The implementation of the carbon tax is postponed to 2016, Finance Minister Pravin Gordhan announced during his budget speech.

According to the Budget Review, the National Treasury and the Department of Environmental Affairs have agreed that the carbon tax needs to be aligned with the proposed desired emission-reduction outcomes. The deferral has been made to allow for this process and ensure adequate time for consultation on draft legislation.

Government plans to implement the carbon tax and reduce the electricity levy at the same time. The net tax burden will be low in the first five years of implementation, rising slowly thereafter and more steeply after 10 years.

Along with carbon tax, environmental regulations, renewable energy projects and other targeted support programmes, form part of a package of measures to address climate change. The National Treasury and the Department of Environmental Affairs agreed that this were needed following public consultation. The proposed carbon tax and incentives such as the energy-efficiency tax incentive will encourage the economy onto a path of low-carbon growth.

The National Treasury published a Carbon Tax Policy Paper in May 2013. More than 100 written comments were received, two public workshops were held and a number of meetings took place. According to the Budget Review, 94% of respondents supported the policy and more than half are in favour of the carbon tax.

Following this process of consultations, several adjustments to the policy package will be proposed. Government will take these into account when finalising the design of the carbon tax to ensure that households and firms are not unnecessarily disadvantaged. The proposed adjustments include:

• reducing Eskom’s tax liability, with a credit for the renewable energy premium, limiting the potential effect of the tax on electricity prices
• addressing concerns about international competitiveness, including a formula to adjust the basic percentage tax-free threshold to reward over performance
• refining the research and development tax incentive to provide for related green technology
• using firms’ carbon offsets to reduce their carbon tax liability by between 5% and 10% of actual emissions
• using some of the revenue generated from the carbon tax to fund the energy-efficiency tax incentive
• aligning reporting and classification of greenhouse gas emissions for tax purposes with mandatory emissions reporting to the Department of Environmental Affairs.