The Political Economy of South Africa’s Carbon Tax

Abstract

The subject of carbon pricing is rising up the global policy agenda, as countries take action in the aftermath of the United Nations Framework Convention on Climate Change’s Conference of the Parties 26 summit in November 2021. South Africa is the only country in sub-Saharan Africa to have enacted a carbon tax to date, and, globally speaking, was ahead of the curve when it started to consider its implementation at the start of 2010. With a historically energy-intensive and carbon-intensive economy as a core feature of its minerals-energy complex, South Africa is the world’s 14th largest emitter of greenhouse gases, and the largest emitter on the continent. Its electricity grid is the world’s most carbon-intensive, and its primary energy consumption is ranked 17th globally. While the country’s gross domestic product is the 30th highest in the world, it is also one of the most unequal. It has a legacy of socioeconomic and political exclusion, and marginalisation created by the apartheid history that has persisted in the decades since the democratic transition in 1994. This paper asks to what extent and in what way has South Africa’s political economy shaped the process and implementation of its carbon tax? In answering this question, the report explores and analyses the design and implementation of the tax; the key criticisms to which it has been subjected; the effectiveness of the tax, not least in light of the considerable allowances and exemptions that have been included in its design; the relationship between the carbon tax and other existing climate change policies; and the potential relevance of South Africa’s experience for other countries on the continent.