Carbon Tax Developments from Budget Speech

The Minister of Finance gave an update on the Government’s intentions with respect to the introduction of a carbon tax in the Budget Speech on Wednesday.

The introduction of the tax on the emission of greenhouse gas emissions will bedelayed by one year to 2016.  In addition, the introduction of carbon tax is intended to occur at the same time as a reduction in the electricity levy.

The delay is following issuesconcerns raised during public consultation and input from the Department of Environmental Affairs that the carbon tax should be part of alarger group of measures.  Apart from carbon tax, environmental regulations, renewable energy projects and other targeted support programmes is required to address climate change and reduce emissions.

These measures must however be aligned.  The National Development Plan also mentioned the importance of creating a framework for the transition to an environmentally sustainable, low carbon economy.

Specifically, the alignment of the proposed tax with the system of Desired Emission Reduction Outcomes, also called DERO’s, requires more time.  The Department of Environmental Affairs is designing the DERO system as an implementation tool for the carbon budgets that form a central part of the Government’s overall climate change response strategy.

National Treasury extended an invitation to companies at the end of 2013 to engage on a bilateral basis and give input in the design of the tax.

The extension offered by the Minister in the budget speech gives companies the opportunity to actively engage with National Treasury on the design of the tax.

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