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The subject matter of the research conducted in this mini dissertation is carbon tax within South Africa. It investigates the Carbon Tax Act 15 of 2019 to determine whether it is suitable for the South African economy. The tax was implemented in South Africa to send a strong signal to producers and consumers to change their polluting behaviour, reduce their carbon emissions and initiate the transition to a low-carbon economy. Pigouvian taxes such as carbon tax have the potential to correct market failures and negative externalities by reflecting the true costs of carbon intensive activities in the price of carbon products. The ‘double dividend hypothesis’ is a foundational principle of carbon tax, it assumes that the carbon tax is capable of achieving double and perhaps in special cases, triple benefits for the economy and society at large. Placing a price on carbon emissions increases the price of carbon-intensive goods, consequently polluters are required to pay for their emissions. Decision-making is heavily influenced by price; therefore, the carbon tax corrects the defective behaviour by incentivising the public to consider the cost of carbon emissions going forward. An improvement in environmental outcomes as behavioural patterns change and shift to renewable and greener energy alternatives, and an improvement in economic and social welfare funded by revenue generated from the tax gives rise to the double benefit. The triple benefit comes in where the carbon tax also reduces poverty.The increase in revenue from carbon tax could improve economic efficiency and reduce the overall burden on the tax system. The tax will have widespread effects, many of which cannot accurately be predicted before some time has been allowed for it to be operational. This study considers the framework of carbon tax within South Africa and critically evaluates whether it is capable of achieving the double dividend. / Mini Dissertation (LLM (Tax Law))--University of Pretoria, 2021. / National Research Foundation/ NRF / Mercantile Law / LLM (Tax Law) / Unrestricted

The objective of this research and aim of this dissertation was to determine the potential impact of the introduction of a carbon emissions tax (hereafter CET) on the South African mining industry and this has been achieved by addressing the following three areas of research: Most urgently, a literature review was required in order to obtain an understanding of why a carbon tax or alternative system was required. A detailed understanding of the functioning of these systems was invaluable to the outcome of the study. The survey conducted, confirmed the fact that global warming and related climate change brought about by human interference, constitute both global and national complications. The study confirmed that market based instruments can assist in addressing this problem and that these are generally considered to be more effective than traditional command-and-control policies. Notwithstanding this finding, in order to ensure efficacy, careful consideration should be given to the economic climate in which they are to be implemented. Secondly, a literature review was essential in order to fully comprehend the nature of the South African economy and specifically the South African mining industry’s contribution to the aforementioned problem. The importance of the industry to the economy had to be acknowledged. It was then established that the South African economy, and in particular the South African mining industry, contribute to this predicament due to their considerable dependence on coal fired power stations for the supply of electricity. The study revealed that should this industry be adversely affected by the proposed taxation, the economy as a whole would suffer. Finally, a literature review as well as quantitative examples were used to estimate the impact of CET on the South African mining industry. This outcome was achieved by evaluating the results of taxation as opposed to the objectives of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). The study found that the effect on most of the objectives of the MPRDA, and especially those related to job creation, economic growth and equal access for all applicants on entering the arena of the mining industry, may well be affected adversely by the implementation of the proposed CET, as the tax was found to impact negatively on the industry’s profits. It has also been assessed that the iron ore sector will be the most affected sector and that smaller companies will be affected to a larger degree than larger companies. The modus operandi and selection of allocated beneficiaries when allocating the revenue collected from the proposed CET by the National Treasury were also found to play a significant role in whether or not the objectives of the MPRDA were positively or negatively influenced by the implementation of the tax. The outcome of the study performed on the research question confirmed that, if said effect of the proposed CET on the South African mining industry was to be compared to the objective of the MPRDA, both positive and negative implications could be identified. / MCom (South African and International Taxation), North-West University, Potchefstroom Campus, 2014

