SA carbon tax could spur economic growth - study

The law will probably come into effect in about a year and would add to costs for the nation’s biggest polluters such as power utility Eskom and oil company Sasol. (Photo: AP)
The law will probably come into effect in about a year and would add to costs for the nation’s biggest polluters such as power utility Eskom and oil company Sasol. (Photo: AP)

Johannesburg - South Africa’s proposed carbon tax will boost growth in the economy, provided the revenue is reinvested in green-energy projects, according to Applied Development Research Solutions (ADRS).

The government is completing a law to tax emissions and help it meet a target to reduce greenhouse gases by 34% below a “business as usual” scenario in five years and by 42% by 2025.

The tax will start at R120 per metric tonne of carbon dioxide equivalent emissions and increase by 10% a year until 2019. The law will probably come into effect in about a year and would add to costs for the nation’s biggest polluters such as power utility Eskom and oil company Sasol.

The Johannesburg-based Chamber of Mines says the tax will harm investment in Africa’s most-industrialised economy and undermine an industry battling rising costs and low commodity prices.

The Treasury estimates that less than half of emissions will actually be taxed. It projects the initial impact on gross domestic product to be “marginally negative,” but will improve as it uses the revenue to reduce other taxes and provide incentives for green-energy projects.

ADRS, an economic-modeling group, shows in its forecasts that economic growth and household spending could be boosted through tax recycling measures.

It based its study on the assumption that half of the revenue from the carbon tax will go into the government’s infrastructure-investment budget for “greening” the economy, and the remainder toward investment by state-owned companies in green technology and services.

According to the ADRS model, average annual economic growth from 2015 to 2030 will be 2.4% if the government introduces the tax without supporting measures, compared with an estimated 3.1% rate without the charge. Reinvesting the revenue will boost expansion to 4.3% a year.

Investment in the primary sector, most of which is mining and agriculture, could swing to negative from positive, even with the tax recycling measures.

Growth in investment in the economy would more than halve because of the effect of the carbon tax. Recycling the revenue could boost average investment growth to about 6%.

Growth in household income would also be lifted by reinvesting the income from the tax.

ZAR/USD
17.00
(-0.36)
ZAR/GBP
21.21
(-0.30)
ZAR/EUR
19.12
(-0.30)
ZAR/AUD
11.81
(-0.62)
ZAR/JPY
0.16
(-0.21)
Gold
1774.43
(-0.02)
Silver
18.05
(+0.69)
Platinum
807.99
(+0.12)
Brent Crude
42.92
(+2.64)
Palladium
1914.00
(+1.46)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1575 votes
I am taking a hit, but should be able to recover in the next year
23% - 2068 votes
My finances have been devastated
34% - 3086 votes
It's still too early to know what the full effect will be
25% - 2240 votes
Vote