Energy

Low tax guarantees solar benefits

Summary

The comparatively low carbon tax benefit in South Africa, and various allowances readily accessible by the government in year one of adoption of the Carbon Tax Act, that came into effect in 2019  June, have culminated in the existing shortage of […]

The comparatively low carbon tax benefit in South Africa, and various allowances readily accessible by the government in year one of adoption of the Carbon Tax Act, that came into effect in 2019  June, have culminated in the existing shortage of incentives for the solar energy, Eckart Zollner, head of business growth at the EDS Systems, informed Engineering News. Originally, the carbon tax only extends to the Scope 1 emitters in the first period of the carbon tax start from 1st June 2019 to around 31st December 2022. Scope 1 emitters are all those liable for direct pollution from an owned or regulated source, such as those generated by the fossil fuel burning.

Scope 2 emissions are all indirect emissions arising from the generation of imported electricity that will be charged from the year 2023 to the year 2030 in the second step of the roll-out. The new carbon tax design of South Africa also offers substantial tax-free pollution permits, varying in the first step from 60 percent to 95 percent. This provides a general allowance of between 60 percent and 75 percent based on the practice, a maximum allowance of around 10% for businesses using carbon credits to mitigate their tax obligation, an efficiency allowance of up to 5 percent for companies lowering the pollution intensity of their operations, a 5% carbon expenditure allowance to satisfy reporting standards and a maximum allowance of around 10 percent for industries exposed to commerce.

It is also predicted that, during the first stage, the carbon tax would not affect the price of energy. This would result in a comparatively moderate carbon tax limit, with carbon dioxide or comparable emissions varying between R6/t as well as R48/t. Via improvements in energy production, renewables and the other less carbon consuming initiatives, this comparatively low tax rate is meant to provide ample time for large existing emitters to move their activities to cleaner technology.

“As some allowances are removed or decreased as well as the value of carbon tax rises and as the second stage of the Carbon Tax Act comes into effect in the year 2023, we expect it to boost growth not just in the solar power sector, but also in other areas of the renewable energy industry,” notes Zollner. Solar energy is a means of producing power that is “carbon positive.” Many that adopt it qualified for carbon credits, as soon as it is documented and accepted in the Carbon Offset Administration System of the Department of Mineral Resources and Energy, intended to promote the listing, allocation and removal of the carbon credits to mitigate carbon tax liabilities.

Carbon emitters adopt renewable energy sources, like solar energy, which qualify for a carbon offset credit of not more than 10% against the pollution liability. With this in hand, Zollner notes that EDS Systems has developed the carbon tax administration program, EcoGauge, to allow businesses to measure and apply their carbon tax liability to include permitted carbon offset allowance.

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