Abstract
There is growing global recognition that market-based instruments (MBI), such as environmentally-related taxes, levies and user-charges, are viable tools for facilitating environmental management and, ultimately, sustainable development. These instruments seek to correct market failure to value, or accurately value, environmental goods and services that consequently lead to environmental concerns being accorded insufficient consideration in everyday market activities. South Africa has introduced various MBI, largely in the form of environmentally-related taxes pertaining to mining, agriculture, electricity supply, water supply, waste water discharge and various products such as fuel and plastic shopping bags. The primary rationale underlying the introduction of these instruments has been revenue generation. Government has, however, acknowledged that MBI have potential to achieve other objectives, namely to mould human behaviour, encourage more efficient resource use and improve actual environmental outcomes.In an effort to facilitate further debate on the issue, the National Treasury recently published a draft policy paper titled A Framework for Considering Market-Based Instruments to Support Environmental Fiscal Reform in South Africa. The Draft Policy Paper reflects a significant shift in fiscal policy and provides four broad tax reform options that could contribute towards meeting both fiscal and environmental objectives, namely: reforming existing environmentally-related taxes and charges in the transport and solid waste sectors; introducing new environmentally-related taxes in the electricity and waste water sectors; reforming legal aspects of non-environmentally-related taxes with perverse environmental incentives and creating incentives to improve environmental outcomes. This article briefly considers each of the above options set out in the Draft Policy Paper by focusing on the following questions: Why has there been a shift toward the use of MBI to achieve environmental outcomes? To what extent are they used currently in South Africa? What are the options for extending their use in South Africa? What are the prerequisites for their successful implementation?
Highlights
South Africa’s pristine landscapes and natural resources are under significant threat
Government has been considering the potential of using market-based instruments (MBI) as tools for environmental management in South Africa for a number of years, the outcome of which has been the publication of many research reports and policy documents including: the Environmental Resources Economics Discussion Document Three,[27] the Katz Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa,[28] the Market-Based Instruments to Support Environmental Fiscal Reform in South Africa: A Discussion Document,[29] the White Paper on Environmental Management,[30] the White Paper on Biodiversity,[31] the National Biodiversity Strategy and Action Plan[32] and recently, the National Treasury’s Budget Tax Proposals (2005/2006).[33]
Which would potentially encourage individuals, communities and companies to play a more active role in this regard. These are exceptionally broad in their ambit and include extending: the range of conservation organisations qualifying for income tax deductions in respect of income received or accrued by them; the value and range of donations to conservation organisations and activities which are tax deductible; the value and range of donations to conservation causes which are exempt from donations tax and the value and range of property transfers fostering conservation which are exempt from transfer duty and estate duty.[76]
Summary
South Africa’s pristine landscapes and natural resources are under significant threat. Following South Africa’s conversion to a constitutional democracy, the government introduced many significant environmental laws to fulfil its constitutional mandate to take ‘reasonable legislative and other measures’ to protect the environment.[1] The majority of these laws adopt the traditional ‘command-and-control’ approach to environmental management. This approach is based on the assumption that the way to regulate human behaviour impacting on the environment, is to prescribe a range of legislative standards, prohibitions and restrictions and to sanction any person who contravenes them. Package of policy instruments that seek to correct environmentally-related market failures through the price mechanism...[6]
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