Rate changes and the fuel sector

With effect from 2023 and following a lengthy public consultation process, the Carbon Tax Act was amended to state the exact annual carbon tax rate increases from 2023 to 2030. One of the reasons for this was to promote certainty from an investment perspective and to enable South Africa to meet its Paris Agreement commitments by gradually increasing the carbon tax rate. It therefore comes as no surprise that in the Budget it was confirmed that the carbon tax increased from R159 to R190 per tonne CO2 equivalent from 1 January 2024. Concomitantly, it was announced that the carbon fuel levy will increase to 11c/litre for petrol and 14c/litre for diesel effective from 3 April 2024.

21 Feb 2024 1 min read Special Edition Budget Speech Alert 2024 Article

Other important changes are:

  • Effective from 1 January 2024, the carbon tax cost recovery quantum for the liquid fuels sector increased from 0,66c/litre to 0.69c/litre. This is an important amendment given the challenges faced by this sector.
  • The Budget states that to ensure alignment between the Carbon Tax Act and the Department of Forestry, Fisheries and the Environment’s (DFFE) Methodological Guidelines for Quantification of Greenhouse Gas Emissions, changes to the CO2 emission factors and net calorific values for the relevant fuel types are necessary. The Budget thus proposes that Schedule 1 fuel combustion emissions factors and new fuel types be added. In this regard, it is the stationary and non-stationary emission factors in Schedule 1 that are amended for several fuel types, including aviation gasoline, diesel, heavy fuel oil, jet kerosene, liquified petroleum gas, paraffin and petrol. Some of the new fuel types to be added are acetylene, refuse-derived fuel, sawdust, waste tyres and methane rich gas. From this, it appears that as the DFFE and SARS collect data regarding emissions and gain a deeper understanding of the emissions that affect South Africa’s greenhouse gas emissions, they are gradually increasing the carbon tax base.
  • Furthermore, to align with the guidelines, it is proposed that the density factors for the calculation of the carbon fuel levy be changed from 0,75 to 0,7405kg/litre for petrol and from 0,845 to 0,8255kg/litre for diesel.

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