South Africa’s carbon tax: Balancing climate action and economic development

South Africa introduced a carbon tax in 2019 to meet greenhouse gas emission reduction targets of 34% by 2020 and 42% by 2025. The policy primarily targets the energy sector, which is responsible for approximately 80% of the country's emissions due to a heavy reliance on coal. While the tax aims to incentivize a shift toward renewable energy, it faces challenges including potential conflicts with WTO non-discrimination principles, the risk of carbon leakage due to a lack of border price adjustments, and negative socio-economic impacts such as increased consumer prices and potential job losses in energy-intensive industries like mining and steel. The document argues for a balanced approach that includes worker re-skilling, targeted incentives for renewables, and regional coordination through agreements like the AfCFTA to prevent protectionism and ensure a just transition.

• South Africa's energy sector is the primary source of greenhouse gas emissions, accounting for approximately 80% of the total, with carbon dioxide making up over 85% of emissions in 2000 and 2015 due to coal use.
• The 2019 Carbon Tax Act implements a 'polluter pays' principle, but the lack of border price adjustments for imported products may make domestic goods uncompetitive and undermine the Paris Agreement's objectives.
• To mitigate the initial economic shock, the government provides tax allowances in the first five years that can total up to 95%, including a 60% basic allowance and full exemptions for the agricultural, forestry, waste handling, and land-use sectors.
• The carbon tax may create socio-economic tensions by increasing consumer prices and threatening employment in energy-intensive sectors such as mining, chemicals, iron, steel, and cement.
• South Africa is a leading emitter in the developing world and the leading GHG emitter in Africa, though it accounts for only 1.2% of global emissions and is ranked 14th globally.
• There is a potential legal conflict between the UNFCCC's environmental goals and the WTO's principle of non-discrimination, as carbon taxes target production methods rather than the final product.

APA

KALABA, M. (2020). South Africa’s carbon tax: Balancing climate action and economic development. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2020/03/Policy-Insights-81-EDIP-kalaba.pdf

Chicago

KALABA, MMATLOU. South Africa’s carbon tax: Balancing climate action and economic development. South African Institute of International Affairs, 2020. https://saiia.org.za/wp-content/uploads/2020/03/Policy-Insights-81-EDIP-kalaba.pdf.

Wikipedia

{{cite report |last1=KALABA |first1=MMATLOU |title=South Africa’s carbon tax: Balancing climate action and economic development |publisher=South African Institute of International Affairs |date=March 2020 |url=https://saiia.org.za/wp-content/uploads/2020/03/Policy-Insights-81-EDIP-kalaba.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kalaba2020south, author = {KALABA, MMATLOU}, title = {{South Africa’s carbon tax: Balancing climate action and economic development}}, institution = {South African Institute of International Affairs}, year = {2020}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2020/03/Policy-Insights-81-EDIP-kalaba.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }