Contextualizing of Organized Labour Position on Carbon Tax in South Africa Using a Qualitative System Dynamics Model

Abstract

The South African government planned to introduce a carbon tax from 2013 as part of its efforts to reduce pollution levels emanating from domestic economic activities. The government sought buy-into the carbon tax policy from all stakeholders before its introduction. The position of organized labour has, however, ranged from outright rejection to requests for a delay in implementation of the policy until employment safeguards are put in place. Organized labour felt strongly that a carbon tax would have a negative impact on local employment. The objective of this study was to analyse the potential impact of a carbon tax on employment in South Africa, in the medium to long-term, with the aim of establishing the validity of organized labour’s concerns on possible job losses. A qualitative system dynamics approach was used in the analysis, based on its usefulness in allowing holistic appraisal of effects of policy interventions. The paper highlights the fact that the motivation for firms to migrate towards the adoption of low emission production processes could be constrained by the cost of the clean technology. On the consumer side, the shift towards consumption of low emission products as a result of the imposition of a carbon tax could be constrained by increases in prices of the low emission products resulting from their increased demand. A case is made that despite being set at low levels, the carbon tax has potential to negatively affect competitiveness of firms in the long-term. The potential job losses from the carbon tax will not necessarily be a result of increases in the immediate operational costs of firms, but rather will be from the loss of firms’ competitiveness in the long-term. It is recommended that the implementation of the carbon tax be put on hold until safeguards to local employment are put in place. One of the possible safeguards is to ensure that local manufacturers have access to low cost but clean production technologies that do not substitute the local labour force but rather supplement its productivity.