Carbon Taxes Can Cut Exports in South Africa by 10%-SA Reserve Bank

Carbon Taxes in South Africa are making a buzz as the South Africa Reserve Bank has warned the country that if the government goes on to implement the tax, economic growth could be hindered as exports could experience a 10% cut.

The South African tax administration in recent times has muted the plans to thoroughly impose a Carbon Tax on South Africa’s exports.

Further in its report, the South Africa Reserve Bank also elucidate that beyond the imports, the impact could reach 9% of the Gross Domestic Product in 2050 where trading partners would have to bear the cost impost on these products through the tax.

The report emphasized that these risks should spur initiatives towards a greener economy. Although South Africa is responsible for just 1% of global greenhouse gas emissions, it has the highest carbon intensity among the G20 nations. Approximately 80% of the country’s power is produced from coal.

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Carbon Taxes: More on the Report

The report also added that the South African Reserve Bank (Sarb) stated in its latest Bulletin of Economic Notes that the impacts can be mitigated if South Africa swiftly reduces the carbon intensity of production and increases local carbon taxes.

It further added that efficiently utilizing the additional tax revenue can expedite the green transition and establish South Africa as a green producer.

See Excerpt from the Report

“Total exports fall by 10.1% in 2050 and GDP declines by 9.3% relative to the baseline,” it said. “The employment effects too are large: 350 000 jobs are lost by 2050 if more countries adopt a CBAM. This number rises to 2.6 million if all exports are subject to a CBAM.”

More Impacts for South Africa From the European Blog Carbon Tax Move

Currently, the bloc’s mechanism will primarily impact South Africa’s natural resource sectors, including mining. The central bank found that if this remains the case, exports to the EU will decline by only 4% in 2030, reducing gross domestic product by a mere 0.02%.

However, the Sarb also examined the potential effects if the EU’s mechanism were extended to all South African exports and if other countries, such as the US, Canada, and Japan, adopted similar measures. The impact under these conditions would be severe.


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