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Draft Carbon Tax 2017 – public comment deadline 9 March, 2018

National Treasury

Enquiries: Communications Unit

Email: media@treasury.gov.za Tel: (012) 315 5944 1

MEDIA STATEMENT RELEASE OF CARBON TAX BILL FOR INTRODUCTION IN PARLIAMENT AND PUBLIC COMMENT

The National Treasury has today published the Second Draft Carbon Tax Bill for introduction in Parliament, as well as public comment and convening of public hearings by Parliament, which is expected to be early in 2018. Following that process, a revised Bill will be formally tabled in Parliament, which is expected to be by mid-2018. The publication of the Bill follows on the announcement made in the 2017 Medium Term Budget Policy Statement, by the Minister of Finance, giving effect to the announcement made in the 2017 Budget in February.

The first draft Carbon Tax Bill was published for public comment in November 2015. Carbon tax bill will enable South Africa to meet its nationally-determined contribution (NDC) commitments in terms of the 2015 Paris Agreement (on climate change), and to reduce our greenhouse gas emissions in line with the National Climate Change Response Policy and National Development Plan. Cabinet approved the submission of the draft bill to Parliament on 16 August 2017 and noted Decarbon tax as an integral part of the system for implementing government policy on climate change.

South Africa ratified the Paris Agreement in November 2016 and endorsed its NDC, which requires that our greenhouse gas (GHG) emissions peak in 2020 to 2025, plateau for a tenyear period from 2025 to 2035 and decline from 2036 onwards. The Paris Agreement comes into operation in 2020, which means that efforts to reduce our GHG emissions and meet our commitments cannot be further delayed. The NDC noted that carbon tax is an important part of the package of measures to reduce emissions, complemented by appropriate regulations and incentives.

The actual date of implementation of the carbon tax will be determined through a separate and later process by the Minister of Finance through an announcement during 2018, or at the Budget 2019, taking into account the state of the economy.

This announcement on the implementation date of the carbon tax will be complemented by a package of tax incentives and revenue recycling measures to minimise the impact in the first phase of the policy (up to 2022) on the price of electricity and energy intensive sectors such as mining, +iron and steel.

The impact of the tax in the first phase is designed to be revenue-neutral in terms of its aggregated impact, when assessed together with the complementary tax incentives and revenue recycling measures.

Further, in order to ensure a minimal impact on the price of electricity in the initial phase, a credit for (or reduction in) the electricity generation levy and the renewable electricity premium (built into the current price of electricity) will also be introduced.

Some revenue recycling measures have already been introduced, such as the energy efficiency savings tax incentive (introduced in 2013) to help with the transition to a lower carbon economy. The effective recycling of revenues to be collected will mitigate any possible short-term negative impacts on the economy and jobs.

Beyond the first phase, a review of the impact of the tax after at least three years’ implementation will be conducted. The review will take into account the progress made to reduce GHG emissions, in line with our NDC Commitments.

Future changes to rates and taxfree thresholds in the Carbon Tax will only follow after the review, and be subject to the same transparent and consultative processes for all tax legislation, after any appropriate Budget announcements by the Minister of Finance.

This draft bill is the culmination of an extensive consultative process on carbon tax policy since the publication of the Carbon Tax Discussion Paper in 2010, the 2013 Carbon Tax Policy Paper, and the 2014 Carbon Offsets Paper.

This Bill has been revised to take into account the substantive comments received in writing, and from meetings and workshops with a wide range of stakeholders, including business, non-governmental organisations, civil society, labour, state owned entities, government line departments and other spheres of government.

Summary of Comments Received on the First Draft Carbon Tax Bill

The main comments received on the first draft of the Carbon Tax Bill, released in November 2015, led to revisions relating to:

 Electricity prices, electricity generation levy and renewable energy premium

 Competiveness and the design of the trade exposure allowance

 The tax rate and thresholds for phases 1 and 2 of the carbon tax

 Carbon offset and performance allowances

 Policy alignment of the carbon tax and carbon budgets

 Technical legal and administrative aspects

A Response Document of initial responses to the submitted comments has been compiled (See Annexure 3).

