The latest update on Carbon Tax

The potential for jobs in carbon accounting and carbon project development

South Africa’s Carbon Tax—what it means for potential future jobs. The Carbon Tax in South Africa, which was first proposed in 2013 and most recently postponed until 2016, is one of several green initiatives that aim to reduce greenhouse gasses and facilitate a transition to a green economy in South Africa.

While the decision to implement such a tax signifies a shift in the right direction for global Climate Change and a more environmentally just economy, concerns have been expressed over the possible impact on economic growth and job creation. The South African Chamber of Commerce and Industry (SACCI) released a comment on 5th August 2013 about the Carbon Tax Policy Paper. In the statement the CEO of the SACCI expressed concern over the “potential malign economic impact” of the tax, stating that the impact “will be significant on the South African economy and may have severe effects on international competitiveness and job creation”. More recently, in February 2014 the SACCI commented on the 2014 Budget and stated that the postponement of the Carbon Tax suggests that the National Treasury “recognizes the concerns voiced by the business community on the job losses in heavy industry that a carbon tax will impose”. But what is the basis for these concerns and could the Carbon Tax have a positive effect on the economy and job creation?

Carbon Tax has the potential to encourage increased levels of employment on a national scale and to directly create new carbon-related jobs

Essential for a successful carbon tax is effective revenue recycling. Revenue recycling involves redeploying the revenues from the tax into the economy in ways that create economic gain. When taxes are imposed ‘distortions’ occur in economic activity that depress overall levels of employment and investments in the economy, this is referred to as the ‘tax-interaction effect’. The revenues from a carbon tax, however, can be used to reduce other taxes that encourage increased levels of employment and investment. This kind of economic gain is termed the revenue recycling effect and it can offset much of the added costs from the tax-interaction effect. It all sounds quite confusing to a layman, but the message is quite simple, the Carbon Tax is only as effective (in terms of economic gain) as the way its revenues are reinvested back into the economy.

The postponement of the tax was reportedly a measure to give the South African government time to better develop its strategy for revenue recycling and hopefully by 2016 an effective and well-structured tax will come into play that will bring on nation-wide benefits that go further than reducing CO2 emissions.

In addition to encouraging employment from revenue recycling, the Carbon Tax stands to create jobs in more direct and immediate ways. Two significant avenues include Carbon Accounting and Carbon Offset Projects. The demand for Carbon Accounting services and specialists is expected to increase significantly among companies that have significant Carbon Tax liabilities in order to understand and manage their related risks—this increased demand will fuel increased jobs in the field. The avenue, a Carbon Offset Project, is a mechanism by which companies can offset up to 10% of their emissions. In other words, Carbon Projects entail implementing a project off-site, that is unrelated to a company’s operations and that reduces carbon emissions while positively contributing to society. Off-setting one’s emissions through carbon projects affords companies the opportunity to reduce their emissions at a lower financial cost than the carbon tax. An increase in carbon projects will result in various social and economic benefits, including growth in the Green Economy and increased investments in renewable energy innovations and above all, job creation.

Growing the Green Economy presents additional opportunities for job creation

The New Growth Path: The Framework (EDD, 2010) identifies the green economy as offering significant potential for the creation of new jobs, in particular through utilising technological innovation, expanding existing public employment schemes to protect the environment, and producing renewable energy and biofuels. These are all activities that the implementation of the Carbon Tax could encourage. In fact, it is expected and hoped that the tax, along with consequent investments in renewable energy, will propel the development of a local green industry and create a renewable power manufacturing base and jobs.

Innovation drives growth and growth creates jobs
In a recent June 2014 interview with Harvard Magazine, economist Dale Jorgenson spoke about his book Double Dividend: Environmental Taxes and Fiscal Reform in the United States. The book examines the potential effects of recycling revenues from carbon taxes into the economy. Jorgenson argues that a carbon tax is the only approach capable of generating revenues and re-injecting those funds into the economy in ways that stimulate economic growth, thereby “curbing emissions while simultaneously achieving economic growth”.

The benefits of a carbon tax in a developing, coal dependent economy stand to be even greater than elsewhere in the world

Jorgenson extensively researched both the U.S and Chinese economies and found that a carbon tax is also a very effective way of controlling air pollution in coal-dependant economies (South Africa is roughly 90% dependant on coal). For these countries Jorgenson speaks of a triple dividend where a country experiences better economic performance, control of climate change and improved air quality. Therefore, the benefits of a carbon tax in a developing, coal dependent economy (such as South Africa’s) stand to be even greater; achieving maximum benefits, however, almost entirely depends on what Jorgenson stresses is the most important consideration for each country, how revenues are recycled.

Ultimately, the carbon tax stands to benefit job creation in South Africa directly in the area of carbon accounting and carbon project development, but if the revenues are recycled appropriately the carbon tax has the potential to not only encourage nation-wide employment but it stands to achieve this while simultaneously mitigating climate change, improving air quality, fuelling economic growth and transitioning to a green economy.