Carbon tax may be noble but it will add to SA’s woes

14 June 2019
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President Cyril Ramaphosa has signed the Carbon Tax Act into law. This new tax will be imposed on South Africans from June 1 2019.

Although carbon taxes are in vogue in Western and other more developed nations, this tax will have a regressive economic effect in SA.

South Africans need as much energy in supply as possible, and this tax is going to restrict the flow of that energy. The first phase of the tax is from June 1 2019 to December 2022, with a tax rate of R120 per tonne of carbon dioxide equivalent.

We can expect job losses to result from this tax. If affected industries cannot pass on the cost of the tax to their customers in the form of higher prices, employers will have to cut staff to compensate for the rise in cost of operation.

Regardless of one’s view of climate change, this tax is definitely not one South Africa can afford.

In the Freemarket Foundation’s submission on the Carbon Tax Policy Paper, Eustace Davie wrote: “What has become clear is that the greatest certainty on the issue of climate change is the persistence of uncertainty.” Among the specific areas of uncertainty are:

- Whether absolutely reliable predictions about future climate conditions are possible.

- Whether humans are capable of having any significant influence on climate – either to bring about a worsening of conditions or an improvement.

- Whether increased quantities of CO2 in the atmosphere have negative or positive effects.

Attempts to have a mitigating influence on the climate face the difficulty of too much uncertainty to warrant the imposition of a carbon tax intended to change the behaviour of energy producers and users.

Because of this lack of certainty there is a distinct possibility that the introduction of a carbon tax could slow or possibly even reverse progress on poverty reduction.

To be productive, people need energy, whether it comes from coal, gas, nuclear, or other sources. Now is not the time to punish both industry and consumers for trying their best to develop and grow the economy.

While the carbon tax is intended to cut South Africa’s contribution to the perceived problem of man-made climate change, it is highly debatable whether it will change the perceived effects carbon emissions have on the climate when weighed up against the huge number of natural causes of climate change.

What is not in any doubt, however, is that the carbon tax will have a detrimental effect on South Africa’s economic development.

The government committed to lowering greenhouse emissions by signing the 2015 Paris Agreement; now SA’s development will be restricted because of that commitment.

It is not right for some countries to be punished because others feel their own commitments must be imposed on all the nations of the world, whether rich or poor, developed or developing.

Carbon taxes disproportionately impact more negatively on some nations than on others, especially those with struggling economies.

The benefits of energy abundance are many, including the move away from dirtier forms of energy such as wood-burning stoves in people’s immediate vicinity.

The more developed a nation becomes, the more people become concerned for the environment around them.

If they are secure in where the energy for their daily needs is going to come from, and they have improved their economic station to a relatively satisfactory level, they can divert more time, money, and attention to matters such as renewable concerns, and their general impact on the environment around them.

But before they can consider such “bigger” matters, they must first be able to improve their lot in life, and an integral part of that is energy.

It has become clear that Eskom can no longer keep the lights, and, most importantly, the machines on in South Africa.

South Africans will be subjected to crisis after crisis for as long as we are forced to rely on only Eskom to provide electricity for us.

Government should open the energy market to competition, whether from a renewable source or not; government should not impose restrictions, such as the carbon tax, on the amount of energy which citizens and businesses are able to use.

The country’s economic development must not be hamstrung by regressive taxes and policies that will only hinder economic growth.

The CO2 reduction that South Africa will achieve at great cost and with major disruption to many firms, will be minute compared to the huge increases in CO2 produced by the world’s major countries.

The introduction of this new and unavoidably destabilising carbon tax at a time when the economy is struggling is a cause of great concern. South Africa currently has a 38% unemployment rate – almost 10 million people without work.

What the government should be focused on is repealing onerous labour legislation, reducing taxes, and significantly reducing government spending, not imposing yet more taxes.

• Chris Hattingh is a researcher at the Free Market Foundation.

This article was first published on City Press on 31 May 2019

 

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