carbon tax policy for South Africa

South Africa's cabinet has adopted a policy that is planned to include carbon taxes and incentives for business transformation. While cabinet accepts there may be short-term pain, there should be long-term efficiency improvements and opportunities to improve South Africa's competitive position globally.

While it is predictable that business objects to the tax, their argument (at least as reported in Cape Business News) is flimsy. They say that government is unlikely to use the revenue efficiently. Well, maybe so, but what has that to do with the price of cheese? Business doesn't use energy efficiently because it is so unreasonably cheap in South Africa - should we ration their energy on those grounds? They also say that government should use incentives rather than taxes. Yes, I too would rather eat apple pie than broccoli, but that would make me fat, just as a high-carbon diet has made business dirty.

Presumably the businesses that object are proponents of a free market - at least where this is to their benefit - but targetted incentives are a more dangerous market intervention than a carbon tax that doesn't dictate how you should achieve carbon efficiency. Both are risky, but incentives depend heavily on government knowing what the solution is, while a tax doesn't make any such claim.

And for heaven's sake, business will benefit from reduced energy costs if they reduce their carbon diet, so it is quite possible that the increased cost of the tax will be offset by the reduced cost from improved energy efficiency. That would mean small pain for business, accompanied by environmental benefits and improved energy security. And continued access to global markets that will increasingly be excluding carbon-intensive products.

Note to Eskom: The CEO of Duke Energy, the US electricity utility that is the 12th largest CO2 emitter in the world, believes in the need to move to a low-carbon future. CEO James Rogers says "we need a sense of urgency, but not a sense of panic... a sense of hope, not a sense of fear." He says "energy efficiency is one of the five ways you generate electricity - it should be treated as a production option."