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Introduction of carbon tax ill-timed - David Ross

MP says new tax will directly lead to an increase in electricity prices and place further pressure on Eskom

DA to oppose ill-timed introduction of carbon tax 

8 April 2015

The Democratic Alliance (DA) will this week make formal submissions to the Davis Tax Committee on Treasury's proposed implementation of a carbon tax set for early next year. The DA opposes a new carbon tax as it will lead to further electricity price increases which South African consumers simply cannot afford. 

This comes after Treasury Deputy Director-General, Ismail Momoniat, this week reaffirmed Treasury's commitment to the implementation of a carbon tax, stating that a draft Bill will be made available for public comment within the next two months.

The creation of this new tax will directly lead to an increase in electricity prices and place further pressure on Eskom in the midst of an electricity crisis. This will place a further burden on South Africans who continue to fund a government that mismanages the public purse at every turn.

While the DA is fully committed to the goals of building a low carbon "green" economy in South Africa and recognises that current greenhouse gas emissions are far too high, this cannot be done by creating a new tax with an array of unintended consequences.

Both the NDP and the National Climate Change Response White Paper - compiled in 2011 - refer to the smooth and gradual transition toward a low carbon economy. The NDP further states that "South Africa can manage the transition to a low-carbon economy at a pace consistent with government's public pledges, without harming jobs or competitiveness".

The very opposite is happening at this point. The "transition" is inconsistent with government's public pledge to resolve the electricity crisis, and according to Sasol, a carbon tax will certainly reduce our country's competitiveness.

While Eskom faces an increasingly uphill battle to keep the lights on by burning millions of litres of diesel, it will find itself violating the regulations imposed by such a carbon tax.

The result is predictable - Eskom will shift this cost to the consumer, adding to the ever-increasing price of electricity. 

This was already acknowledged in 2013, when Treasury's Chief Director of economic and tax analysis, Cecil Morden, admitted that the proposed carbon tax is likely to have an impact on the South African electricity price.

Electricity tariffs are already set to increase by 12.69% for direct customers and 14.25% for municipalities from July this year, far exceeding the 8% annual tariff increase the National Energy Regulator of South Africa (Nersa) initially agreed to as part of the multi year price determination (MYPD).

Recent reports suggest that Eskom is requesting a new electricity price increase of 25.3%, which would be triple the 8% agreed to in the MYPD. 

Consumers cannot continue to fund the electricity crisis through exorbitant electricity costs. 

The DA will continue the fight against tax increases for the benefit of all South Africans, and will therefore oppose this ill-timed carbon tax proposal. 

Statement issued by David Ross MP, DA Shadow Deputy Minister of Finance, April 8 2015

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