South Africa's Bold Step: Revised Carbon Tax Balances Activist and Industry Pressures

South Africa's revised carbon tax aims to lower tax-free allowances while allowing companies to increase the use of offsets. These changes, effective in 2026, aim to meet climate commitments without overly burdening 'hard-to-abate' sectors, notably in a country ranked among the top greenhouse gas emitters globally.

South Africa's government has unveiled a revised carbon tax that seeks to strike a balance between the demands of climate activists and the industrial sector. The move, as announced by the Treasury's acting tax chief, Chris Axelson, aims to lower tax-free allowances while permitting companies to make greater use of offsets. These changes are set to take effect in 2026.

The new tax structure will aid the country in fulfilling its climate commitments, providing 'hard-to-abate' sectors more flexibility, as stated by Axelson. Notably, South Africa ranks among the world's top 15 greenhouse gas emitters and is the only African nation currently enforcing a carbon tax.

Axelson highlighted that the revised system allows for an increase in the offset allowance for combustion emissions, rising from 10% to 25% post-2026. This adjustment is coupled with a reduction in tax-free allowances from 60% to 30% by 2026, with further annual cuts leading up to 2030. The changes are part of an ongoing effort to find a middle ground amid complaints from both industry figures and climate activists.

(With inputs from agencies.)