The objective of this research and aim of this dissertation was to determine the potential impact of the introduction of a carbon emissions tax (hereafter CET) on the South African mining industry and this has been achieved by addressing the following three areas of research: Most urgently, a literature review was required in order to obtain an understanding of why a carbon tax or alternative system was required. A detailed understanding of the functioning of these systems was invaluable to the outcome of the study. The survey conducted, confirmed the fact that global warming and related climate change brought about by human interference, constitute both global and national complications. The study confirmed that market based instruments can assist in addressing this problem and that these are generally considered to be more effective than traditional command-and-control policies. Notwithstanding this finding, in order to ensure efficacy, careful consideration should be given to the economic climate in which they are to be implemented. Secondly, a literature review was essential in order to fully comprehend the nature of the South African economy and specifically the South African mining industry’s contribution to the aforementioned problem. The importance of the industry to the economy had to be acknowledged. It was then established that the South African economy, and in particular the South African mining industry, contribute to this predicament due to their considerable dependence on coal fired power stations for the supply of electricity. The study revealed that should this industry be adversely affected by the proposed taxation, the economy as a whole would suffer. Finally, a literature review as well as quantitative examples were used to estimate the impact of CET on the South African mining industry. This outcome was achieved by evaluating the results of taxation as opposed to the objectives of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). The study found that the effect on most of the objectives of the MPRDA, and especially those related to job creation, economic growth and equal access for all applicants on entering the arena of the mining industry, may well be affected adversely by the implementation of the proposed CET, as the tax was found to impact negatively on the industry’s profits. It has also been assessed that the iron ore sector will be the most affected sector and that smaller companies will be affected to a larger degree than larger companies. The modus operandi and selection of allocated beneficiaries when allocating the revenue collected from the proposed CET by the National Treasury were also found to play a significant role in whether or not the objectives of the MPRDA were positively or negatively influenced by the implementation of the tax. The outcome of the study performed on the research question confirmed that, if said effect of the proposed CET on the South African mining industry was to be compared to the objective of the MPRDA, both positive and negative implications could be identified. / MCom (South African and International Taxation), North-West University, Potchefstroom Campus, 2014

ENGLISH ABSTRACT: This research report aims to determine whether an emissions trading scheme or carbon tax is the most suitable market-based emissions reduction mechanism for South Africa, given its multiple environmental, social and economic objectives. Key factors considered in this comparison include: environmental effectiveness; economic efficiency; social welfare impacts; public finance considerations; administrative complexity and costs; and, finally, the relationship to global greenhouse gas reduction mechanisms. These factors are compared in the short and long term to determine which mechanism is most likely to deliver South Africa’s emissions reduction targets within the given time frames. The comparison of these factors involves a non-empirical literature review, followed by a rating of the mechanisms in order to distil a best fit in terms of the various aspects of an effective emissions reduction mechanism, taking into account the specific needs and conditions of South Africa. The research found that, in the short term, a carbon tax was best suited to the South African context. This is because of the fiscal certainty inherent in this mechanism, which provides clear price signals and a stable public income. However, the reasons for these comparative advantages over an emissions trading scheme relate to the long lead times and structure of the latter mechanism, which requires years of implementation and favours environmental effectiveness over economic efficiency. Further reasons include a lack of understanding and buy-in in terms of market-based mechanisms, a situation that favours familiarity over effectiveness in some instances. Taking these issues into account, the research shows that an emissions trading scheme is better suited to the South African context in the long term. Once properly implemented, this mechanism provides superior results in terms of the above-mentioned factors, and specifically in terms of environmental effectiveness and the potential for benefit through international integration. This research report concludes that the South African government has failed to take a long-term view of the mechanisms available for emissions reduction, choosing instead to implement a carbon tax, which favours economic growth at the expense of the environment and future generations. A general lack of understanding of the structures and opportunity costs of the two mechanisms necessitates an investigation by government of the applicability and structure of an emissions trading scheme in the South African context before market-based mechanisms can play an effective part in the future development of the country’s environmental regulatory regime.

