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South Africa's new Carbon Tax Act was signed into law in May 2019. Here's why it is an important first step in curbing carbon emissions.
Many South Africans are already experiencing the impacts of climate change and we need to do our fair share to reduce our carbon emissions which cause climate change. A carbon tax is widely accepted by economists as a cost-effective and economically efficient means of achieving this, which is why WWF South Africa has welcomed the signing into law of the new Carbon Tax Act 2019.
What is a carbon tax?
A carbon tax is a way for government to put a price on carbon emissions, and to shift the costs from society to those companies that are creating the emissions. The more a company emits, the more tax it must pay. The more action a company takes to reduce its emissions, or if it is by nature low-carbon, the lower its tax.
Why does South Africa need a carbon tax?
The costs of climate change impacts will be much higher than the cost of reducing emissions through mechanisms like the carbon tax. For example, the impacts of changing rainfall and crop disease patterns, droughts and extreme storms, and higher temperatures are forcing agriculture to change – and this leads to higher food prices, whether or not we tax emissions.
Through the impacts of climate change to water, food prices, health, infrastructure, disasters and conflicts, the public purse and the public are already paying the costs. The tax intends to shift this to polluters.
As the global economy shifts towards a lower-carbon economy, if we don’t keep pace, we risk losing our export markets or being left stranded with business models that no-one wants. Increasingly, the demand for our high-carbon exports will fall – among them thermal coal, locally produced iron and steel and combustion engines.
Numerous economic studies have demonstrated that the cost of early action to reduce the causes of climate change considerably outweighs the later cost of having done nothing – this refers to the cost to the economy as a whole, as opposed to the cost to those with an interest in maintaining business-as-usual.
So, how will the tax help us shift to a low carbon economy?
Innovative companies that avoid emissions by using new technologies, or producing new products or providing services in a new way, are at a relative advantage compared to heavy emitters. Investors, lenders and consumers will start to find lower-carbon options relatively more attractive, because they are subject to less tax.
Some companies will add the carbon tax they are paying to the prices they charge customers. Customers will tend to choose cheaper, lower-carbon goods and services.
Over the medium to long term, the tax serves to reorientate the whole economy to be lower carbon. This is its ultimate purpose.
What you can do now to adjust?
Re-orientate your lifestyle and the economy now. Choose energy-saving appliances; implement energy savings in your home and workplace; choose locally produced foods and proudly South African products; if you have a car, think about how to make your car trips more efficient by combining trips or sharing lifts.
This information was first published when the Carbon Tax Act 2019 was still in its draft form. You can read the original document here.