The Energy Tab

This report analyzes energy subsidies in South Africa for financial year (FY) 2025, finding that they totaled at least ZAR 198 billion (USD 10.8 billion). The analysis highlights a heavy reliance on fossil fuel subsidies, significant financial bailouts for the state-owned power company Eskom, and inefficiencies in the Free Basic Electricity (FBE) policy. The document recommends a comprehensive action plan for subsidy reform, a financial recovery plan for Eskom, and a redesign of the carbon tax and liquid fuel subsidies to better support low-income households and the energy transition.

• In FY 2025, South Africa's energy subsidies reached at least ZAR 198 billion (USD 10.8 billion), with 55% consisting of direct fossil fuel subsidies. Direct subsidies for fossil fuel consumption grew in real terms from ZAR 37 billion (USD 2.9 billion) in FY 2018 to an estimated ZAR 110 billion (USD 6 billion) in FY 2025, driven by carbon tax exemptions, tax exemptions and refunds for petrol, diesel, and illuminating paraffin, and a freeze on the General Fuel Levy.
• Electricity subsidies increased more than fourfold in real terms between FY 2018 (ZAR 21 billion/USD 1.6 billion) and FY 2025 (ZAR 87 billion/USD 4.8 billion). These subsidies primarily support a fossil fuel-dominated system, as 83% of national electricity generation was from fossil fuels in 2024, making South Africa the 12th most carbon intensive electricity generator globally. Since FY 2020, over 70% of nominal electricity subsidies have been used for Eskom debt relief rather than improving supply or affordability.
• The Free Basic Electricity (FBE) policy, intended to provide 50 kWh of free electricity per month to households below the poverty threshold, suffers from significant implementation failures. In 2025, Eskom reported that 8 million out of 10 million eligible households were not receiving their FBE, suggesting that only 20% of the funding provided to municipalities is used for its intended purpose. Consequently, approximately ZAR 14.6 billion (USD 0.8 billion) intended for indigent households was used elsewhere by municipalities in FY 2025.
• South Africa's carbon tax is criticized for being ineffective due to high exemption levels and a low tax rate. In FY 2025, the headline rate of ZAR 236 (USD 12.6)/tCO2e was only a fraction of international social cost of carbon estimates. The IMF estimated the average effective carbon tax rate in FY 2022 to be only ZAR 7 (USD 0.47)/tCO2. Energy sector carbon tax exemptions were estimated at ZAR 57.2 billion (USD 3.1 billion) in FY 2025.
• Liquid fuel subsidies are largely untargeted, benefiting the largest consumers, with VAT zero-rating for petrol, diesel, and illuminating paraffin accounting for over 70% of these subsidies since FY 2018. The subsidy landscape heavily favors liquid fuels over electric vehicles; for example, a proposed electric vehicle tax incentive for FY 2027 is predicted to reduce revenue by ZAR 500 million, which is only 2% of the FY 2023 VAT zero-rating for petrol sales.
• Data on renewable energy subsidies is limited and lacks transparency, as the National Treasury and South African Revenue Service (SARS) have not published the value of claims for key incentives like Section 12B. While the 12BA expansion was expected to reduce government revenue by ZAR 5 billion (USD 0.27 billion) in its first year, figures for the second year have not been released.

APA

Bridle,, R. H. (n.d.). The Energy Tab. International Institute for Sustainable Development. https://www.iisd.org/publications/digital-story/the-energy-tab

Chicago

Bridle,, Richard Halsey,Richard. The Energy Tab. International Institute for Sustainable Development, n.d. https://www.iisd.org/publications/digital-story/the-energy-tab.

Wikipedia

{{cite report |last1=Bridle, |first1=Richard Halsey,Richard |title=The Energy Tab |publisher=International Institute for Sustainable Development |url=https://www.iisd.org/publications/digital-story/the-energy-tab |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bridlendenergy, author = {Bridle,, Richard Halsey,Richard}, title = {{The Energy Tab}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/publications/digital-story/the-energy-tab}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }