Why South Africa's carbon tax should stay

Carbon taxes are important ways of changing the behaviour of polluting companies, reducing greenhouse gas emissions to mitigate climate change and using tax revenue to benefit all of society. This according to researchers from the University of Cape Town (UCT).

The South African minister of electricity and energy, Kgosientsho Ramokgopa, is proposing to suspend the country’s carbon tax after experiencing pressure from fossil fuel lobbies.

The carbon tax is based on a “polluter pays” principle under the Carbon Tax Act, which increases the cost of fossil fuel-intensive activities. When the law was passed in 2019, carbon emissions were taxed at a rate of R120 (US$7.50) per tonne of carbon dioxide. But some companies secured large reductions of the amount down to just R6-R48 (US$0.37-2.50) per tonne.

The tax is due for an increase this year as it enters its second phase. The annual tax revenue collected is estimated to be R1.5 billion (US$93 million), which is the same amount as was spent on early childhood grants in 2023.

South Africa’s Carbon Tax Act was passed after more than a decade of negotiations between competing coalitions of government, advocacy groups and businesses. The tax is unpopular with major emitters, who argue that it will harm the economy and create job losses in emission-intensive sectors.

Yet about 20% of global emissions are subjected to carbon prices. Carbon taxes are important ways of changing the behaviour of polluting companies, reducing greenhouse gas emissions to mitigate climate change and using tax revenue to benefit all of society.

The South African government has consistently identified the carbon tax as a central national policy to meet its Nationally Determined Contributions which set out the country’s emission reduction targets. South Africa has ratified the Paris Agreement, which requires countries to reduce emissions further and revise their national climate plans every five years. A higher carbon tax rate reduces both the cost of the transition to clean energy and inequality.

As members of South Africa’s academic community and researchers in climate science, governance and law, we argue that the carbon tax must stay as a matter of justice.

Removing the tax would benefit a few large emitters in the short term. But this would be at the expense of everyone else living in South Africa, both now and in the future.

Suspending the carbon tax would be unlawful and weaken human rights

Because the Carbon Tax Act is legislation enacted by parliament, ministers in the executive branch of the government attempting to “suspend” its implementation would undermine the rule of law. The rule of law preserves democracy, since parliament represents the people.

The South African parliament also passed the Climate Change Act into law in 2024 to ensure that the country reduces emissions and makes a fair contribution to the global effort to reduce global warming.

The carbon tax is aligned with the Climate Change Act and many climate policy objectives that promote, protect and fulfil:

“the right to an environment not harmful to health and well-being”

of all people in South Africa, in line with the country’s constitution.

A carbon tax U-turn would hurt South Africa’s credibility in climate diplomacy

The South African government is a progressive leader in global climate change negotiations in that it aims to do its fair share to reduce greenhouse gas emissions globally.

South Africa’s G20 presidency emphasised climate action under the core principles of equality, sustainability and solidarity in an increasingly divided world.

Suspending the carbon tax would undermine South Africa’s credibility in climate diplomacy and its ability to fulfil its global obligations. International climate funders have already pledged funds for South Africa to transition away from coal-fired electricity to clean energy based on the country’s Just Energy Transition Partnership. This sets out how clean energy, industrial development and transport will be introduced to achieve the goals stated in the Nationally Determined Contributions.

Removing the carbon tax will not spare polluting companies from paying tax on their emissions. High emitters will pay costs on the goods they export at foreign borders. Companies from countries without carbon taxes pay under international carbon tax schemes such as the European Union’s Carbon Border Adjustment Mechanism, which tries to encourage cleaner production in states outside the European Union.

Suspending the carbon tax would reduce the amount of tax revenue collected in South Africa, and undermine industrial competitiveness. It would also weaken the country’s position in the global trading system.

Competitiveness, inclusive economic development and the investment climate

Carbon taxes are among the most effective ways of reducing greenhouse gas emissions. Taxes motivate companies to shift to cleaner production and consumption systems.

Well designed taxes foster innovation in products, services, processes and business models. This in turn attracts investment in the economy, which is necessary for long-term job creation.

Carbon taxes can also reduce inequality. Large polluting companies pay more in carbon tax, and the government can use this money to provide services to disadvantaged communities.

Some opponents of the carbon tax argue that it will raise energy prices, because emitters will pass the tax on to their consumers. Taxes, however, raise revenue which the government can spend on increasing access to clean energy and reducing the electricity prices in lower income areas.

Taxing emissions now means paying less to adapt to climate change later

Reducing emissions is the primary way to minimise the impacts of climate change. The South African government’s own research has shown that the negative impact of climate change on water, rainfed agriculture and infrastructure alone will reduce the gross domestic product by up to 3.6% by year compared to a world without climate change.

These reductions will consistently build up over time. Over the next 35 years, an estimated R259 billion (or US$16.1 billion) will be lost because of the damage caused by inaction on global warming, if there is no carbon tax.

These losses are significant. The social, economic and natural impacts of climate change increase exponentially with the amount of global warming, along with the costs of adapting to these.

We call on the government to continue to implement the Carbon Tax Act in line with the constitutional right:

“to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that prevent pollution”.