In response to growing concerns about the negative impact of GHG emissions, several countries such as the European Union have adopted a cap-and-trade policy to limit the overall emissions levels. Alternatively, other countries including Argentina, Canada, the United Kingdom, and United States have proposed an intensity-based cap-and-trade system that targets emission intensities, measured in emissions per dollars or unit of output. Arguably,intensity regulations can accommodate future economic growth, reduce cost uncertainty, engage developing countries in international efforts to mitigate climate change, and provide incentives to improve energy efficiency and to use less carbon-intensive fuels. This work models and studies a carbon tax scheme where policy makers set a target emission factor, which is used as an intensity measure, for a specific industry and tax firms if they exceed that limit. The policy aims to promote energy efficiency, alleviate the impact on low emitters, and allow high emitters some flexibility to comply. We examine the effectiveness of the policy in reducing the emission factor due to manufacturing and transportation. The major objective of this research is to provide policy makers with a decision support tool that can aid in investigating the impact of an intensity-based carbon tax on regulated sectors and in finding the tax rate that achieves a target reduction. Therefore, we first propose a social-welfare maximizing model that can serve as a tool to evaluate the economic and environmental impacts of the policy. We compare the outcomes of the intensity-based tax and other existing environmental policies; namely, carbon tax imposed on overall emissions, cap-and-trade systems, and mandatory caps using case studies that are built within the context of the cement industry. The effectiveness of the policy is measured by achieving a balance between the target emission factor and the social welfare. To find the optimal tax rate that achieves a target reduction, we propose a bilevel programming model where at the upper level, the government sets a target emission factor for the industry and taxes firms if they exceed that target, and at the lower level, the industry sets output levels that maximize social welfare. In the design of the policy, the government takes into account the decisions of the producers regarding fuel types and production quantities as well as the decisions of the market regarding demand. To evaluate the effectiveness of the policy, we build case studies in the context of cement industry. The policy is found to be effective in reducing the CO2 emissions by opting for a less carbon-intensive fuel with a little impact on social welfare. To examine the effectiveness of the intensity-based carbon tax on reducing CO2 emissions from transportation, which is a major supply chain activity, we finally propose a bilevel program where at the upper level the government decides on the tax rate and at the lower level firms decide on the design of their supply chain and truck types. The policy is found to be effective in inducing firms to reduce their emission factors and consequently reducing the overall emissions.

In response to growing concerns about the negative impact of GHG emissions, several countries such as the European Union have adopted a cap-and-trade policy to limit the overall emissions levels. Alternatively, other countries including Argentina, Canada, the United Kingdom, and United States have proposed an intensity-based cap-and-trade system that targets emission intensities, measured in emissions per dollars or unit of output. Arguably,intensity regulations can accommodate future economic growth, reduce cost uncertainty, engage developing countries in international efforts to mitigate climate change, and provide incentives to improve energy efficiency and to use less carbon-intensive fuels. This work models and studies a carbon tax scheme where policy makers set a target emission factor, which is used as an intensity measure, for a specific industry and tax firms if they exceed that limit. The policy aims to promote energy efficiency, alleviate the impact on low emitters, and allow high emitters some flexibility to comply. We examine the effectiveness of the policy in reducing the emission factor due to manufacturing and transportation. The major objective of this research is to provide policy makers with a decision support tool that can aid in investigating the impact of an intensity-based carbon tax on regulated sectors and in finding the tax rate that achieves a target reduction. Therefore, we first propose a social-welfare maximizing model that can serve as a tool to evaluate the economic and environmental impacts of the policy. We compare the outcomes of the intensity-based tax and other existing environmental policies; namely, carbon tax imposed on overall emissions, cap-and-trade systems, and mandatory caps using case studies that are built within the context of the cement industry. The effectiveness of the policy is measured by achieving a balance between the target emission factor and the social welfare. To find the optimal tax rate that achieves a target reduction, we propose a bilevel programming model where at the upper level, the government sets a target emission factor for the industry and taxes firms if they exceed that target, and at the lower level, the industry sets output levels that maximize social welfare. In the design of the policy, the government takes into account the decisions of the producers regarding fuel types and production quantities as well as the decisions of the market regarding demand. To evaluate the effectiveness of the policy, we build case studies in the context of cement industry. The policy is found to be effective in reducing the CO2 emissions by opting for a less carbon-intensive fuel with a little impact on social welfare. To examine the effectiveness of the intensity-based carbon tax on reducing CO2 emissions from transportation, which is a major supply chain activity, we finally propose a bilevel program where at the upper level the government decides on the tax rate and at the lower level firms decide on the design of their supply chain and truck types. The policy is found to be effective in inducing firms to reduce their emission factors and consequently reducing the overall emissions.