Carbon tax seeks to give effect to the polluter pays principle by ensuring that the real cost of GHG emissions to the environment and society are explicitly incorporated into the prices of carbon intensive production activities. The carbon tax will assist, in a least cost manner, in reducing GHG emissions and ensuring that South Africa will meet its NDC commitments. The tax aims to encourage companies to change their future behaviour by taking steps now to gradually change their fuel inputs, production techniques and processes by encouraging investments in energy efficient, low carbon technologies to lower their emissions. It helps to ensure that firms and consumers take these costs into account in their production,  consumption and investment decisions. The carbon tax will also ensure that emission reductions are delivered while sustained economic growth is realised.

The carbon tax will have a significant impact on reducing South Africa’s GHG emissions, and would lead to an estimated decrease in emissions of 13 to 14.5 per cent by 2025 and 26 to 33 per cent by 2035 compared with business-as-usual.

Alignment of Carbon Tax and Carbon Budgets

A study on the options for alignment and integration of the carbon tax and carbon budget policy instruments post 2020 has been completed by the Department of Environmental Affairs and the National Treasury. The mandatory carbon budgets regime will be introduced in a way that is fully-aligned with the carbon tax, and designed to ensure no double penalty. An integrated review process to assess both instruments will be done after three years of implementation of the carbon tax, and will inform any significant changes in the tax rate and the implementation of the carbon budgets.

Process for Adoption of the Carbon Tax Bill

The Carbon Tax Bill is a Money Bill in terms of section 77 of the Constitution. The process and practice for money bills is governed by the Money Bills Amendment Procedure and Related Matters Act read together with the rules of Parliament. This allows for the current process (as applies to the annual tax bills such as the Rates and Monetary Amounts and Amendment of Revenue Laws Bill and Taxation Laws Amendment Bill), whereby

i) Tax bills are first published as draft bills, following announcements in the Budget by the Minister of Finance;

ii) National Treasury calls for public comments, and comments are submitted to National Treasury;

iii) Submission of the draft bill to the Standing Committee on Finance (SCoF) for consideration;

iv) SCoF calls for public comments;

v) Public hearings are held by the SCoF;

vi) NT submits a Response Document to formally respond to all comments received;

vii) SCoF completes its process with recommendations for changes to the bill where necessary; and

viii) The Minister of Finance tables the bill to the National Assembly. Due date for comments

Stakeholders are hereby invited to submit written comments on the draft Carbon Tax Bill by close of business on 9 March 2018 to carbontaxbillcomments@treasury.gov.za.

Kindly email any queries to Sharlin Hemraj (sharlin.hemraj@treasury.gov.za) or Dr Memory Machingambi (memory.machingambi@treasury.gov.za).

Annexures Enquiries: Communications Unit Email: media@treasury.gov.za Tel: (012) 315 5944 4

The Draft Carbon Tax Bill together with the following annexures is available on the National Treasury website: www.treasury.gov.za

2017121401 MEDIA STATEMENT – CARBON TAX BILLGHcomments Annexure 1 Explanatory Memorandum Draft Carbon Tax Bill December 2017GHcomments9.01.2018 Annexure 2 Socioeconomic Impact Assessment – Carbon Tax Bill 2017GHcomments9.01.2018 Annexure 3 Response Document to 2015 Draft Carbon Tax BillGHcomments9.01.2018 Draft Carbon Tax Bill December 2017.GHeditsDraft Carbon Tax Bill December 2017.GHeditsAnnexure 1 Explanatory Memorandum Draft Carbon Tax Bill December 2017GHcomments9.01.2018Annexure 1 Explanatory Memorandum Draft Carbon Tax Bill December 2017GHcomments9.01.2018Annexure 2 Socioeconomic Impact Assessment – Carbon Tax Bill 2017GHcomments9.01.2018Annexure 3 Response Document to 2015 Draft Carbon Tax BillGHcomments9.01.2018

 Annexure 2: Socioeconomic Impact Assessment Report

 Annexure 3: First Draft Carbon Tax Bill 2015: Response Document

Issued by the National Treasury

Date: 14 December 2017

With global emissions rising, the euphoria of the Paris Agreement is colliding with reality – Chicago Tribune

Brady Dennis and Chris MooneyWashington Post

Barely two years ago, after weeks of intense bargaining in Paris, leaders from 195 countries announced a global agreement that once had seemed impossible. For the first time, the nations of the world would band together to reduce humanity’s reliance on fossil fuels in an effort to hold off the most devastating effects of climate change.

