Carbon tax: too little for environmentalists; too much for business
The tax, introduced in June, is considered too weak at its current level by some, but mines and unions are more worried about job losses
SA’s new carbon tax has provoked a storm of criticism from environmental campaigners who say it is too weak, and from industry that predicts it will cause mass job losses.
The new tax, the first of its type in Africa, was cautiously introduced in June in the first of several gradual steps and is scheduled to come into full force in three years’ time.
The tax has been planned for almost a decade, but was delayed as the country struggles to boost economic growth while also being the 14th largest polluter in the world, according to Greenpeace.
Canada, France, Colombia and Sweden all have carbon taxes, with the World Bank saying a total of 46 countries now have such levies or similar schemes in place or scheduled for implementation.
The tax puts a price on releasing greenhouse gases from fuel combustion and industrial processes as countries work to meet the global climate change targets negotiated in Paris in 2015.
The Miner ... says the tax could wipe out 6,800 jobs in the next two years, then about 6,000 jobs annually after that
In SA, environmental groups such as the World Wildlife Fund (WWF) have hailed the new tax as “a significant first step”, but say it is far too weak at its present level.
Set at R120 per tonne of carbon dioxide (CO2), the tax will be largely offset by allowances to lower it to an effective rate of between R6 and R48 per tonne in the first three years. This is far below the $40 to $80 cost per tonne the Carbon Market Watch non-profit group says is necessary to reach the objectives of the Paris Agreement.
‘Weak but symbolic’
“It is pretty weak but very important symbolically,” says Ismail Momoniat, deputy director-general of the National Treasury, promising that a re-assessment will be held after four years.
Nevertheless, industry is indignant that the tax has been introduced by a government that says its priority to foster growth and create jobs by promoting investment.
SA’s key mining sector, which is in long-term decline, fears the tax will further hasten its demise as one of the country’s main employers.
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The Minerals Council SA, which represents mining companies employing 450,00 people, says the tax could wipe out 6,800 jobs in the next two years, then about 6,000 jobs annually after that.
It describes the tax as “the wrong method at the wrong time — a time of already deep financial stress”, adding it would “erode profitability through increasing costs resulting in a shrinking sector”.
Trade unions have taken a more mixed stance.
Matthew Parks, of the union federation Cosatu, says it is “worried about the impact of pollution and global warming on poor working class communities”. But he adds there are also major fears of the impact on jobs.
SA’s unemployment rate is at near record highs of more than 27%, with youth joblessness above 50%.
Parks says climate change could be “a perfect opportunity” to create jobs in SA through the manufacture of environmentally friendly cars and solar energy exploiting the country’s abundant sunshine. But he says that “we feel businesses just want profit and are reluctant to change”.
At shop floor level, the tax has created uncertainty and resistance. “For me, the only way I can reduce my emissions is literally by switching furnaces out,” says Theo Morkel, the boss of Transalloys, an iron alloy manufacturer in Mpumalanga that employs 400 people.
The cost of the tax is already being passed on to motorists. Fuel prices have been put up by R0.09/l for petrol and R0.10 for diesel, according to the Automobile Association.
Eskom, already on the brink of collapse as it struggles with $30bn in debt, will not be hit until 2023. But then Eskom’s carbon tax liability is projected to be in the region of R11.5bn a year, according to Gina Downes, Eskom’s environmental economics advisor.
Eskom, which produces more than 90% of SA’s electricity and more than a third of its greenhouse gas emissions, says the national plan to meet Paris Agreement targets include winding down its coal-powered stations and boosting low-carbon energy production.
But Eskom is still finishing two huge new coal-power stations that are far behind schedule and over budget.
Noëlle Garcin, project manager at African Climate Reality Project, says the squabbling over the tax bears no relation to the threat of climate change.
“The costs will be very low for industries and the big emitters in the next three years,” she says. “When we look at the timeframe we have, I feel like it is three years lost, which we can’t really afford. The burden will be much more on the next generation. I don’t even know if we can talk about the next generation anymore.”