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SOUTH AFRICA’S budget for 2012 includes proposals for a carbon tax to be introduced incrementally from the financial year 2013-2014.

Under the proposed scheme, R120 (US$15.60) would be charged for each tonne of emitted carbon dioxide

South Africa is the 14^th largest carbon emitter in the world. Some 48% of its carbon emissions come from energy generation, and 93% of this is from coal-fired power stations. Production of metal and related products accounts for 22% of emissions, while transport, including domestic petrol consumption, accounts for 10%. The government recognises the need to lower its impact, but also the need to protect industry and competitiveness.

As such, under the proposals there will be a 60% tax-free threshold on emissions for all industry sectors, meaning tax will only be paid on 40% of emissions. Additional concessions will be made for process emissions and for trade-exposed sectors. The Treasury will consider the limitations of the cement, metal and glass sectors lowering emissions in the near term.

Companies which reduce their carbon emissions during the first phase to 2020, will also be considered for additional relief. Companies will be allowed to use carbon offsetting, but with maximum limits set at 5-10%. During the second phase from 2020-2025, the tax-free threshold could be reduced, and eventually replaced with absolute emissions thresholds.

The Treasury will introduce tax incentives for energy efficiency, and measures to assist low-income households. Revenue from the scheme won’t be specifically allocated but the Treasury says in the budget document that it will consider using it for environmental projects.

That shifting towards a more resource-efficient, low-carbon economy leads to growth and economic reforms supporting greater competitiveness, the Treasury says. It believes that a carbon tax will incentivise such a shift and lead to changes in behaviour, with more people actively choosing cleaner energy, and implementing energy efficiency measures.

A draft policy document will be published later this year.

Australia’s parliament passed a controversial bill in November to launch a carbon tax . China recently announced that it was considering a carbon tax, and said that it would pilot an emissions trading scheme in seven of its most polluting cities and regions. The EU has been running a trading scheme since 2005.