Electricity + Control February 2017

TRANSFORMERS + SUBSTATIONS

How is a company’s carbon tax liability determined?

For companies and businesses, two main questions are important

when it comes to the carbon tax:

1. Is my business liable to paying carbon tax?

2. What is the amount of the carbon tax payable?

The answer to these questions is described in the Draft Carbon Tax

Bill that was released by National Treasury on 2 November 2015 for

public comment. However, in conjunction with Annexure I of Notice

172 of 2014, published in the GG No. 37421 of 14 March 2014. The

latter document lists the activities that are subject to the carbon tax.

Basically, the Draft Carbon Tax Bill states that a person (which includes

a partnership and a trust) is liable to pay carbon tax if that person

conducts an activity as set out in this list. During the first phase of the

implementation of the carbon tax (2017 - 2020), the effective carbon

tax payable is determined by three main parameters:

1. The total scope 1 (or direct) emissions of the liable entity

2. The maximum applicable allowance (determined by the sum of

different types of allowances applicable to the liable entity [1]

3. The carbon tax rate; which is determined by National Treasury

in the Draft Bill at R120 per tonne of CO

-equivalents emissions

Let’s assume a construction company with 60 000 tCO

e scope 1

emissions in a given tax-year [2]. Construction-activities are listed in

Annexure 1 of Notice 172 of 2014 as referred to by the Carbon Tax

Bill. The table in Schedule 2 of the Draft Carbon Tax Bill [3] sets out

the allowances that are applicable per sector, including the maxi-

appy 2017! It is likely that this is the year during which the

carbon tax regulation will finally be implemented in South

Africa. This topic has been subject of discussion among

governments and industry since over a decade.

Publication of the Draft Carbon Tax Bill (November 2015) and the

Draft Carbon Offset Paper (June 2016) and the development of a Car-

bon Offset Administrative System as well as a National Atmospheric

Emissions Inventory System (NAEIS) are all signals affirming that the

infrastructure of a carbon tax system has been designed and is ready

for the carbon tax regulation to come into effect.

Background and purpose of the proposed

carbon tax

South Africa has committed to contribute to the global effort to stabi-

lise greenhouse gas concentrations in the atmosphere at a level that

keeps the average global temperature from rising more than 2°C. This

commitment means that South Africa has to reduce its greenhouse

gas emissions significantly which can only be achieved by reducing

the carbon intensity of its economy.

Policy-measures will be introduced and implemented, forcing

companies to invest in energy-saving and cleaner technologies. To

achieve the desired emissions reduction outcomes, South Africa

wants to deploy a mix of measures among which the carbon tax. The

carbon tax is expected to generate price signals that will stimulate

industry and businesses to align their strategies to a low carbon

economy.

Financial

Implications

of Carbon

Tax Liability

Silvana Claassen, CES South Africa

The aim of this article is to clarify how a company’s carbon tax liability is determined, the amount payable, and relief-systems available for

companies to reduce their tax payable.

Electricity+Control

February ‘17