Big energy users oppose South Africa's proposed carbon tax law

CAPE TOWN (Reuters) - Big energy users including Sibanye-Stillwater and ArcelorMittal’s local unit on Wednesday opposed plans by South Africa to enact long-delayed carbon tax laws in 2019, arguing the levies are unaffordable and should be scrapped or delayed.

ArcelorMittal plant is seen in Vanderbijlpark, an industrial city south of Johannesburg, South Africa, November 21, 2017. Picture taken November 21, 2017. REUTERS/Siphiwe Sibeko

The carbon tax has already been postponed at least three times since first being mooted in 2010, after mining companies, steel firms and state-owned power utility Eskom said it would erode profits and push up electricity prices.

Former finance minister Malusi Gigaba said last month that Africa’s most industrialised economy would implement the carbon tax from January next year - part of a raft of tax changes that include raising value added tax for the first time in 25 years in a bid to plug a revenue hole.

The new law would affect about 1,000-1,500 companies and 75 percent of national emissions. It proposes a tax rate of 120 rand ($10) per tonne of carbon dioxide equivalent and states that total tax-free allowances during the first phase until 2022 can be as high as 95 percent.

“Sibanye-Stillwater’s position on the imposition and implementation of a carbon tax remains the same, that is, a total rejection of the carbon tax in any shape, form or quantum,” said the gold and platinum miner.

It delivered its opinion in a written presentation to parliament at the start of public hearings on the second draft carbon tax bill released in December.

Developed in line with the polluter pays principle, the proposed carbon tax bill includes staggered increases and tax breaks in the early years, allowing companies to pay six rand to 48 rand per tonne in the first phase, National Treasury said.

South Africa ratified the Paris climate change pact two years ago and has pledged to cut emissions by almost half by 2030, when they are seen peaking between 398 and 614 million tonnes of carbon dioxide equivalent.

Industrial firms say the proposed tax fails to take into account a lower carbon path already adopted, will create policy uncertainty and diminish South Africa’s investment allure.

ArcelorMittal’s South African unit opposed the carbon tax bill on the grounds that it would hurt the steel firm’s competitiveness at a time when it was struggling with cheaper imports and weak demand.

“When considering 2016 and 2017 financial figures, the estimated carbon tax payable would have affected EBITDA figures by 57 to 100 percent, which should be cause for concern,” said Siegfried Spanig, environment group manager at ArcelorMittal’s local unit in his submission at the hearings.

The company said its estimated carbon tax liability would be in the region of 100 million rand a year, and wanted changes to be made, including additional tax incentives to protect struggling companies.

($1 = 11.7731 rand)

Editing by James Macharia, Editing by William Maclean