South Africa delays carbon tax amid industry pressure

South Africa’s delay to carbon tax a further reminder of lobbying power of major emitters


By John McGarrity

South Africa has postponed a planned carbon tax until 2016, the latest country to compromise its climate policy in response to industry lobbying.

Finance minister Pravin Gordhan said plans for a 120 rand ($11) levy on each tonne of carbon dioxide equivalent emitted would be put back until the beginning of 2016, rather than the start of 2015.

“Government will take into account the range of factors … when finalising the design of the carbon tax to ensure that households and firms are not unnecessarily disadvantaged,” South Africa’s Treasury said in an accompanying document.

The measure was welcomed by South Africa’s main business lobby, which said the original version and timing of the tax would have led to job losses in key industries such as mining, chemicals and food processing.

South Africa is one of the world’s largest producers of coal and is reliant on fossil fuels for around 90% of its power generation, meaning almost all energy users – including the powerful precious metal industry – would be exposed to carbon costs.

Business was also worried that the carbon tax would created uncertainty among smaller enterprises about how to comply with the levy.

Although the postponement is just one year,  South Africa’s concession underlines the difficulties that countries have in imposing new and often complex carbon-related costs on energy-intensive industries that are major employers and have strong lobbying power.

Earlier this year, Brazil’s Sao Paulo state suspended plans for carbon trading, citing costs to heavy industry in a similar move made by Rio de Janeiro in 2012.

South Korea, one of the world’s largest exporters, will likely to have to raise its emissions cap from 2020 so that companies in its carbon trading scheme are spared high costs of compliance.

The EU has continued to delayed plans to make airlines pay for emissions resulting from all flights into the 28-nation bloc in order to fend off a potential trade war with developing countries, and possible cancellations for new orders of Airbus aircraft.

China has launched pilot scheme in 7 cities and provinces  that will help inform policymakers ahead of a possible national cap-and-trade system that could launch early in the next decade, which could give it invaluable insight into how major companies – many of them state-owned – deal with additional carbon costs.

The UN said earlier this year that the private sector worldwide – including power companies and heavy industry – need to take much more responsibility in cutting emissions and help climate talks deliver a deal on cutting carbon by the end of 2015.

Although some big users of energy have lobbied strongly against regulations on emissions, others say they can accept carbon taxes and higher carbon prices if they are complimented by other polices that help them to achieve emissions goals.

Green groups point to the increased tendency of North American law firms to set up offices in Brussels to lobby against the EU’s environmental laws, and want policymakers there to fend off a campaign from Canada to reverse a ban on oil from its carbon-intensive tar sands.

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