After more than a decade, Finance Minister Tito Mboweni has announced the implementation of the much talked about carbon tax bill.

The bill is part of South Africa's commitment to the Paris Agreement on Climate Change. According to Minister Mboweni, this will benefit all of South Africa and will be part of the country's contribution to the world, given the threat posed by climate change to humanity.

Bongani Mahlangu conducted extensive research on the topic of carbon tax and its impact on the economies of the world during his MCom studies at the North-West University (NWU).

What is carbon tax?

Bongani explains that carbon tax is aimed at businesses and companies that conduct activities that result in the emission of greenhouse gases above an allowed threshold, polluting the atmosphere. “Industries which rely on fuel consumption and electricity generation are the most frequent offenders,” he says.

Organisations who don’t take action to reduce their carbon footprint will face punitive measures, and will be forced to pay tax to the state for producing higher amounts of air pollution.

Bongani says this tax is ultimately designed to encourage a transition to more environmentally friendly ways of operating in various industries.

According to Minister Mboweni, there will be a grace period to allow companies to implement the necessary changes. The first phase of the tax is set to take effect from January 2020, giving businesses two years (until 2022) to comply and decrease emissions.

The tax rate is set at R120 per ton of carbon dioxide equivalent produced. To allow businesses time for transition, a basic percentage-based threshold of 60% will apply, below which tax is not payable.

The flip side of the coin

Even though the bill will benefit the country and the world, there are certain drawbacks, which Bongani’s research revealed.

“Although the introduction of carbon tax will contribute to a healthier planet and lead to a positive change in business ethics and moral conduct, it may spell disaster for the destitute and the working class, owing to a higher cost of living,” explains Bongani.

During his research he found that there isn’t a proper plan in place to control the effect carbon tax will have on the average person’s pocket.

“Another tax added to an already struggling economy will create a further financial burden,” adds Bongani.

“Social safety nets should have been developed to mitigate the effects of the new tax levy – especially to minimise the trickle-down effect it will have on the consumers of goods and services provided by these businesses.

 Bongani Mahlangu conducted extensive research on the topic of carbon tax and its impact on the economies of the world.