Carbon tax: Future models and impact

This paper aims to describe the least cost energy efficiency financing portfolio for demand side projects within a carbon tax environment. Climate change mitigation and adaption costs as a result of an energy supply market failure will impact South African commerce and remove competitive advantages associated with relatively cheap energy. The National Treasury is biased towards a carbon tax solution to reduce green house gas emissions and implementation appears to be eminent. An initial tax of R75 with a gradual increase to R200 per ton COι emissions is expected to yield the desired behavioural changes and achieve emission targets. The appropriateness of carbon taxes and emission trading schemes to effectively price carbon are subject to debate. To alleviate the impact of high capital costs, when shifting towards bio fuels, renewable energy and energy efficiency companies should exploit national and international incentive schemes. These include Eskom\´s DSM programme, the CDM, the Energy Conservation Scheme (ECS), possible tax rebates on "green" CAPEX etc. These national and international energy policies overlap in terms of eligibility and additionality. A simple cost benefit analysis is applied to a 10 MW baseline scenario within the industrial sector using the Mega flex pricing structure. The cause and effect of the following incentive or mandatory programmes are tested for the baseline scenario: Non-compliance with the ECS; Carbon tax; Utilising DSM funding; and Registering and selling of CERs. The development history of each policy is described briefly, together with the latest cost implications to industry.