Does the South African Carbon Tax Incentivise Mines to Invest in Solar Photovoltaic?

Abstract

The aim of this study was to evaluate the adequacy of South Africa’s carbon pricing policy in incentivising adoption of Solar photovoltaic in South African mines. A qualitative study was conducted to evaluate the adequacy of South Africa’s carbon tax policy design to encourage adoption of solar photovoltaic in mines. The study further establishes the carbon pricing level that will induce South African miners to invest in Solar photovoltaic through a net present value simulation. A review of South Africa’s Carbon Tax regime highlights that the policy shortcomings can be attributable to low carbon prices, excessive free emission allowances, and continued subsidy support of fossil fuels. Furthermore, the carbon price needs to exceed cost of abatement to encourage investment in decarbonisation measures. A net present value simulation finds that a carbon price of ZAR 668.62 per tonne of CO2 would need to be levied to incentivise mining entities to invest in solar photovoltaic. The study recommends higher carbon prices be levied for carbon for emissions to encourage mining entities to adopt solar photovoltaic renewable energy. The paper contributes to tax policy scholarship on designing a carbon pricing model for South Africa’s mining sector. Decarbonising the mining industry, a significant contributor of GHG emissions, will advance the decarbonisation efforts of South Africa.