Consequences of global warming and climate change issues have become more apparent over the last several decades. Heat waves, floods, tornados and storms are not just natural disasters occurring elsewhere, but they are now serious environmental catastrophes threatening New Zealand (NZ) and nearby countries as a result of continously escalating greenhouse gas (GHG) emissions. Thus, the Kyoto Protocol was prepared for countries to work collaborately to provide a solution through encourging countries to commit themselves to reducing their individual share of the total GHG emissions. To date, NZ has gone through several phases of modification – introducing and revising two distinctive climate change policies (a Carbon Tax and an Emissions Trading Scheme [ETS]) as a tool to reduce GHG in NZ. These attempts to address climate change, coupled with the question raised by McDonald (Irish Times, 2009) doubting the actual effect of a tax on behaviour-change, provide an extensive basis for a case study in a NZ context involving an evaluation of the effectiveness of these regimes on incentivising behaviour-change to reduce and stablise the level of GHG emissions. In an attempt to answer the research question and conduct a case study in a NZ context, a triangulation approach incorporating both quantitative and qualitative research methods was undertaken. Statistical data analysis was conducted as a quantitative method to analyse and compare numerical changes 'with‘ and 'without‘ the existence of climate change policies. To enhance the results obtained from the quantitative research, qualitative information was also collected by interviewing politicians directly related to the introduction, implementation and the review process of the climate change policies in a semi-structured manner. The results of this study reinforced the need for regulations and policies to reduce and maintain the level of GHG emissions. Statistical data analysis proved that the existence of climate change policies results in lower level of GHG emissions. The interviewees also perceived that some sort of policy is definitely required to regulate the level of emissions, although whether the current, National-led Government‘s modfied-ETS is the 'right' approach is still uncertain. However, the majority of interviewees agreed that the type of tool does not matter, as long as it is correctly-designed to reflect the necessary policies to influence the decision making process of individuals and businesses, and ultimately change their behaviour as a result. However, in order to maintain NZ‘s relationship with other countries, it is preferable to retain its ETS regime until other countries decide to do otherwise.

A stylised analytical framework is used to show how the global carbon tax and the amount of untapped fossil fuel can be calculated from a simple rule given estimates of society's rate of time impatience and intergenerational inequality aversion, the extraction cost technology, the rate of technical progress in renewable energy and the future trend rate of economic growth. The predictions of the simple framework are tested in a calibrated numerical and more complex version of the integrated assessment model (IAM). This IAM makes use of the Oxford carbon cycle of Allen et al. (2009), which differs from DICE, FUND and PAGE in that cumulative emissions are the key driving force of changes in temperature. We highlight the importance of the speed and direction of technological change for the energy transition and how time impatience, intergenerational inequality aversion and expected trend growth affect the time paths of the optimal global carbon tax and the optimal amount of fossil fuel reserves to leave untapped. We also compare these with the adverse global warming trajectories that occur if no policy actions are taken.

It is increasingly recognized that banks might not be pricing adequately climate risks in the value of their loans contracts. This represents a barrier to scale up the green investments needed to align the economy to sustainability and to preserve financial stability. To overcome this barrier, climate-aligned policies, such as a revision of the microprudential banking framework (for example a Green Supporting Factor (GSF )), and the introduction of stable green fiscal policies (for example a Carbon Tax (CT )), have been advocated. However, understanding the conditions under which a GSF or a CT could represent an opportunity for scaling up green investments, while preventing trade-offs on risk for financial stability, is still insufficient. We contribute to fill this knowledge gap threefold. First, we analyse the risk transmission channels from climate-aligned policies, a GSF and a CT, to the credit market and the real economy via loans contracts. Second, we assess the reinforcing feedbacks leading to cascading macro-financial shocks. Third, we consider how banks could react to the policies, i.e., their climate sentiments. In this regard, we embed for the first- time banks climate sentiments, modelled as a non-linear adaptive forecasting function into a Stock-Flow Consistent model that represents agents and sectors of the real economy and the credit market as a network of interconnected balance sheets. Our results suggest that the GSF is not sufficient to effectively scale up green investments via a change in lending conditions to green firms. In contrast, the CT could shift the bank's loans and the green/brown firms' investments towards the green sector. Nevertheless, it could imply short-term negative transition effects on GDP growth and financial stability, according to how the policy is implemented. Finally, our results show that bank's anticipation of a climate-aligned policy, through stronger climate sentiments, could smooth the risk for financial stability and foster green investments. Thus, our results contribute to understand the conditions for the onset and the mitigation of climate-related financial risks and opportunities. / Series: Ecological Economic Papers