South Africa: SA's Carbon Tax Bill Nearly There, but Not Yet Enough to Do the Job

opinion

In under a year, South Africa's carbon tax is likely to be introduced. It is to be welcomed, but it is still too weak to do the job of pushing South Africa into a just low-carbon transition. South Africa needs to do more given its international and domestic climate obligations.

So, what is the overall and systemic purpose of the carbon tax?

Simply put, the carbon tax is a way of pricing an environmental externality. The carbon tax is intended to help achieve three things, namely: to lower carbon intensity through improved energy efficiency or switching to alternative energy; to stimulate new growth, new technologies and enterprise; and to encourage the development of new product lines which, in turn, would stimulate new investments and jobs.

Put another way, the aim of a carbon tax is to disincentivise future carbon-intensive investments. It will also encourage the investment world to start pricing carbon dioxide emissions as a risk factor in the way they make future investment decisions and capital allocations.

The Paris Agreement means that most countries will likely have some form of carbon pricing by the middle of the next decade. The aviation industry is already moving in that direction and...

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