"History will remember this day," the secretary general of the United Nations, Ban Ki-moon, said amid a backdrop of diplomats cheering and hugging.

Two years later, the euphoria of Paris is colliding with the reality of the present.

Global emissions of carbon dioxide are rising again after several years of remaining flat. The United States, under President Donald Trump, is planning to withdraw from the Paris accord and is expected to see emissions increase by 1.8 percent this year, after a three-year string of declines. Other countries, too, are showing signs they might fail to live up to the pledges they made in Paris.

In short, the world is off target.

Link to the full article

Australia – Tesla battery + solar now “significantly cheaper” than grid power : RenewEconomy

By Bruce Mountain on 20 February 2018


Here is the link to the full article
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In November 2016, our analysis shows that a Tesla Powerwall and a 5kW rooftop solar system could deliver electricity around the same price as grid power. Our latest estimate shows solar and storage is now significantly cheaper.

In late 2016 Tesla launched the Powerwall 2, halving the price of storage relative to Powerwall 1.

In a note in November 2016 we analysed the economics of one of these batteries plus 5kW of rooftop solar plus grid for back-up and exports, relative to grid-only supply for a household with north facing roof in Adelaide that consumes 4800 kWh per year.

The comparison worked out the annual bill with and without PV and battery.

The price of 5kW PV has however fallen considerably from $7,318 to $5,500 (taking the average price quoted on solarchoice.com.au then and now).

And PV feed-in rates have more than doubled from around 6.8 cents per kWh in November 2016 to typically around 16 cents per kWh now).

Bringing this information together and using the same analysis that we used in November 2016 we get the results in Chart 2 below.

Chart 2: Tesla Powerwall 2 plus 5 kV PV plus grid versus grid-only in Adelaide in February 2018

The combination of 5 kW PV plus Tesla Powerwall 2 plus grid is now significantly cheaper than the average price achieved from grid-only supply even if all the discounts in the grid offers are assumed to be met.

The difference between Chart 1 and Chart 2, over just 14 months, is remarkable. The writing was on the wall for grid-only supply 14 months ago and while we expected the gap between grid only and PV+battery+grid would grow larger, this is happening more quickly than we imagined.

South Australia’s consumers bought 20% less electricity from the grid in 2017 than they did in 2010. I imagine that by 2025 the amount will be at least 20% less again.

Bruce Mountain is director of CME

Paying attention to the ‘weave’ – Emily Tyler

https://emilytyler.co.za/2018/02/20/paying-attention-to-the-weave/

Posted on February 20, 2018 by Emily Tyler

Our classically trained minds love distinctions. We seek the separate and individual rather than the interconnections. We identify the ‘thing’ before the fabric or the ‘weave’ – as Montuori a writer on complexity in education describes it – that gives it context.

Here is the full article

Thabametsi coal plant given go ahead despite staggering climate impacts | Credible Carbon

https://www.crediblecarbon.com/news-and-info/news/thabametsi-coal-plant-given-go-ahead-despite-staggering-climate-impacts/

Minister of Environmental Affairs, Edna Molewa

On 30 January 2018, Edna Molewa, the minister of environmental affairs, issued a long-awaited decision in relation to the environmental authorisation for the Thabametsi coal-fired power station. The Minister has decided that – despite the undisputed evidence of the significant climate impacts of the power station, and a landmark judgment of the High Court last year, setting aside the authorisation – the Thabametsi environmental authorisation will remain in place. This leaves civil society organisations with no choice but to return to court to challenge the minister’s decision.

