The Carbon Tax Act and its Impact on Sustainable Development Goals (SDGs)
The carbon tax is a tax in response to climate change. The aim is to reduce greenhouse gas emissions (GHG) by making polluters pay for emissions. In South Africa, the Carbon Tax Bill of 2019 was signed after a lengthy consultation process. Its main objective is to reduce GHG emissions in a sustainable, cost-effective and affordable manner.
The Polluter Pay Principle and the Carbon Tax
It operates under the “polluter pay principle”, where “those responsible for harming the environment must pay the costs of remedying pollution and environmental degradation and supporting any consequent adaptive response that may be required”. This implies that households should not bear the total weight of the carbon tax and that businesses are encouraged to adopt cleaner technologies over the next decade and beyond.
Phases of the Carbon Tax
- The first phase –- with relatively low rates — only applied to Scope 1 emitters.
- The second phase will run from 2023 to 2030.
The finance minister has extended the first phase by three years until 31 December 2025.
Increasing Carbon Tax Rates
The carbon tax rate was increased to R144 from 1 January 2022. To comply with COP26 commitments in South Africa, the tax rate will be increased by about R20 each year until it reaches about R350. The government is expected to raise the carbon price sharply every year thereafter starting in 2026.
Impact of Carbon Tax on Households
Considering South African taxpayers’ financial constraints, we conducted a study that investigated the impact such a tax has on households using a computable general equilibrium (CGE) model. This model is well suited to analyse how policies like these affect the economy as a whole while also allowing the impact of the tax to be isolated.
- Our results show that the impact of the carbon tax on economic growth is minimised when the revenue is fed back into the economy.
- While the richest households’ expenditure is hardly affected by the introduction of a carbon tax, relatively poor households are much worse off.
- This is mainly because poorer households spend a greater portion of their income on energy and/or electricity than richer households.
- Interestingly, middle-income households are shown to be more affected by the carbon tax than low-income ones.
The Carbon Tax and Economic Inequality
The results of this analysis draw attention to the effects of a carbon tax on households, mainly on the most vulnerable ones. Although the carbon tax in South Africa was, from its inception, designed under the “polluter pay principle” to protect industry competitiveness, this does not mean households will not also be affected. In addition, the study shows not all households will be affected equally.
Figure: Carbon tax: Impact on Households expenditure Note: the study analyses twelve different categories of households – for ease of reading here, we include low -, middle – and high-income households only.
South Africa is in the middle of a multi-layered crisis, with Eskom’s power-constraint issues high on the list, closely followed by the external pressures of increasing oil prices and the economic aftermath of the Covid-19 pandemic. These stressors have amplified the problems of already burdened South African households which are struggling to make ends meet.
It is a given that the tax will affect all households in the country but avoiding a tax on carbon might have worse consequences in the long run. Can the planet afford that?
Amid such turmoil, we tend to forget that the environment has been deteriorating for some time and the consequences of climate change have severely affected the most vulnerable populations. Some have argued that the Covid-19 lockdowns assisted in the slowdown of climate change. Still, the economies have bounced back, and the policy and technology changes were not drastic enough to continue the path towards reducing emissions and slowing down climate change.
So, considering South Africa’s economic issues, exacerbated by the most extended power crisis it has faced, where is South Africa standing in its effort to combat climate change while
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 7: Affordable and Clean Energy
- SDG 10: Reduced Inequalities
- SDG 13: Climate Action
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 7.2: Increase substantially the share of renewable energy in the global energy mix.
- SDG 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality.
- SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Indicator for SDG 7.2: Proportion of total final energy consumption from renewable sources.
- Indicator for SDG 10.4: Gini coefficient.
- Indicator for SDG 13.2: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer.
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 7: Affordable and Clean Energy | Increase substantially the share of renewable energy in the global energy mix. | Proportion of total final energy consumption from renewable sources. |
| SDG 10: Reduced Inequalities | Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality. | Gini coefficient. |
| SDG 13: Climate Action | Integrate climate change measures into national policies, strategies, and planning. | Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer. |
The article addresses the issues related to the carbon tax and its impact on households in South Africa. These issues are connected to multiple Sustainable Development Goals (SDGs) including SDG 7 (Affordable and Clean Energy), SDG 10 (Reduced Inequalities), and SDG 13 (Climate Action).
Based on the content of the article, specific targets under these SDGs can be identified. For SDG 7, the target is to increase substantially the share of renewable energy in the global energy mix. For SDG 10, the target is to adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality. And for SDG 13, the target is to integrate climate change measures into national policies, strategies, and planning.
The article mentions or implies indicators that can be used to measure progress towards these targets. For SDG 7, the indicator is the proportion of total final energy consumption from renewable sources. For SDG 10, the indicator is the Gini coefficient, which measures income inequality. And for SDG 13, the indicator is the number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer.
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: mg.co.za
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