Carbon Tax Phase 2 Implementation and Revenue Use
Theme: Climate / environmental taxation
Assessment
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.
Stakeholder Landscape
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.
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…
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…
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, EskomEskom: South Africa's national electricity utility and dominant power producer, transmitter, and distributor. Eskom's debt crisis and maintenance failures have been a primary cause of load shedding and a binding constraint on economic growth. 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.
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.
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
Evidence & Research
Research corpus →- TIPS South Africa's Iron, Steel and Aluminium Industries Readiness to Respond to CBAM
TIPS · Jun 2024
The paper analyses how an external carbon price mechanism (EU CBAM) conditions South Africa's domestic carbon policy instrument and its effectiveness for trade-exposed industries, directly bearing on Phase 2 implementation design for iron, steel and aluminium sectors.
- South Africa: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for South Africa
IMF · Jan 2025
The IMF Article IV explicitly discusses increasing effective carbon taxation and the need for targeted support to vulnerable groups to mitigate near-term costs of carbon reforms, directly addressing Phase 2 implementation and revenue use design questions.
Links proposed by lexical matching and screened by a calibrated research judge. Follow the paper for the full argument and its caveats.
Parliamentary record
3 meetingsCommittee sittings this reform was drawn from, most recent first. Each row opens the meeting on this site; the PMG link goes to the source record.
Finance Standing Committee
21 August 2024Induction Workshop: engagement with National Treasury entities; with Deputy Minister
Finance Standing Committee
22 March 2024Pension Funds Amendment Bill: adoption
Finance Standing Committee
27 February 2024Briefing by Parliamentary Budget Office (PBO) and Financial and Fiscal Commission (FFC) on the 2024 Budget
How to cite
Wilse-Samson, L. (2026). Carbon Tax Phase 2 Implementation and Revenue Use. SA Policy Space. Retrieved 24 August 2026, from https://sa-policy-space.vercel.app/ideas/carbon-tax-phase-2-implementation-and-revenue-use?snapshot=2026-08-24
Status History
tracked since Mar 2026- Recorded as Under review when status tracking began — held since at least Mar 2026.Mar 2026
Data as of 2026-08-24 · latest PMG meeting 2026-08-21