The National Treasury has released its Draft Carbon Tax Bill for public comment, which must be submitted by the 15 December 2015 deadline.

The Carbon Tax Bill is part of South Africa’s commitment to reduce greenhouse gas (GHG) emissions below business as usual by 34 per cent by 2020 and 42 per cent by 2025.

The carbon tax is expected to be implemented with complementary measures, which include the reduction in the electricity levy and other measures to recycle revenue.

It is anticipated that the carbon tax will come into effect on 1 January 2017 at a marginal rate of R120 per ton CO2-e.

The tax will be administered as an environmental levy as contemplated in the Customs and Excise Act.

Taking into account the listed tax-free thresholds, the effective carbon tax rate will vary between R6 and R48 per ton CO2-e.

Calculation of the tax base is closely linked to the Department of Environmental Affair’s (DEA’s) mandatory reporting requirements of emissions for all economic sectors in South Africa, which is expected to become effective in the first half of 2016. Entities will be liable for their:

• Fossil fuel combustion emissions

• Industrial processes and product use emissions

• Fugitive emissions (e.g. fugitive emissions from coal mining).


Carbon tax design

The revised carbon tax design as contained in the Draft Carbon Tax Bill includes the following features:

1. Basic 60 per cent tax-free threshold during the first phase of the carbon tax, from implementation date up to 2020;

2. Additional 10 per cent per cent tax-free allowance for process emissions;

3. Additional tax-free allowance for trade exposed sectors of up to 10 per cent;

4. Recognition for early actions and/or efforts to reduce emissions that beat the industry average in the form of a tax-free allowance of up to 5 per cent;

5. A carbon offsets tax-free allowance of 5 to 10 per cent;

6. To recognise to role of carbon budgets, an additional 5 per cent tax-free allowance for companies participating in phase 1 (up to 2020) of the carbon budgeting system;

7. The combined effect of all of the above tax-free thresholds will be capped at 95 per cent.


The carbon tax will be revenue-neutral during the first five years. Revenue recycling measures will include amongst others, funding for the energy efficiency tax incentives and a reduction in the electricity.

  • The emissions reporting will be in line with mandatory reporting requirements for GHG emissions designed by the DEA, which approves the appropriate emission factors and procedures, in line with information published by the Intergovernmental Panel on Climate Change (IPCC).
  • DEA’s reporting system is aligned with the IPCC Guidelines for National Greenhouse Gas Inventories, which is different to the way companies report their emissions, using the GHG Protocol or the ISO 14064. Some companies report emissions for their financial year and would need to realign their reporting according to the calendar year.
  • — Source: Izak Swart, Deloitte & Touche (Taxation Services)
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