on Jan 1, 2015.

Expected to be phased in over time, the carbon tax is one of several green initiatives, including a biofuels production incentive and greater vehicle emission taxes South Africa wants as it strives to reduce its carbon footprint.

Among the new changes expected in the final carbon tax are reducing power utility Eskom's tax liability and addressing concerns about international competitiveness, including a formula to adjust the basic percentage tax-free threshold to reward over-performance.

Limiting the impact on households by providing subsidies to install solar water geysers and lowering the existing electricity levy are also proposed.

"Government will take into account the range of factors ... when finalising the design of the carbon tax to ensure that households and firms are not unnecessarily disadvantaged," the National Treasury said in an accompanying review document.

Africa's top polluter - which five years ago voluntarily committed to reduce harmful greenhouse gas emissions 34 percent by 2020 - believes the carbon tax and associated incentives provide markets with the necessary price signals needed to push the economy onto a low-carbon growth trajectory. (Reporting by Wendell Roelf; Editing by Ed Stoddard)