Climate change has become an important concern for most governments in the current
day. The impact of global warming on economic productivity, human welfare and
environmental sustainability is becoming increasingly apparent to most people on the
planet, resulting in a rapid evolution of policy instruments which are capable of
addressing the issue of climate change. The ultimate aim of these policy instruments is to
influence corporate activity to environmentally sustainable behaviour. The two most
common policy instruments to effect change to most environmentally sustainable
behaviour is carbon taxation and cap-and-trade schemes.
Linked to climate change and environmental sustainability is the concept of sustainable
development which encompasses environmental sustainability, economic sustainability
and social sustainability. These principles are formalized and made relevant for
companies in the form of the triple bottom line. In South Africa, National Treasury
implemented a carbon excise tax in 2010 for the motor vehicle manufacturing industry in
response to the problem of global warming, and published a discussion document in
support of their decision to implement carbon tax. The document highlighted reasons for
the choice of carbon tax over other policy instruments such as cap-and-trade schemes and
penalties. Even though the choice for carbon tax was assessed from an environmental
perspective, the concept of sustainable development encompasses environmental,
economic and social sustainability. The subject matter for the 1st article was to compare
the two most widely used climate change instruments, known as cap-and-trade schemes
and carbon tax, from the broader perspective of sustainable development. This included an analysis of the effects of both instruments on both greenhouse gases as well as
economic indicators such as gross domestic product (GDP) and fiscal revenue.
Linked to the implementation of any instrument designed to address carbon emissions is
the concept of the social cost of carbon (SCC). The SCC is an estimate of the associated
monetary cost of the damage cause by emitting one additional ton of carbon into the
atmosphere. In a perfect world the SCC would be equal to, or lower than, the carbon tax
price. National Treasury‟s carbon tax price has never been assessed from an economic
perspective and in particular whether the price equates to the SCC from a feasibility
viewpoint. The testing of the carbon tax price against the SCC from an economic
perspective was the subject of the 2nd article, which then also evaluated the impact of
carbon tax on motor vehicle manufacturer‟s production techniques and vehicle fuel
efficiency.
Under the assumption that the carbon tax price approximates the SCC it is arguable that
companies are effectively paying for the damage cost to the environment in the form of
the carbon excise tax implemented. If the argument holds true, then the corporate social
investment expenditure may well be adjusted since corporate responsibilities to the
environment have been partially addressed by the payment of carbon tax. The impact of
carbon tax on CSI expenditure by motor vehicle manufacturers in South Africa was the
subject of the 3rd article in the thesis.
Furthermore, also linked to the implementation of carbon taxation for the motor vehicle
industry is the financial and sustainability reporting of the motor vehicle manufacturers‟
tax in the sustainability report and financial statements. Since carbon tax was designed to
promote behaviour toward a lower carbon footprint, evidence that such behaviour is being
affected can be observed in a company‟s sustainability report, which specifies the
company‟s planned path to carbon reduction in accordance with the disclosure standards
set in the Global Reporting Initiative (GRI). In terms of financial accounting there is no
specific International Financial Reporting Standard (IFRS) statement dealing with carbon
tax, and the correct treatment thereof will have to be interpreted in accordance with
existing accounting standards on revenue (IAS 18) and provisions (IAS 37). The subject
matter of 4th article assessed motor vehicle manufacturers reporting compliance of carbon
tax transactions in accordance with IFRS and the GRI. In summary, the implementation of carbon tax in South Africa is seen as a significant
move in the fight against climate change. If the instrument is to be considered effective it
must prove to be sustainable from an environmental, economic and social perspective.
The effectiveness of the instrument can only be measured if it was accurately reported in
the financial statements and sustainability reports in accordance with IFRS and the GRI.
Furthermore, the instrument should not be seen as an opportunity by motor vehicle
manufacturers to forego corporate responsibility to environment and thus should not
impact CSI expenditure which is a significant part of the welfare contribution by South
African businesses to the people of South Africa. / PhD (Tax), North-West University, Potchefstroom Campus, 2014
| Identifer | oai:union.ndltd.org:NWUBOLOKA1/oai:dspace.nwu.ac.za:10394/11940 |
| Date | January 2014 |
| Creators | Pillay, Surendran Subryan |
| Source Sets | North-West University |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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