What It Is and How It
Will Help Us Sustain the Future
“greenhouse effect”, “carbon emissions” – since Al Gore’s 2006 Nobel Peace
Prize-winning documentary, An Inconvenient Truth, some have found these
words popping up around every corner. For others, these concepts have been a
part of dialogue years before Leonardo DiCaprio’s voice started informing
viewers of the melting ice caps. South Africa’s Carbon Tax Act, which came into
effect on 1 June 2019, is proof that people from this latter group have been
working for more than a decade to help put South Africa onto the list of
countries that are committed to lowering their greenhouse gas emissions and in
so doing, saving the world.
The Carbon Tax Act, in
a nutshell, is the “polluter pays” principle, where companies who have
high-volume carbon- and greenhouse gas emissions pay a special tax on these
emissions. Although new to South Africa, carbon tax has been around since the
1990s, when Denmark, Finland, Norway and Sweden started taxing high-emission
companies. Countries such as Switzerland and Japan, along with Canada’s British
Columbia province, have all moved into their second stage of Carbon Tax since
the 2000s as well.
Now while it may seem
that South Africa is somewhat late to the party, extensive sustainable
development processes preceded this Act. In 2011, the National Climate Change Response
Policy was drawn up, followed by the National Development Plan of 2012. These policies paved
the way for South Africa’s joining the rest of the members on the United
Nations Framework Convention on Climate Change in signing the Paris Agreement –
the joint commitment to take immediate action in battling the rising climate
change. The 2019 Carbon Tax Act is our next step.
The Act will be
introduced in two phases. Phase one, which began in June 2019, will run until
the end of 2022, after which the second phase will run until the end of 2030.
The purpose of splitting this venture in two is to lessen the initial blow on
the affected parties. This lower initial tax rate is put in place to make
companies aware of the change that needs to be made in their infrastructures,
giving them time to lessen their emissions before the second phase commences.
The rates for the second phase will be finalised after a review of phase one,
promising to be much higher than the initial rates.
Although many may
feel this Act is “too little, too late”, the benefits are long-term and are
aiming not to improve or drastically change the country in a few years, but to
gradually create a sustainable, lower-emission economy which will improve the
lives of all South Africans daily. European countries who introduced a carbon tax
as early as the 1990s are showing visible decreases in their carbon emissions
compared to their neighbours who have not initiated similar taxing endeavours.
Taking this into consideration, the visible results of this Act will most
likely only become apparent after 2030.
While this act is
a bold statement on the government’s behalf – hoping to turn the country
towards sustainable development along with taxes on products such as fuel and
plastic bags – it is by no means enough to ensure a more sustainable future.
Directors of the affected organisations are encouraged to align their
businesses with the larger environmental goals and remedying their shortfall
areas (which will be helped along by the first phase of the Carbon Tax Act),
while also embarking on their own endeavours to improve the sustainability of
decision-makers of the industry, the board of directors will be expected to
lead by example, ensuring their decisions are driven by effectivity and ethical
motivations. In all decision-making, the greater long-term implications and
sustainability of the company have to be considered, regarding not only the
environment, but also third-party stakeholders and, most importantly, its
employers. Change comes from within, and so the board has to secure an ethical,
transparent, workplace while changing the way the company sees itself in
relation to the larger sustainable movement.
development of environmental policies, the implementation of an Effective
Environmental Management system, and the inclusion of environmental issues in
the company’s risk management are key steps towards the board’s aim to create
responsible corporate citizenship.
Along with almost
200 other countries who have joined in the commitment to lower carbon emissions
and battle climate change, South Africa is helping to change the world. By
taking the initiative your company can help change it, and in so doing save the
future as well.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)