Update on the Operationalisation of the Carbon Tax – Carbon Budget Mitigation System (South Africa)

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On 23 February 2021, the Department of Environment, Forestry and Fisheries (DEFF), Government of South Africa gave a presentation at the Portfolio Committee Meeting on the Operationalisation of the Carbon Tax – Carbon Budget Mitigation System for Phase II (2023 – 2027). You can view that presentation by clicking the button at the end of this email.

We’ve summarised the most significant points here:

  • The end date for Phase I voluntary carbon budgets submissions was 31 December 2020.
  • A transition period has been agreed and gazetted (22 October 2020) running from January 2021 – December 2022.

The two primary objectives for this transition period are:

  • Phase I extension of existing carbon budget:
    • Voluntary carbon budgets will continue to be accepted during the transition period (5% carbon budget allowance applicable).
    • Budget submission must include the period 2021 – 2025.
  • Phase II initiation of new carbon budget methodology:
    • A methodology will be decided through an extensive process of engagement.
    • Budgets to be reviewed in 2022 to commence the 2023 – 2027 period.
  • Three potential carbon budget allocation methodologies were proposed.

  • There are two proposed options for the integration with Carbon Tax:
    • Option 1 relates to a carbon taxpayer being required to pay a different tax rate for exceeding the carbon budget (i.e. R600/ton CO2e exceeded).
    • Option 2 relates to the transferral of a percentage of the basic allowance to the carbon budget allowance (for example the 60% basic allowance reduced to 20%, and the 5% carbon budget allowance increased to 40%).
  • National Treasury and DEFF are leaning toward Option 1 as they believe this is the more progressive tax option and will allow for a smoother transition from Phase I to Phase II.

Download DEFF presentation

Note: This policy brief is a re-post of the original posted on the Creamer Media website.