Tuesday, August 3, 2010

Treasury Considering Carbon Tax on Coal

According to industry sources, the Treasury is considering a proposal to introduce a carbon tax at source, probably of about R100 per ton. Coal companies would be taxed on the coal they deliver to Eskom, which emits the largest amount of greenhouse gases, although Eskom itself would not pay the tax. But a carbon tax of R100-R200 a ton could cause a 1 percent decline in gross domestic product in the first six years. SA has undertaken to reduce its greenhouse gas emissions 34 percent by 2020 and 42 percent by 2025.

Eskom would face higher prices for coal, forcing it to look for more carbon-efficient ways to generate electricity or it would pass the cost on to the consumer. It would also result in less incentive for Eskom to invest in technology such as carbon capture and storage. Ultimately, demand for fossil fuel would drop.

A tax of R100 a ton could generate about R45-billion in tax revenue as the country generates about 450-million tons of greenhouse gases a year. But around R650-billion in tax revenue was collected last year, so the proposed carbon tax represents a substantial additional burden and would be inflationary. (IAAfrica, 8/3/2010)

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