South Africa set for carbon tax in 2013

South Africa could introduce a carbon tax next year if a proposal contained in the country's latest budget comes to fruition.

The Treasury yesterday put forward plans for a carbon tax of 120 rand (£10) per ton for emissions over and above a 60 per cent threshold that will be set for a number of carbon intensive sectors, including electricity, petroleum, iron, steel and aluminium.

It added that it plans to publish a draft policy later this year.

Under the initial plans, the levy would increase by 10 per cent a year until 2020, while all sectors bar electricity will be able to claim additional relief of at least 10 per cent.

This means nearly two-thirds of emissions will be tax-exempt until 2020 - a scenario that will be seen as a victory for heavy industry lobbying. Companies had complained the tax would further damage profits and economic growth at a time when they are already struggling with rising power and wage costs.

South Africa is not only Africa's largest economy, it is also the continent's biggest polluter and one of the world's 20 largest carbon emitters.

Despite efforts to diversify its energy supply, almost all the country's electricity is produced by state-owned utility Eskom's coal power stations, giving customers few green alternatives.