Absa AgriTrends 2022

Carbon Taxes in South Africa The carbon tax act of 2019 came into effect on 1 June 2019 and will be implemented in three phases. The first phase, in which agriculture was not included was bound to end at the end of 2022. During the 2022 budget speech, phase 1 was however extended

Carbon trading could hold opportunities

Although the first phase of the carbon tax act may not affect

agriculture in terms of payments yet, it does hold opportunities. Producers that have carbon offsets or carbon sinks may qualify for the sale of carbon credits under the Carbon Tax Act or voluntary carbon credit sales. Here the possible advantage of selling carbon credits should be considered against the cost of compliance. To qualify for carbon credit sales under the Carbon Tax Act, off-setting projects need to be licensed and monitored through the Department of Environmental Affairs (DEA). Although the current local price of carbon (linked to the tax rate per ton) is quite low compared to international standards, prices will increase over the coming years which could make the sale of credits in relation to the cost of monitoring it more feasible. During Phase 2, which will start in 2026, the carbon tax will increase more rapidly and exemptions and allowances will fall away. At the moment, the tax is expressed in USD dollar terms. Organised business has critiqued this and noted that a tax in USD could also expidite the cost of carbon in South Africa due to a depreciating exchange rate. Beyond 2025 the Carbon Tax Act holds risks for agriculture on two fronts. The first is through the cost of electricity. During phase 1 this tax did not impact the cost of electricity. From 2026 onwards, it will apply to electricity generation from fossil fuels such as coal, and with South Africa reliant on coal-generated electricity for much of its needs, the final cost could increase for all users and have widespread inflationary effects. The second is through direct car- bon taxes to agriculture since exemptions and adjustments applicable during phase 1 will fall away during phase 2. Although the regulations around agriculture are not clear yet, development and gradual introduction of regulations for livestock and crop production are envisioned for the future.

to 31 December 2025. The implication is also that the

allowances and other exemptions on carbon taxes will apply until

2026 Phase 2 of the Carbon tax act will commence in the end of 2025. The first phase started with a carbon tax rate of R120 per ton of carbon dioxide equivalents with industry-specific tax-free emissions allowances ranging from 60 to 95 percent. This resulted in carbon taxes ranging from R6 to R48 per ton of carbon dioxide equivalents. The tax rate has been adjusted by CPI +2% for the past two years. For 2022 this has amounted to R144 per ton of CO2e.


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