The influence of carbon tax implementation on green growth in South Africa

Abstract

The idea of sustainable, greener growth has resonated in South Africa like in the rest of the world. Their national goals, such as reducing very high unemployment, mitigating air pollution, in particular CO2 emissions and addressing the problem of water scarcity are perfect fit with the Green Growth concept. Each country needs to start the change from the policy level downwards. In order to reflect the real environmental and social costs in its economy, South Africa has already made some progress in its policy reform. In 2010, the Government started developing a carbon tax in order to address GHG emission problem and influence the transition towards energy efficiency and renewable energy sources. The goal was correcting present prices of goods and services that produce excessive emissions, so that social cost is included. Carbon Tax Bill was released in November 2015. The drafted Bill states 1 January 2017 as a starting date of implementation. The biggest concern of the South African Government is redistribution of revenues gained from the carbon tax. This paper analyzes 17 carbon tax designs around the world and combines their experience with economic and environmental profile of South Africa. The main objective is to answer the following question: Will Implementation of a carbon tax positively contribute to the Green Growth in South Africa? In order to answer this question, I have focused on 2 other questions, i.e. sub-objectives: will a carbon tax reduce carbon emissions in South Africa and what is the ideal carbon tax revenue recycling method for South Africa in order for a carbon tax to be cost-effective? The paper concludes that CO2 emissions are expected to decrease due to comprehensive effect of a carbon tax and renewable energy program in the country. Moreover, if revenue recycling is designed in such way to compensate firstly poorest tax payers, then finance green energy projects and helps trade exposed industry, a carbon tax will be cost-effective. This means that both, the “Green” and the “Growth” will be achieved and that a carbon tax has a positive influence on Green Growth in South Africa.