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Carbon tax policy

Carbon tax policy. BUSA submission to Portfolio Committee on Trade and Industry August 2013. South African business has already made significant progress in emission reduction Domestic mitigation options are limited Economic impacts likely to be substantial. Overview.

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Carbon tax policy

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  1. Carbon tax policy BUSA submission to Portfolio Committee on Trade and Industry August 2013

  2. South African business has already made significant progress in emission reduction Domestic mitigation options are limited Economic impacts likely to be substantial Overview

  3. 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 Overarching business view

  4. Change required: reduce GHG emissions Potential at firm level limited by: lack of choice in energy supply non availability of mitigation technology engineering constraints Structure of the economy energy intensive and trade exposed Shift to significantly lower carbon intensity not possible concurrent with beneficiation objectives Potential change in behaviour

  5. Current environment State of economy Mitigation

  6. Manufacturing trends ( the dti, 2011)

  7. Trade trends (the dti, 2011)

  8. South African exports 2012 Energy intensive sectors (R438bn) Source: SARS unaudited trade statistics, BUSA calculations

  9. Trends in economic activity

  10. Employment trends in manufacturing

  11. Trends in energy intensity and electricity sent out

  12. SA electricity efficiency vs average real electricity selling price

  13. Selected electricity prices

  14. Contribution of sources to the total energy sector GHG emissions

  15. Paper does not recognise current and future carbon pricing instruments Carbon tax on motor vehicles Carbon price included in electricity price: Levy on non renewable electricity generation: R35/ton Premium of R116/ ton CO2 for renewable electricity generation Mitigation instruments being developed by DEA will have an implementation cost which results in a price for carbon Biofuel levy Carbon price

  16. Availability of mitigation technology • Technology to reduce GHG emissions resulting in non energy process emissions is not available for all processes • Examples • nitric production: nitrous oxide emissions have been already been significantly reduced • Carbide and ammonia: slight efficiency improvements possible

  17. Emission levels in the Chemical Industry, 2000 – 2010. No technology Technology Technology No technology

  18. Mitigation analysis currently in progress Mitigation options are generally limited in energy intensive sectors Analysis will be used as basis for further detailed sectoral and firm level work to develop desired emission reduction outcomes DERO’s will be implemented through mandatory mitigation plans Energy efficiency targets will be implemented through mandatory energy management plans Desired emission reduction outcomes

  19. Challenges with proposed carbon tax Impact Lack of policy alignment

  20. Effect of tax on electricity price Impact of carbon tax on electricity CPI 9% 8% per annum Source: EIA, Eurostat, Direct Energy, Regulated Services, Australian Energy and Market Operator, (2013 uses year to date data)

  21. Electricity price weight in CPI basket Source: StatsSA, BUSA calculations

  22. Illustrative effective carbon price • First developing country with a carbon tax • Premature given global • negotiations • More regions moving to trading schemes • Effective carbon price higher than most other jurisdictions US$ per ton CO2 *Potential impact of Z factor not taken into account

  23. Electricity contribution to operating cost ( Megaflex tariff)

  24. Global agreement on mitigation Expected in 2015 Implementation in 2020 Adjust timing to ensure tax supports South Africa’s commitment Desired emission reduction outcomes Expected in 2014 Adjust timing to base thresholds on DERO’s Alternative approaches

  25. Simplify and clarify design Provide protection for trade exposure and energy intensive sectors Do not limit use of offsets Use desired emission reduction outcomes as basis of thresholds Align tax level with levels in competing economies Alternative approaches (2)

  26. Collaboration to find balanced approach Way forward

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