Abolishing or suspending the tax would surrender an established policy lever for energy reform, fiscal stability, competitiveness and decarbonisation.

Cabinet is currently facing intense lobbying to abolish or temporarily suspend South Africa's carbon tax. This would be a grave mistake. Instead of scrapping this vital policy tool, Treasury should retain the tax and urgently refine its design, particularly for the electricity sector, to deliver real emissions reductions while protecting affordability and equity.

Affordable, adequate, and clean electricity is essential to both our economic recovery and our climate goals. The electricity sector remains South Africa's largest source of greenhouse gas emissions, accounting for over 40% of the national total. As we transition from a coal-dominated monopoly to the competitive South African Wholesale Electricity Market (SAWEM), effective price signals are crucial to guide supply, demand, dispatch, and investment toward cleaner options.

Yet, as currently designed, the Phase 2 carbon tax (effective from 2026) fails to incentivise meaningful additional mitigation in this critical sector. Meridian Economics argued in their September 2025 briefing note and reinforced in a November 2025 follow-up, that the design ensures price and revenue neutrality: Eskom offsets its carbon tax liability via the Renewable Energy (RE) Premium (replacing the Environmental Levy in place since 2009). The result is no change in dispatch decisions, merit order, supplier behaviour, or investment...