South Africa Needs Choice Before Carbon Tax, City Official Says

South Africa isn’t ready for the start of a carbon tax because there are insufficient alternatives to fossil-fuel energy, according to an official at the City of Tshwane, an area that includes the capital, Pretoria.

“Ninety-five percent of our energy requirement is still very much fossil fuel-based,” Dorah Nteo, the chief sustainability specialist for the municipality, said in a presentation at Bloomberg’s office in Johannesburg on Tuesday. “We have not allowed the infiltration of enough renewable” power sources, she said.

A proposed carbon tax would be delayed from this year to 2016 to allow time for public consultation and the drafting of legislation, former Finance Minister Pravin Gordhan said in 2014. Draft legislation on the levy will be published later this year, his successor, Nhlanhla Nene, said in his February budget.

Eskom Holdings SOC Ltd., the state-owned utility that provides most of the nation’s electricity and relies on coal for 80 percent of its generation, is struggling to meet demand with aging plants following years of underinvestment. While the Department of Energy has approved 79 renewable power projects from private companies with a capacity of 5,243 megawatts, Eskom is building two coal-fired power plants with a potential combined output of 9,564 megawatts.

The Davis Tax Committee, which was appointed by Gordhan in 2013 to evaluate the South African tax system, is reviewing the scope and design of the proposed carbon tax.

Plays Role

“A carbon tax can play a role in achieving the transition to a low carbon economy and South Africa’s commitment to help in the international efforts to reduce greenhouse gas emissions,” the committee said in an e-mailed statement on April 7. “These commitments and aspirations should also take into account any possible negative economic and social impacts of the carbon tax.”

Taxes make up one-third of the retail price of gasoline after Nene raised the levy by 80.5 cents ($0.07) a liter (0.26 gallon) in the budget. He increased electricity levies by 2 cents to 5.5 cents a kilowatt-hour to help curb power demand and will phased these out when the carbon tax is implemented, he said.

“What has been introduced effectively is the fuel levy for your motor vehicles, rather than your broader carbon tax,” Nteo said. “That is because with cars you have a choice between big cars or small ones, there are alternatives.”

South Africa is ready to implement the tax despite its reliance on coal for energy, National Treasury spokeswoman Phumza Macanda said in an e-mailed response to questions Wednesday. The government plans to implement the tax in the second half of 2016, it said.

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