S.Africa's carbon tax could hurt business, consumers

Wed Dec 15, 2010 9:17am GMT

By Wendell Roelf

CAPE TOWN (Reuters) - South Africa is likely to phase-in a carbon tax on fossil fuel inputs as part of new measures to curb carbon dioxide emissions, the national treasury said, in a move that may hit company profits and hurt consumers.

Africa's biggest economy, also the continent's worst polluter, is considering three carbon tax options as it moves to reduce CO2 discharges by 34 percent over the next decade.

In a draft carbon tax policy approved by cabinet on December 9, the government said it was considering a direct carbon tax on actual measured emissions, a fossil fuel input tax based on carbon content and an output tax applicable to emitters.

South Africa hopes the taxes will influence behaviour among consumers and industry, including power utility Eskom and petrochemicals group Sasol, which ranked as the country's worst emitters in 2009.

Treasury said a tax of 75 rand per tonne of CO2, which could increase to around 200 rand per tonne CO2, would be "feasible and appropriate" to achieve reduction targets.

However, while the proposed tax on fossil fuel inputs would probably hit companies using coal, crude oil and natural gas, it did not guarantee less harmful emissions, an analyst said.

"Producers will have less profit and consumers will have to pay more. What we need is alternative energy sources and not increased costs," Cornelis van der Waal, an energy analyst at Frost and Sullivan told Reuters.

Both Eskom and Sasol said they were still studying the paper to determine its financial implications and would hold further discussions with government on its implementation.   Continued...

<p>Smoke rises from a chimney at the Sugar Cane Growers cooperative in Belle Glade, Florida January 6, 2010. REUTERS/Carlos Barria</p>
Powered by Reuters AlertNet. AlertNet provides news, images and insight from the world's disasters and conflicts and is brought to you by Reuters Foundation.