Thursday, October 20, 2011

Switch to green economy 'will be painful' to South Africa

By Rio+ 20 Secretariat, October 19, 2011

South Africa's economy will need serious restructuring if the country is to successfully manage its carbon emissions, MPs have heard.

The switch to a greener economy was going to be painful, environmental affairs portfolio committee chairman Johnny de Lange said after the National Treasury briefed the committee on Wednesday on the introduction of a carbon tax.

"If we as a nation are serious in responding to what the scientists are telling us... If we're serious about this, we're going to have to make serious structural changes," said De Lange.

The National Treasury has been consulting extensively since March this year on the introduction of an appropriate carbon tax.

This is to be phased in over a specific period and is aimed at reducing the country's levels of greenhouse gas -- especially carbon dioxide -- emissions.

De Lange said the White Paper on Climate Change Response, gazetted on Tuesday, had caused a fundamental shift in government thinking.

"The white paper... has fundamentally changed a lot of our thinking. It is introducing very strong measures.

"The whole issue of carbon budgeting, then a carbon tax on top of that, then sectors having targets they have to meet in terms of carbon emissions. You are starting to fundamentally restructure this economy," he said.

Earlier, National Treasury deputy director-general for tax and financial sector policy Ismail Momoniat told members the country's economy had long been based on low energy prices.

A critical problem now was how to price carbon in the market.

"Certainly, a carbon tax offers the best way forward," he said.

While there was no easy solution to the climate change challenge, the polluter-pays principle meant that "in the end, you've got to go to who emits".

He declined to speculate on a carbon tax rate.

"Even if we knew what rate we're going to set the tax, we can't say it now, we've got to do it as a tax announcement, because it's market sensitive," Momoniat said.

His colleague, economic tax analysis chief director Cecil Morden, told members the rationale for a carbon tax was that it provided a means for the government to "level the playing fields" between carbon-intensive and low carbon emitting sectors.

"The external costs of greenhouse gas emissions are not reflected in the market prices of certain goods and service, for example, energy [production]," he said.

The National Treasury had "consulted extensively" on the introduction of a carbon tax with several key sectors, including mining, Eskom and Sasol, as well as the cement, paper, liquid fuel, chemical and manufacturing sectors, among others.

What had emerged from the discussions was "an initial preference for an input tax approach, based on the carbon content of fuel".

The tax could then "later migrate to actual emissions". There had also been discussion on sectoral thresholds and offset credits.

De Lange warned that the switch to a greener economy was going to be painful for South Africans.

"The problem... is it's going to be very painful. We must open up this debate because we mustn't think it's not going to be painful," he said.

"But if we don't do it, it's going to be even more painful. And the quicker we start, taking structural changes to [the economy], the quicker we'll adapt and... become a successful nation.


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