S. Africa Is Latest Nation to Turn to Carbon Tax

On June 1, South Africa became the latest country to take the advice of the world’s most-respected economists and implement a carbon tax. There are now 46 national jurisdictions and 28 subnational jurisdictions that have implemented a price on carbon, or are scheduled to do so, according to the Carbon Pricing dashboard created by the World Bank.

The first phase of the tax runs through December 2022, with a tax rate of 120 rand ($8.34) per ton of carbon dioxide equivalent. It is to rise annually at a rate of two percent above inflation.

Allowable tax breaks will reduce the effective rate to between 6 rand and 48 rand per ton, the National Treasury said in a statement after the tax was signed into law by President Cyril Ramaphosa.

“A review of the impact of the tax will be conducted before the second phase and will take into account the progress made to reduce GHG (greenhouse gas) emissions in line with our National Determined Contribution,” the National Treasury said. The second phase will run from 2023 to 2030.

The tax had a lot of trouble getting out of the starting gate. It was to have begun in 2010 but was postponed at least three times after mining companies, steelmakers and the state-owned power utility Eskom said it would erode profit and push up electricity prices.

And at its current level, the tax is taking hits from local and overseas climate activists. They say that the tax is too low to achieve the emissions targets the country signed up for in the 2015 Paris Agreement. The tax is considered “highly insufficient” by the Climate Action Tracker, an independent scientific analysis produced by three research organizations tracking climate action since 2009. CAT monitors 32 nations, which produce about 80 percent of the world’s emissions.

But Aljazeera called the tax “a rare step for an emerging economy.” South Africa, which relies largely on coal for its energy supply, is the 14th-largest polluter in the world and the largest in Africa, according to Greenpeace.

"We definitely welcome this. It is very, very overdue," said Melisse Steele, senior campaign manager at Greenpeace. "It is a major step, but Greenpeace has expressed our concern that we don't think that the carbon tax will be effective enough, and the tax level is inadequate."

South Africa’s move comes two months after Canada moved ahead with its carbon pricing plan. The federal government extended its carbon-pricing program nationwide by imposing a tax on fossil fuels in four provinces that had declined to write their own climate plans.

Canada currently has one of the most ambitious carbon pricing programs in the world, The New York Times reported. Under Prime Minister Justin Trudeau, the Liberal government has enacted a nationwide tax on oil, coal and gas that starts at $15 per ton of carbon dioxide this year and will rise to $38 per ton by 2022. Most of the revenue will be refunded to Canadians on their tax bills; the government estimates that these refunds will offset higher energy costs for about 70 percent of people.

Individual provinces can opt out of the federal program by designing their own local climate policies. British Columbia, for instance, has its own higher carbon tax in place, which rose to $30 per ton this year, and Quebec has enacted a local cap-and-trade system. But four provinces, including Ontario, refused to create their own plans, and the federal tax went into effect in those places on April 1.

The Times has called Britain's carbon tax "perhaps the clearest example in the world of a carbon tax leading to a significant cut in emissions." The European Union has already implemented a cap-and-trade system, but Britain tacked on its own price floor for carbon, which The Times said “essentially functions as a carbon tax of around $25 per ton.” The policy has helped to drive greenhouse gas emissions in Britain to their lowest level since 1890.

It’s time for our own country to start competing with these nations.