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Wednesday, October 23, 2019

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December : Carbon Tax Modelling Report

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20 December, 2016

Carbon Tax Modelling Report Commissioned by the Treasury

Below find attached a Report produced by PMR Secretariat for the National Treasury of South Africa to support the preparation of South Africa's introduction of a carbon tax for your information.

What needs to be noted is the following:

  1. The impact is based on a GDP growth of 3.5% and a second scenario, 2.4%
  2. Impacts:
    1. Reduction in carbon emissions of between 13 to 14.5 percent by 2025 and 26-33 percent by 2035
    2. Slight fall in employment
    3. Slight fall in GDP growth
    4. Slight fall in household consumption
    5. Slight fall in real wages

The Bad News
  • The predictions regarding economic growth are, in my opinion, way too optimistic. We are currently hovering at zero growth and the situation is not likely to improve in the short-term, or even the medium term, unless there are serious structural changes made to the economy (i.e. labour market reforms, reducing the cost of the public service, cost of doing business etc. etc.) - this will take political will to achieve, so do not hold your breath!
  • Given a more realistic GDP growth scenario (i.e. minimal), the potential negative impacts on (a) employment, (b) GDP growth, (c) household consumption and (d) real wages of introducing this tax will be far more profound than those contained in the Report.
  • The Government needs to raise more tax revenue so this is one of the ways they can do so relatively easily and without any adverse reaction from their constituency - they will introduce it.

The Good News

  • Dependent on whether "carbon" credits can be claimed, the Forestry and Forest Products Industry could, potentially, mitigate most. If not all of any carbon tax payments levied.

The Bottom Line

  • Given the current state of the economy, the last thing business needs, is an additional tax. FSA, alongside our partners, needs to fight its introduction.


Download the report: HERE

Roger Godsmark
Operations Director
Forestry South Africa
Tel :+27 33 346 0344
Fax: +27 33 346 0399
Cell: 082 805 7123
E-mail: forest@global.co.za

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