In 2011, SA, one of the world's top 15 greenhouse gas emitters and Africa's largest, adopted a national climate change policy comprising emissions-reduction measures and public investment in "climate change resilient" infrastructure and actions. Carbon taxation is viewed as a key reduction measure.
The tax, proposed to be R120 per ton of carbon dioxide or equivalent greenhouse gas, with a basic 60% tax-free threshold, was initially set for next year, but the government postponed implementation to better fashion the tax regime around it.
Carbon offsetting - a reduction in the emission of carbon dioxide or other greenhouse gases made to compensate for an emission made elsewhere - was one of the carbon tax's six key elements.
Others are the tax-free threshold, a formula to adjust this threshold in favour of companies that have taken voluntary emissions mitigation action, allowances for sectors with limited emissions reduction potential, graduated relief for trade-exposed and emissions-intensive sectors, a 90% limit on the tax-free threshold, and offsetting.
"To ensure a relatively smooth transition to a low-carbon economy, the carbon tax design incorporates a number of relief measures and a gradual phased-in approach to protect households and the international competitiveness of local businesses," the Treasury says.
The deadline for comment is 30 June.
Offsetting is aimed at giving companies an avenue through which carbon tax liability can be reduced at a cost lower than that of carbon tax.
Energy Intensive Users Group spokesman Shaun Nel said the Treasury had released the paper surprisingly quickly considering it had said it would look at carbon taxation as a whole, especially in light of Eskom's contribution to SA's greenhouse gas emissions, and the Department of Environmental Affairs' plans to roll out carbon budgeting.
A carbon budget places a restriction on the total amount of greenhouse gases an industry or entity is allowed to release.
State power utility Eskom is more than 90% reliant on coal, which has heavy emissions.
Nel said the proposed increase in maximum offset allowance from 5% of emissions to 10% for electricity, petroleum, pulp and paper, and sugar industries was still low.
The maximum for the iron and steel, cement, glass and ceramics and chemicals industries, and for coal mining emissions, remained 5%, the document said.
SA in 2009 promised the international community that it would reduce its emissions 34% from "the current level by 2020, and by 42% by 2025.
Source: Business Day via I-Net Bridge
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