By Lehlohonolo Lehana.
The Minister of Forestry, Fisheries and the Environment, Barbara Creecy, has welcomed the announcement of the implementation of the carbon tax as a mechanism to ensure that South Africa lowers its greenhouse emissions.
Finance Minister Enoch Godongwana announced on Wednesday during his maiden Budget Speech that the carbon tax rate will progressively increase every year from 2026 onwards.
Creecy believes that the move is consistent with the Low Emissions Development Strategy (LEDS) that South Africa deposited to the United Nations Framework Convention on Climate Change (UNFCCC) in 2020.
The carbon tax, along with industry targeted carbon budgets and Sectoral Emission Targets (SETs), is part and parcel of the mix of mitigation measures aimed at reducing South Africa’s greenhouse gas emissions profile.
In October last year, South Africa announced its revised Nationally Determined Contribution (NDC), which aims to reduce carbon emissions to a trajectory range of 350 – 420 metric tons of carbon dioxide equivalent (Mt Co2-eq) by 2030.
“We believe the [Finance] Minister’s pronouncements regarding future increases or targets for carbon taxes in the second phase from 2026 onwards to 2030 will enhance our ability to achieve our ambitious NDCs and allow South Africa to meet its commitments under the Paris Agreement on climate change.
“At the time of releasing the NDC, we said these targets can be achieved with a well-structured plan by major emitters, as well as access to investment and financing. We have no doubt that the trajectory for carbon tax increases will act as a powerful incentive for the development of the appropriate plans to a lower emissions trajectory,” Creecy said.
To prepare South Africa for the structural transition to a climate-resilient economy, government proposes to progressively increase the carbon price every year by at least $1 to reach $20/t of CO2e by 2026.
For the second phase of the tax, government intends to increase the carbon price more rapidly. It is projected to reach $30/t of CO2e by 2030, accelerating higher every few years to up to $120/t of CO2e by 2050.
Treasury assures that basic tax-free allowances will also be gradually reduced to strengthen the price signals under the carbon tax from January 1, 2026, to December 31, 2030.