Carbon tax: Who will be affected and how?

South Africa is more than ready to embrace the first phase of the Carbon Tax Act, and despite challenges, it is essential that we honour our commitment to sustainable industry practices, according to EDS Systems head of business development Eckart Zollner.

Zollner explained that due to the Covid-19 pandemic, the first phase of the Act’s tax deadline was delayed by three months. He suggested that businesses use this time to invest in tracking, quantifying and visualising their carbon footprint, as international deadlines remain.

South Africa’s phased approach to enforcing the Carbon Tax Act, as well as tax-free allowances and carbon offset credits, seeks to take time to create a mindset change and become aware of better technology, to remove carbon emissions in earnest.

Many countries, notably in Europe, have embraced the concept of paying for greenhouse gas emissions faster than others. However, Zollner explained that we are all part of the global trading system, and therefore if one country defaults, it sets back international efforts to curb emissions.

He added that some countries have even gone as far as to introduce additional input tax on products from companies that do not take emissions seriously.

Who will be affected? 

Although many consumers may not have realised it yet, we have already begun to pay for fuel emissions on petrol and diesel.

In terms of industries said to be most affected by the Carbon Tax Act, Zollner said that businesses with any significant greenhouse gas emissions, or any large-scale factories, will have to adhere to the Act. Most notably, Zollner said the coal mining industry would be affected, because it emits some of the gases listed in the Act that are known to cause heavy carbon emissions.

“It won’t affect every single business. It’s only those companies who in this phase of the Act have direct control and majority ownership in the production plant. It does not apply downstream,” he explained.

Zollner used the example of a business purchasing cement from a supplier. He said the cement factory would be liable for carbon tax, but cement users will not be. Simply put, “if you just use something, but don’t make it, you will not be liable for the carbon tax emitted on that product.”

Therefore, the “taxpayers” referred to in the Act refer to business, more so than individuals. He did however predict changes to electricity prices, as power plants are one of the players involved in emitting significant carbon emissions.

Zollner said that carbon tax and the importance of addressing climate change has been significant for a while.

“If we don’t create sustainable living on our planet, we won’t have a home left to live in, and business won’t have healthy workers.”

And if we do not take this seriously, we are sure to pay the penalties for it afterwards – when it may be too late.

Phase one of the Act 

Tollner explained that the first phase of the Act, which runs from 1 June 2019 to 31 December 2022, aims to soften the financial blow to business and electricity prices. Phase one also seeks to create a consciousness around being sustainable, and is designed to reach a certain emissions target by a certain date.

But most importantly, Zollner said that phase one allows for crucial time for the Act to be understood, by industries and government. He said even the concept of obtaining credits for sustainable practices would need some time to get used to and understand.

He emphasised the need to look at social sustainability, and better realise the efficiency of processes, especially those that are fuel-intensive.

The act also puts necessary pressure on the world to look at renewable energy as the best alternative energy source.

“The Carbon Tax Act is essentially a declaration, and this is nothing new. I think it’s a learning process for everyone involved.

“But rather swallow a small pill now than a much bigger one later down the line. And I think South Africa will fare well. This is not the first time when it comes to introducing new legislation. The Act has good intentions, and is necessary,” he said.

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