A bill setting out the tax regime that will apply to emitters of greenhouse gases was adopted by parliament’s finance committee on Tuesday.

The Carbon Tax Bill is expected to take effect from June 1 2019.

Finance minister Tito Mboweni introduced the bill in the National Assembly in November, marking the culmination of an eight-year process of preparation and consultation with stakeholders.

The Treasury director of environmental and fuel taxes Sharlin Hemraj told the finance committee that the Treasury would undertake a review of the carbon tax after three years of implementation. The review would take into account an assessment of the impact of the tax in helping mitigate emissions and its contribution to SA’s commitments under the Paris Agreement on climate change.

The review would also assess the appropriateness of the rate of the carbon tax and the tax-free thresholds provided for. This would include further modeling analysis.

Also to be reviewed would be the alignment of the carbon tax with other mitigation instruments, including the carbon budget and the possible inclusion of other sectors, such as waste, within the tax net.

The review would look into the interaction between the carbon tax, the electricity levy and the renewable-energy premium, as well as the combined impact of the carbon tax on fuels and the motor vehicles emissions tax.

Under the tax regime, a number of tax-free allowances will apply during the first phase of the carbon tax and will be capped at 95%. An initial headline tax rate of R120 per tonne of carbon dioxide equivalent (CO2e) and various tax-free allowances will thus result in an effective tax rate that will vary between R6 and R48 per tonne of CO2e.

The process of preparing the bill dates back to 2010 when the carbon tax discussion paper was published. This was followed in 2013 by the carbon tax policy paper, the 2014 carbon offsets paper, the 2015 carbon tax bill, and the 2016 draft regulation on carbon offsets.

ensorl@businesslive.co.za