Eskom warns it will pass on full carbon tax effect to consumers

"South African power utility Eskom has warned that it will not be able to absorb the carbon tax proposed by the National Treasury in a recent discussion document, and that it will be forced to pass on the full cost to the consumer in the form of higher prices.

The utility, which burnt 124.7-million tons of coal and produced 230.3-million tons of carbon dioxide (CO2) in the year to March 31, 2011, reports that it has submitted a “strong” response to government. The group is South Africa’s biggest emitter, producing about 1 t of CO2 for every megawatt hour of production.

The National Treasury has issued a discussion paper on a proposed tax and has indicate that it will seek to finalise its policy ahead of the 2012 Budget.

In the paper, government says it favours a direct tax on carbon emissions, which it says will “impose the lowest distortion” on the economy. In fact, the discussion document asserts that a tax of R75/t carbon dioxide equivalent (CO2e), increasing to around R200/t CO2e, “would be both feasible and appropriate to achieve the desired behavioural changes and emissions reduction targets”." Engineering News