Carbon Tax Phase Two Announcements in the 2022 Budget Speech

Finance Minister Enoch Godongwana affirmed during his 2022 Budget Speech that carbon tax is the main mechanism to lower South Africa’s greenhouse emissions and meets its Nationally Determined Contribution (NDC) in terms of the 2015 Paris Agreement on Climate Change.

An increase in the carbon tax rate from R134 to R144 from 1 January 2022 was announced.

The first phase of the carbon tax, featuring substantial allowances and electricity price neutrality, will be extended to 31 December 2025. The carbon tax rate, however, will be progressively increased each year to reach $20 per tonne. In effect this represents an average, year on year, tax increase of 28% over the period between 2023 and 2025.

In the second phase, from 2026 onwards, the carbon tax rate will gradually be increased to reach at least $30 by 2030, and the allowances (i.e. deductions on taxable emissions) will rapidly fall away.

All companies are urged to develop plans to progressively reduce their emissions and avoid these steep taxes. Exporters will face overseas border taxes for carbon-intensive goods such as iron and steel, which will reduce their competitiveness.

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EcoMetrix Africa can assist! Our team of Carbon Tax and GHG Reporting experts help ensure compliance with the Carbon Tax Act. Please email Lodewijk.Nell@ecometrix.co.za or henk.sa@ecometrix.co.za. For more information visit www.ecometrix.co.za.

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