Thabametsi – as a preferred bidder under the Coal Baseload Independent Power Producers Procurement Programme – still needs to obtain further required licences and authorisations in order to reach financial and commercial close under the programme, which appears to be on hold pending the finalisation of the Integrated Resource Plan for Electricity (IRP).

The minister’s decision follows the landmark High Court judgment in March 2017, in favour of Earthlife Africa Johannesburg (ELA), in which the High Court confirmed that a climate change impact assessment is a necessary part of an environmental impact assessment for a coal-fired power station. The minister was ordered to reconsider Thabametsi’s environmental authorisation, but with a climate change impact assessment, and to decide whether the power station can go ahead.

In June 2017, Thabametsi made its final climate impact assessment available for consideration and comment. This assessment revealed that the plant would have staggering greenhouse gas (GHG) emissions; that climate change will pose significant risks for the power station in terms of limited water availability and temperature increases; and that these impacts cannot be substantially mitigated.

In fact, in her decision, the minister points out that her advisors EOH Coastal and Environmental Services (EOH) – which conducted a peer review of Thabametsi’s climate change impact assessment – indicated that “the significant risk relating to GHG emissions could be very high” and pointed out that “emissions risks are very high and water scarcity risks are high and … the very high GHG emission levels associated with the project implies a high social cost.”

The minister, in her decision, says “while the environmental and social costs associated with the proposed power station are high, this does not necessarily represent a fatal flaw, provided that the benefits are justified and can be motivated” (these are the conclusions of the EOH review); and, “Having carefully balanced all relevant factors (including the threat of climate change), the final IRP 2010–2030 does not prohibit the establishment of new coal-fired power stations. Rather it permits that 6,3 GW of new generation capacity may be derived from coal”; and she is satisfied that “the overall assessment of the risks and impacts associated with the GHG emissions and climate change vulnerabilities is systematic, realistic, conservative and not understated”.

Makoma Lekalakala of ELA, which together with the Centre for Environmental Rights (CER) and groundWorkforms part of the Life After Coal/Impilo Ngaphandle Kwamalahle Campaign, says ELA is shocked that the minister will allow Thabametsi to go ahead when the climate change impact assessment clearly shows the devastating impacts that the power station will have, and despite South Africa’s international commitments to reduce GHG emissions. This is a clear indication that the Minister does not take South Africa’s commitments to limit temperature increase to 1,5 or even 2°C, seriously.

The EOH peer review confirms that the risks of harm are very high – actually pointing out that the climate change impact assessment should have classified the GHG emissions impact as “very high”, rather than “high”. Despite this, EOH claims that this does not necessarily present a fatal flaw, provided the benefits are justified and can be motivated. “Yet the Minister’s only reason for allowing this project is that it would be aligned with the IRP 2010. Reliance on an extremely-outdated document that is under review can never be a sufficient justification to cause irreversible damages to our air, water, and climate,” says Elana Greyling of ELA and a resident of Lephalale, where the power station would be built.

South Africa’s own climate change response policy confirms that South Africa is extremely vulnerable to the impacts of climate change and that the energy sector is the largest contributor to South Africa’s GHG emissions and their climate change impacts.

This decision comes at a time when South Africa is revising its IRP and with a growing body of research from institutions such as Meridian Economics and the Council for Scientific and Industrial Research, showing that no new coal power capacity is needed in South Africa (this includes Thabametsi and the other preferred bidder, the proposed Khanyisa coal-fired power station). South Africa’s electricity needs can be met – at least-cost – with renewable energy, which does not have the climate, health, and water impacts of coal plants such as Thabametsi. Bobby Peek of groundWork says that the IRP 2010 does not reflect South Africa’s current electricity reality – the country currently has surplus electricity capacity and renewables are now much cheaper than coal-based electricity.

The previous minister of energy indicated in a media release of 1 September 2017 that all future IPP programmes were on hold, pending the new IRP. The Life After Coal Campaign maintains that Minister Molewa should, at least, have awaited the revised IRP before making her decision.

CER attorney Nicole Loser says that on the face of it, the minister’s decision is neither reasonable nor rational. In the circumstances, ELA has no option but to return to court to challenge the minister’s decision.

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