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Ismail Momoniat Says SA Miners Have Bigger Worries Than Carbon Tax

Amplats estimates the tax could cost it up to R300m while the Minerals Council of SA warns of 6,000 job losses a year

MiningA senior Treasury official dismissed as a “red herring” the SA mining industry’s concern over a relatively new tax on carbon dioxide emissions, saying the levy was too low to add up to unbearable costs.

The tax, which was enshrined into law in May, faced opposition from big polluters such as miners, steelmakers and Eskom, which had warned it would eat into profits and push up electricity prices.

Anglo American Platinum has said the tax could cost it up to R300m, while the Minerals Council of SA warned it could lead to 6,000 job losses a year.

 

“In the short term, the impact of the carbon tax on the price of electricity is minimal,” said Treasury deputy director-general Ismail Momoniat on the sidelines of a coal industry conference on Wednesday.

“So it’s a bit of a red herring when people raise it.”

Momoniat said the challenges facing the mining sector could hardly be attributed to the carbon tax, which seeks to lower carbon dioxide emissions to ensure the country complies with global agreements such as the Paris accord to combat climate change.

Currently, he said, the tax only applied to “scope 1”, or direct emitters, which comprises about 100 companies.

The carbon tax is “no big deal” from a revenue perspective at this stage, Momoniat said. “The challenges mining companies face are much bigger. The tax is so low and the exemptions are so large — up to 95%.”

The mining industry is already taking strain from rising costs, especially electricity price increases, which it fears carbon tax will affect further.

Tariff increases approved by the regulator in March already put 90,000 jobs at risk, according to the council.

While cost hikes could become true in a few years’ time, SA’s two-step process is likely to give firms time
to come up with ways to curb their emissions, and thus pay lesser taxes. “You can see this is coming. The world is going to have to take pretty strong steps if it’s to deal with emissions, and carbon tax is just a mechanism,” said Momoniat.

Robbie Louw, director of Promethium Carbon, a climate change advisory firm, echoed Momoniat’s words, saying the effect of it will be minimal in the first implementation phase of the tax — which runs from June 1 2019 to December 2022.

At that phase, the rate is R120 per ton of carbon emitted, with allowances that this can be brought down to an effective rate of between R48 and R6 a ton in some instances.

“The first step is to build the infrastructure to price carbon into the economy, but you do it at a rate where the actual effective cost of carbon to the economy is very low.” At the end of the first phase, the Treasury will review the effect of the tax, its design and the allowances.

“In the second phase you increase the effective cost of carbon to a level where it can impact and change the behaviour,” said Louw, adding that could possibly be done by phasing out the allowances.

Henk Langenhoven, chief economist at the council, said the mining industry’s major worry was the uncertainty about how it would affect electricity prices.

“We don’t know if Eskom is going to pass it on to us, and the fundamental thing is we cannot pass costs on to the buyers of our commodities.” All of these could throw investment plans off course, he said

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