South Africa’s carbon tax will now cost a bit less

National Treasury has announced that a technical correction in calculating the effect of next month’s carbon tax on fuel prices will see its impact reduced, albeit very slightly.

The Carbon Tax, which comes into effect on 1 June (and implemented along with fuel price changes on 5 June), was initially budgeted to have a 9 cents per litre impact on petrol prices and 10 cents per litre impact on diesel.

However, both these charges have now been reduced by 2 cents per litre. Because of this, the general fuel levy will be increased by 2 cents per litre to ensure the initial values announced by government are unchanged.

“In the 2019 Budget the Minister of Finance announced that the general fuel levy on petrol and diesel would be increased by 15c/l from 3 April 2019, and a carbon tax component on petrol and diesel would be implemented alongside the introduction of the carbon tax,” Treasury said.

“This adjustment will include a technical correction to fully align with the methodology in the recently promulgated Carbon Tax Act No 15 of 2019, and will be effective from 5 June 2019.”

“The carbon tax on fuel will be decreased by 2 c/l to 7 c/l for petrol and to 8 c/l for diesel, and the general fuel levy will correspondingly be increased by 2 c/l.”

“The total fuel levy adjustment will therefore remain the same as per the announcement in the 2019 Budget.”

The Department of Energy is yet to publish the changes to fuel prices for June 2019, but the latest data from the Central Energy Fund points to relatively flat rates for the month.

According to the CEF’s data at 30 May 2019, 93 and 95 grade petrol were showing an over-recovery of 16 cents per litre and 14 cents per litre, respectively.

With the negative impact from the carbon tax of 7 cents per litre, this means motorists could see a petrol price drop of between 9 cents and 7 cents.

For diesel, the picture is somewhat worse, with the CEF showing an under-recovery in the diesel price of around 9 cents per litre. With the negative impact from the carbon tax of 8 cents per litre, diesel users could see the wholesale price of diesel increase by 17 cents per litre in June.

The department is expected to make an official announcement sometime before 5 June.

Fuel (Inland) May Official Over/(under) recovery Carbon tax Fuel Levy Correction June Expected
95 Petrol R16.67 R0.14 (R0.07) (R0.02) R16.62
93 Petrol R16.48 R0.16 (R0.07) (R0.02) R16.41
0.05% Diesel (wholesale) R14.88 (R0.09) (R0.08) (R0.02) R15.07

Read: Here’s how much you’ll likely pay for petrol next week

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South Africa’s carbon tax will now cost a bit less