Theme: Climate / environmental taxation
Responsible: National Treasury / Department of Forestry, Fisheries and the Environment / SARS / DMRE
Medium: Phase 2 legislatively set; rate increases politically sensitive given energy cost pressures. Revenue recycling design the critical unresolved question. JET partnership provides international fiscal support.
Who backs this reform, who needs convincing, and which interests or red lines shape political feasibility.
Backers
9
1 stakeholders
Negotiation weight
15
2 conditional actors
Opposition weight
7
1 opposing actors
Review coverage
0/5
All mapped stance notes are still draft
Provenance warning
Every mapped stakeholder stance for this idea is still draft. The coalition score is directional only until at least the high-influence actors are reviewed.
Coalition Read
Anchor: National Treasury. Highest-leverage swing actor: Business Unity South Africa (BUSA). Most serious blocker: National Union of Mineworkers (NUM).
Political Tractability
No reviewed signals · 0% of mapped influence has been reviewed.
Carbon tax Phase 2 generates revenue while aligning with climate commitments and CBAM readiness.
Interest: Fiscal consolidation with public debt stabilising below 75% of GDP; structural reforms that improve revenue without expanding contingent liabilities;…
Concern: Unfunded mandates in energy transition (JETP co-financing); Eskom's R400bn+ debt and how restructuring socialises costs; reform proposals that create…
Engagement path: Reforms must be fiscally neutral or revenue-positive over the MTEF window; SOE restructuring must demonstrably reduce contingent liabilities; credible…
BUSA conditionally supports carbon tax Phase 2 if the tax rate trajectory is predictable and revenue supports green industrial transition.
Interest: Cross-sector structural reform across energy security, logistics efficiency, regulatory certainty, labour market flexibility, and digital infrastructu…
Concern: Slow implementation pace relative to policy announcements; inconsistency between reform rhetoric and regulatory decisions (e.g. NERSA tariff approvals…
Engagement path: Already actively engaged. Seeks implementation accountability mechanisms with published milestones, predictable regulatory timelines, and NEDLAC outco…
DTIC supports carbon tax if revenue is recycled into industrial competitiveness measures and CBAM readiness for SA exporters.
Interest: Industrial policy objectives — local content requirements, beneficiation, BBBEE transformation, SEZ development, and protection of manufacturing emplo…
Concern: Full logistics liberalisation without local content protections could hollow out domestic manufacturing by reducing input costs asymmetrically for ext…
Engagement path: Logistics and energy reforms include localisation provisions and domestic content requirements; trade agreements include industrial policy safeguards;…
NUM opposes accelerated carbon taxation as it threatens coal-dependent employment without adequate transition funding.
Interest: Mining employment security and worker safety; just transition pace that protects coal-dependent community livelihoods; collective bargaining rights in…
Concern: Accelerated coal phase-out without adequate income support, skills retraining, and community economic diversification; renewable energy job quality —…
Engagement path: Just transition fund with dedicated skills retraining and income support; coal community economic diversification plans with government commitments an…
Carbon tax is a fiscal policy matter outside SARB's mandate, though its macroeconomic effects are monitored.
Interest: Price stability under the 3–6% inflation targeting framework; financial system stability under the Twin Peaks prudential model; integrity of the Natio…
Concern: Fintech entry that could destabilise the payment system or create unregulated credit channels; fiscal dominance risks if public debt crowds out moneta…
Engagement path: Fintech reforms must operate within SARB's NPS oversight framework; fiscal reforms must maintain credible debt trajectory; new financial entrants requ…
South Africa's Carbon Tax Act (2019) introduced a carbon price starting at R127 per tonne CO₂ equivalent (2019), escalating under a schedule to reach R600–800 per tonne by 2035 (Phase 2, beginning 2026). The current effective price—after multiple allowances (process emissions, trade exposure, carbon budget compliance allowances)—is significantly below headline rates, averaging approximately R160–200 per tonne for most large emitters in 2024/25. Phase 2 implementation, which begins in January 2026, reduces allowances and raises the effective carbon price substantially, with revenue implications estimated at R28–35 billion annually by 2030 for SARS. The critical policy design question is revenue use: the 2019 Act hypothecated carbon tax revenue through the electricity levy reduction (offsetting consumer electricity costs), but this offset mechanism expires and Phase 2 revenue must be directed toward the Just Energy Transition Investment Plan, Eskom coal plant closure fund, and SMME energy transition support (id=123). The PC on Finance BRRRs 2023–2024 flag the disconnect between carbon tax ambition and the absence of a clear revenue recycling framework for Phase 2. Industrial sectors (steel, cement, chemicals) have submitted exemption requests that will be adjudicated by SARS and DMRE.
