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Carbon tax policy

Carbon tax policy. BUSA submission to Carbon Tax Consultation November 2013. Overarching business view. Carbon price supported in pursuit of lower carbon growth trajectory Imperative to understand impact of any state intervention Carbon tax must be aligned with other mitigation instruments

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Carbon tax policy

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  1. Carbon tax policy BUSA submission to Carbon Tax Consultation November 2013

  2. Overarchingbusiness view • Carbon price supported in pursuit of lower carbon growth trajectory • Imperative to understand impact of any state intervention • Carbon tax must be aligned with other mitigation instruments • Need to operate in context of global climate action • Proposed carbon tax is not only carbon price • Legislative basis must be clear

  3. Tax on electricity • Scope 1 vs scope 2 emissions • Rebates appear to only apply to scope 1 emissions • In terms of numbers majority of firms are consumersof electricity, on which tax on electricity will be passed through, thus increasing the cost of electricity to them:no access to rebates or offsets; limited mitigation options

  4. Legislative basis • Income Tax Act vs Excise Act? • No provision for group tax? • Gases covered • Revenue recycling and offsets • Determination of taxable amount • Application of thresholds • Z-factor • Link to DEROs

  5. Determination of taxable amount • Appropriate emission factors and procedures approved by DEA • CO2vsCO2eq • Current situation: regulations on mandatory reporting of GHG • DOE: energy consumption and GHG • DEA: GHG

  6. Application of thresholds • Percentage based thresholds vs absolute threshold • Significantly different tax burden outcomes • Application of thresholds to be done at firm level; unambiguous prescription of eligibility required • Process emissions need to be defined • z-factor • Agreement on benchmark • Application of proposed benchmark for electricity increases the tax rate from R48/ton to R54 which with adjustment of distribution losses will be R56/ton • Incentivizes improvement in carbon intensity not absolute reduction and can lead to increased emissions , taxed at a lower tax rate

  7. Link to DEROs • Proposed tax is premised on behaviour change to reduce emissions, which means mitigation or stop activity • Mitigation potential analysis has identified 183 theoretical mitigation opportunities, many of which: • are not available until 2030 • are not technically feasible under SA conditions • have limited potential beyond existing implementation • Threshold design should be based on DEROs

  8. Way forward • Business accepts that: • A carbon price is one of the instruments that could be deployed in lowering the carbon intensity of the economy • But it is only one and should only be introduced in synergy with the other instruments that are already in place or about to be developed. • Business would like : • to engage constructively on the basis of a common understanding of intention and challenges that need to be overcome to change behaviour

  9. Thank you

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