Rising Carbon Taxes to Drive Up Costs for Businesses in South Africa

South Africa is preparing for a significant increase in carbon taxes, with rates set to rise by over 140% by 2030, alongside the phasing out of tax allowances. Some industries may see their carbon tax liabilities soar by 340%, a development that could sharply increase electricity costs and challenge the country’s export competitiveness.

The carbon tax is being implemented in phases, with the price per tonne expected to rise from R190 to R462 by 2030. Deputy Minister of Electricity and Energy Samantha Graham-Maré highlighted the impact on businesses, including electricity costs potentially rising by 60%.

The European Union’s Carbon Border Adjustment Mechanism (CBAM) further compounds the issue, placing R52.4 billion worth of exports at risk by imposing additional costs on carbon-intensive goods entering the EU.

Challenges and Opportunities

While businesses are bracing for increased costs, Graham-Maré emphasized the potential for renewable energy to mitigate the financial burden. “By embracing renewables, we’re not only reducing emissions but creating new opportunities for growth and securing our industries’ future,” she stated.

The government is encouraging businesses to invest in cleaner energy solutions to reduce reliance on coal, stabilize energy prices, and remain globally competitive. Revenue generated from carbon taxes will be redirected toward green initiatives, though it falls short of the funds needed for a Just Energy Transition.

The carbon tax aligns with global efforts under the Paris Agreement but highlights disparities between developed and developing nations. While Western nations have spearheaded the shift away from coal, their financial commitments to support countries like South Africa have often fallen short.

The impending carbon tax increases present a dual challenge and opportunity for South African businesses. Transitioning to renewable energy will be crucial to mitigating costs, protecting jobs, and ensuring long-term economic competitiveness. The government has committed to supporting businesses in this transition, signaling a collective effort toward a more sustainable future.

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