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

Wed Dec 15, 2010 9:17am GMT

Eskom last year emitted some 220 million tonnes of CO2, while Sasol's South African operations were responsible for 70 million tonnes of CO2.

"We do believe a carbon tax has a role to play in a suite of options aimed at reducing carbon emissions. However, we need to ensure it does not make commodities like electricity unaffordable," Hilary Joffe, Eskom's spokeswoman, told Reuters.

Eskom supplies the bulk of power in Africa's biggest economy, using mainly coal-fired stations.

The utility is already struggling to pay for new plants to meet fast rising demand in the world's top producer of platinum and a major supplier of gold, and analysts said a carbon tax could further strain its bottom line.

South Africa, which introduced its first explicit carbon tax in 2008 with the announcement of an electricity generation levy of 2c per kWh, wants the new carbon tax initially set at a modest rate and gradually increasing over time.

The Treasury said it would consider sector specific tax reductions and exemptions to protect the competitiveness of key industries, although these would be temporary.

South Africa, the world's 12th-largest emitter of CO2, will host the next global climate change round in Durban in 2011, and is under pressure to step up its fight against greenhouse gases.

<p>Smoke rises from a chimney at the Sugar Cane Growers cooperative in Belle Glade, Florida January 6, 2010. REUTERS/Carlos Barria</p>
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