Carbon tax policy BUSA submission to Carbon Tax

Carbon tax policy BUSA submission to Carbon Tax Consultation November 2013

Overarching business view • Carbon price supported in pursuit of lower carbon growth trajectory • Imperative to understand impact of any state intervention • Carbon tax must be aligned with other mitigation instruments • Need to operate in context of global climate action • Proposed carbon tax is not only carbon price • Legislative basis must be clear

Tax on electricity • Scope 1 vs scope 2 emissions • Rebates appear to only apply to scope 1 emissions • In terms of numbers majority of firms are consumers of electricity, on which tax on electricity will be passed through, thus increasing the cost of electricity to them: no access to rebates or offsets; limited mitigation options

Legislative basis • Income Tax Act vs Excise Act? • No provision for group tax? • Gases covered • Revenue recycling and offsets • Determination of taxable amount • Application of thresholds • Z-factor • Link to DEROs

Determination of taxable amount • Appropriate emission factors and procedures approved by DEA • CO 2 vs CO 2 eq • Current situation: regulations on mandatory reporting of GHG • DOE: energy consumption and GHG • DEA: GHG

Application of thresholds • Percentage based thresholds vs absolute threshold › Significantly different tax burden outcomes • Application of thresholds to be done at firm level; unambiguous prescription of eligibility required • Process emissions need to be defined • z-factor › Agreement on benchmark › Application of proposed benchmark for electricity increases the tax rate from R 48/ton to R 54 which with adjustment of distribution losses will be R 56/ton › Incentivizes improvement in carbon intensity not absolute reduction and can lead to increased emissions , taxed at a lower tax rate

Link to DEROs • Proposed tax is premised on behaviour change to reduce emissions, which means mitigation or stop activity • Mitigation potential analysis has identified 183 theoretical mitigation opportunities, many of which: › are not available until 2030 › are not technically feasible under SA conditions › have limited potential beyond existing implementation • Threshold design should be based on DEROs

Way forward Business accepts that: • A carbon price is one of the instruments that could be deployed in lowering the carbon intensity of the economy • But it is only one and should only be introduced in synergy with the other instruments that are already in place or about to be developed. Business would like : • to engage constructively on the basis of a common understanding of intention and challenges that need to be overcome to change behaviour

Thank you