Are South African Businesses Adapting To The Demands Of The Carbon Tax Policy ? A Case Of Distell

Trimble, Dale

Are South African Businesses Adapting To The Demands Of The Carbon Tax Policy ? A Case Of Distell

Thesis / Dissertation

2023

Abstract

Climate change is our planet's biggest threat, making it one of the most important subjects. Climate change adversely affects the temperature, weather, and the environment we live in, which causes rising sea levels, prolonged droughts, supercharged storms, wildfires, and flooding. Governments have addressed strategies to create more climate-resilient economies. One approach being adopted by countries is using pricing mechanisms such as Emissions Trading Systems, which was predominately used in Europe, and the Carbon Tax policy, which is being used in South Africa and is the focus of this paper. The carbon tax system is designed to put a value on GHG emissions when businesses produce goods and services. This research focuses on whether South African companies are adapting to the demands of the carbon tax policy. This study initially sought to discover whether the carbon tax policy promotes behavioural change by reducing GHG emissions within businesses. The rationale for this paper is that South Africa must decrease GHG emissions per its agreements with the UNFCCC and the Paris Agreement. South Africa is currently the 14th highest carbon emitter globally, and the reason for its high carbon emissions is that its primary power provider, ESKOM, relies on fossil fuels for electricity generation. Despite the carbon tax system being a pricing mechanism to reduce GHG emissions, there have been criticisms about the policy as it is seen as progressive. However, the tax raises production costs and could negatively impact firms' competitiveness. The research design used was a case study approach performed on South Africa's largest wine producer, namely Distell Group Limited, thus having an idiographic approach with semi-unstructured online interviews conducted. A convenience sampling method was used to gather participants, and the data collected were unstructured and nonnumerical, thus making it qualitative. The main finding of this research was that businesses are generally reducing GHG emissions due to the increased energy costs incurred; thus, limiting and conserving energy is important. The policy has not had much influence in this area as the effective tax rate is too low to encourage any radical change needed to achieve the environmental targets stated in the NDCs. This paper illustrates that there are very few adverse effects on the competition among firms as a consequence of the carbon tax policy. For South Africa to achieve the double dividend, the government must display more transparency in raising and applying carbon taxes. The recommendations for practice are based on the study of the literature and case study insights. The government should limit the discretion around allocating carbon tax revenues and treat them separately for financing environmental reforms, adverse effects on low-income people, and protecting trade-exposed sectors of companies like Distell. Implementing tax incentives for programs that focus on mitigation and adaptation, as well as sustainable business practices and investments in green technology, will assist in transitioning into a green economy.

Keywords

Development Policy and Practice

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