+27 12 362 6500 info@greengain.co.za

We all know by now that humans are contributing to global warming by releasing carbon dioxide and other greenhouse gases into the atmosphere. This is generally not considered “a good thing”. Governments agree that they need to reduce this. The Paris Agreement is an international treaty between nations to combat climate change, and came into force on the 4th of November 2016. The South African government has committed to ambitious greenhouse gas emissions reductions of 34% by 2020 and 42% by 2025 against a business as usual curve. Governments can essentially use either a carrot or stick method, or combination thereof, to reduce greenhouse gas emissions. One of the stick type instruments the South African government intends using is the Carbon Tax, set to become active on 1 January 2017.

This tax aims to change corporate and consumer behaviours by shifting consumption patterns to cheaper (due to no carbon tax) lower carbon products and industries. The intent is thus to move towards a low carbon economy.

Industries affected:

  • Electricity
  • Petroleum (coal / gas to liquid)
  • Petroleum – oil refinery
  • Iron & steel
  • Cement
  • Glass & ceramics
  • Chemicals
  • Pulp & paper
  • Sugar
  • Fugitive emissions: coal mining
  • Some others such as agriculture, forestry, land use and waste are initially exempted but will be liable from 2020.

There may be more industries that will be included at a later stage when more clarity is available.

How will the tax be calculated?

Scope 1 emissions of affected industries will be measured, meaning the direct emissions from sources that are owned

or controlled by the company. Electricity usage will be excluded. Fuel used in mobile equipment/ vehicles is

currently excluded.

The first 60% of emissions are exempt. There may be some other exemptions particular to specific industries that apply

above the 60% threshold. The effective tax level thus equates to about 10%-40% of the direct emissions for the

period 2017-2020, at a current rate of R120 per tonne of CO2 or CO2 equivalent. Taking into account the thresholds

and exemptions this is effectively between R12-R48 per ton of CO2 produced, depending on the type of industry

. SARS will manage the collection of the tax.

What about Carbon Offsets?

The system allows for organisations to reduce their Carbon Tax liability by 5%-10% using carbon offsets. This means

that carbon emissions savings made and registered by one organisation may be bought by another organisation to

reduce carbon tax. This instrument falls in the carrot type as the mechanism incentivises companies to adopt cleaner

production and assist in the transition to a low carbon economy.

Are there any other tax reduction schemes?

There are several tax rebate schemes available that organisations may use depending on the situation:

  • Renewable energy depreciation allowance (s12B)
  • Depreciation allowance for biofuels production (s12B)
  • Tax exemption for certified emissions reductions (s12K)
  • Biodiversity conservation and management expenses (s37C)
  • R&D tax incentive (s11D)
  • Industrial policy incentive (s12l)
  • Energy efficiency savings (s12L)

Reporting requirement:

An important development is that a mandatory reporting scheme will be coming into effect for installations emitting over 100 000 tonnes CO2 annually or that consume electricity that results in over 100 000 tonnes CO2 in annual emissions.


Firstly, understand your status and secondly, identify the risks and opportunities associated with the incoming carbon tax in South Africa. In order to assist our clients in understanding this, we have developed DigiData BI, a tool that can be used to collect, track, calculate and predict an organisation’s carbon footprint and resulting carbon tax. A great feature of this tool is that we have also linked it with our GRC-S Management tool, DigiLex, to enable inclusive reporting on all sustainability related matters. For more information or a demonstration, please contact us.