Referenced in OECD Economic Surveys: South Africa
OECD SA Survey (2017, 2020, 2022, 2025). Recommended ramping up the net effective carbon tax from 2026 and reallocating funding to support renewables.
A carbon price that is politically survivable but environmentally ineffective is the worst outcome — Phase 2 must deliver a credible signal for investment decisions. — National Treasury Carbon Tax Review 2024
SARS, DMRE, and National Treasury will implement Phase 2 of the Carbon Tax Act from 1 January 2026, reducing allowances substantially to raise the effective carbon price above R400 per tonne by 2030, and establish a dedicated revenue recycling framework directing proceeds to the Just Energy Transition Investment Plan (JET-IP). Industrial sector exemption requests will be adjudicated by mid-2025. The disconnect between carbon tax ambition and revenue use will be resolved through a Carbon Revenue Hypothecation Gazette or Ministerial Determination. Success is measured by effective carbon price exceeding R400 per tonne, annual revenue of R28-35 billion by 2030, and JET-IP funded at R75 billion per year.
SARS and DMRE finalise Phase 2 allowance schedule: publish revised Carbon Tax Rate Schedule reducing process emissions and trade exposure allowances per Carbon Tax Act Sections 6 and 7; adjudicate industrial sector carbon budget compliance exemption applications
National Treasury publish Carbon Tax Revenue Recycling Framework: allocate Phase 2 revenue across JET-IP priority areas (Eskom coal plant closure fund, renewable energy transition support for workers, SMME energy transition finance); gazette as Ministerial Determination under Carbon Tax Act
Phase 2 commencement January 2026: SARS operationalise revised tax return schedule, update e-filing system for new allowance calculations, publish guidance notes for large emitters; DMRE activate carbon budget monitoring system
Anti-Extortion and Construction Mafia Task Force
National Treasury PPP Unit and Infrastructure Financing Reform
Fiscal Consolidation and Debt Stabilisation
SAPS Detective Service Capacity and Case Clearance
NPA Prosecution Capacity and Independence
SARS Capacity Expansion and Revenue Recovery
How to cite
Wilse-Samson, L. (2026). Carbon Tax Phase 2 Implementation and Revenue Use. SA Policy Space. NYU Wagner School of Public Policy. Retrieved 11 May 2026, from https://sa-policy-space.vercel.app/ideas/carbon-tax-phase-2-implementation-and-revenue-use?snapshot=2026-05-11
Data as of 2026-05-11 · latest PMG meeting 2026-05-08
Annual carbon tax effectiveness review: monitor effective price per sector, revenue collection, JET-IP disbursement, and emissions trajectory relative to NDC targets; publish in MTBPS documentation and report to PC on Finance
Phase 2 commencement: January 2026; full revenue ramp-up: 2026-2030; revenue recycling framework: mid-2025
No direct fiscal cost; Phase 2 generates R28-35 billion per year in new revenue by 2030; JET-IP funding commitment: R75 billion per year (combined carbon tax, international partners, DFI contributions)
Carbon Tax Act 15 of 2019 (Phase 2 provisions in force from 1 January 2026 by commencement notice); revenue hypothecation may require Carbon Tax Amendment Bill or Money Bills process; DMRE carbon budget regulations (secondary legislation)
Moderate-high feasibility for Phase 2 technical implementation; revenue recycling framework is the politically contested element. Minerals Council SA (mining sector) has lobbied for extended exemptions. Steel and cement sectors face competitiveness pressure. Presidential Climate Commission provides cross-sector governance legitimacy. GNU supports JET-IP as the fiscal anchor for climate investment.
Canada's federal carbon tax (CAD 65/tonne in 2024, rising to CAD 170/tonne by 2030) with revenue returned to households via carbon rebate cheques demonstrates credible revenue recycling reducing political resistance. South Korea's K-ETS (operational since 2015) phased in tighter caps and introduced auctioning in Phase 3 - a comparable trajectory to SA's Phase 2 allowance reduction. UK's Carbon Price Support mechanism demonstrated the transformative impact of a credible price trajectory in driving coal exit from the electricity grid.