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SA Policy Space

Carbon Tax Phase 2 Implementation and Revenue Use

Regulatory BurdenUnder reviewMedium TermRaised 3× in committeeFinance Standing Committee

Theme: Climate / environmental taxation

First raisedFeb 2024Last discussedAug 2024No committee discussion in 12+ months3 meetings on the record ↓
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Reform at a glance

What changes
Carbon Tax Phase 2 Implementation and Revenue Use
Responsible actor (recorded)
National Treasury / Department of Forestry, Fisheries and the Environment / SARS / DMRE
Recorded status
Under review — editorial assessment.
Milestone described by this status
Status scope has not yet been independently documented; it may cover only part of this reform.
Next documented milestone
Next milestone not yet documented
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Description

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. 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.

Assessment

Growth Impact3/5
Feasibility3/5

Responsible: National Treasury / Department of Forestry, Fisheries and the Environment / SARS / DMRE

Feasibility Assessment

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.

Where the numbers stand

All indicators →
  • Manufacturing Production Index90.6 index (2015=100)2025

    +2.9 index points from 87.7 index (2015=100) in 2020. Stats SA (P3041.2)

Next official read on this: Statistics of insolvencies, September 2026 — due 20 October 2026 (Stats SA schedule).

Series tagged to this idea’s binding constraint. The period beside each value is the latest observation this site holds, which can lag the official release: the series are rebuilt offline from the sources named, not read live.

Stakeholder Landscape

Who backs this reform, who needs convincing, and which interests or red lines shape political feasibility.

Backers

9

1 stakeholder

Negotiation weight

15

2 conditional actors

Opposition weight

7

1 opposing actor

Coalition Read

AI-drafted stances · 0 reviewed

57/100Mapped support: contested

Anchor: National Treasury. Highest-leverage swing actor: Business Unity South Africa (BUSA). Most serious blocker: National Union of Mineworkers (NUM).

Political Tractability

—Needs reviewed signals

No reviewed signals · 0% of mapped influence has been reviewed.

Backers1 stakeholder
National TreasuryCoalition anchorInfluence 9/10

Phase 2 raises an estimated R28–35 billion annually by 2030 (idea text); revenue-positive reform is the brief's recorded test, and the unresolved recycling framework is the design question the idea itself flags.

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…

Negotiation Priorities2 stakeholders
Business Unity South Africa (BUSA)Critical swing actorInfluence 8/10

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 (Dept. of Trade, Industry & Competition)Negotiation priorityInfluence 7/10

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;…

Opposition to Manage1 stakeholder
National Union of Mineworkers (NUM)Organised oppositionInfluence 7/10

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…

Watchlist1 stakeholder
South African Reserve BankHigh-salience observerInfluence 8/10

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…

OECD

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

Implementation Roadmap

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.

1

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

Q1-Q2 2025 (ahead of January 2026 Phase 2 commencement)SARS / Department of Mineral Resources and Energy (DMRE) / National Treasury
2

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

Q2-Q3 2025National Treasury / DMRE / Presidential Climate Commission
3

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

January 2026SARS / DMRE
4

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

Annual (MTBPS, October each year)National Treasury / SARS / Presidential Climate Commission
Timeline

Phase 2 commencement: January 2026; full revenue ramp-up: 2026-2030; revenue recycling framework: mid-2025

Estimated Cost

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)

Required Legislation

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)

Political Feasibility

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.

International Precedents

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.

Evidence & Research

Research corpus →

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Policy documents

No linked official-document evidence yet. Coverage is incomplete.

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Status History

tracked since Mar 2026
  1. Recorded as Under review when status tracking began — held since at least Mar 2026.
    Mar 2026

Data as of 2026-10-10 · latest PMG meeting 2026-10-02