The potential impact of a Carbon tax on the South African Coal Mining Industry

Thokan, Mahomed Iqbal
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In December of 2010, the National Treasury Department of South Africa released a white paper for public comment on reducing greenhouse gas (GHG) emissions by introducing a carbon tax of minimum seventy five Rand per ton of carbon dioxide equivalent (R 75/t CO2e), increasing to about R 200/t CO2e. Such a tax could have a significant impact on South Africa’s Coal Mining Industry. This research focused on understanding what the South African Coal Mining Industry’s reaction would be to the possible implementation of a carbon tax, and aimed to evaluate the potential impacts of such a tax on the industry. Data was collected using a face-to-face data collection method from a purposive sample and analysed and interpreted using content analysis since the main medium for data collection was done via human communication. One of the key findings of this research is that government has not outlined a clear framework for its carbon pricing policy. The South African Coal Mining Industry, together with other mining institutes has put together a task team to assist government develop a clear framework. The majority of the respondents interviewed do not believe that a carbon tax is the right carbon pricing mechanism to address climate change. There were various reasons for this point of view, the most prominent being that government had not done its homework with regards to a carbon tax being the appropriate economic instrument. However, climate change mitigation could provide opportunities for both the government and industry at large. The impacts of a carbon tax are dependent entirely on the policy framework and the design of the carbon pricing mechanism, and could be minimal or significant enough to impact on the economy as a whole. Climate change mitigation measures could prove to be advantageous with many inherent growth opportunities, viz., by being an industry in its own right, beginning from the development of new technologies and following on through to the sales of goods and services. The key message of this research is that government needs to develop a clear framework for its carbon pricing policy and design a carbon pricing mechanism that does not affect its sustainable growth plan. Industries need to be proactive rather than reactive and assist government in developing the best possible climate change mitigation and adaptation policies. Climate change mitigation is a growing market with increasingly significant opportunities. Industries need to be proactive in taking advantage of these opportunities so that they can have the competitive edge.
MBA thesis - WBS
Carbon taxes, Coal mining