Carbon tax should protect the poor

Johannesburg - The National Treasury's proposal to introduce a carbon tax should ensure that the poor are protected, an analyst said on Tuesday.

"The key one is the impact on the poor. If you are going to tax Eskom for their energy generation, then you are going to have an increase in energy prices on an already restricted poor. How we manage the provision of energy to the poor will be critical," National Business Initiative programme manager on climate change Steve Nicholls said.

Last month, Treasury released the carbon tax policy discussion document, which advises tax companies on their carbon emissions.

The document is currently open for public participation, and Treasury intends implementing its first phase of carbon tax by January 1, 2015.

South Africa is a carbon-intensive economy and the proposed legislation could affect some of the country’s biggest employers in the mining, energy, and manufacturing sectors.

These sectors are also the country’s highest carbon emitters.

How South Africa changed over to the new legislation would be critical, Nicholls told Sapa on the sidelines of a discussion held in Johannesburg.

If government did not get the timing of the transition right, there could be possible employment losses.

"Industries that have high emissions will pay high taxes and therefore could potentially become less competitive against low carbon alternatives [firms]," he said.

Nicholls said the business community was not necessarily against the proposal, but was "cautious".

This was due to the fact that the document dealt with a number of implementation issues but did not provide detail.

"For example it refers to the tax being input driven, but how will it be input driven? How will that be measured, audited?" he asked.

He emphasised management of the transition.

"Obviously you want to maintain employment, maintain services to the poor ... a whole range of issues are critical to the survival of the economy. You can’t make a sudden transition."

Nicholls said the business community wanted a stable policy signal which enabled it to make good long-term decisions.

"They need to know if they build up a factory now, it is going to have a 50-year life-span, and government will not change the policy environment significantly and make that investment less sustainable."

Nicholls said the document provided a high-level framework of what shape the legislation could take.