The dividends from a revenue neutral tax on coal in South Africa

T J De Wet,J H Van Heerden

doi:10.4102/sajems.v6i3.3301

Abstract

South Africa is endowed with a significant proportion of the worlds coal reserves, which is used relatively cheaply to supply in more than 75 per cent of the country's energy needs. In terms of its per capita South Africa is one of the largest air polluters in the world. Even higher on the list of social preferences in South Africa, however, is the problem of unemployment, which also ranks amongst the highest in the world. In this paper we use a Computable General Equilibrium (CGE) model to simulate fiscal policy scenarios that address both these problems, and try to establish a double dividend, namely a reduction in CO2 levels of pollution as well as a reduction in unemployment levels.

Highlights

The South African government has achieved remarkable results in the fiscal management of the country over the past decade
Equation (14), which relates the price of the variable factors to that of the fixed factors, indicates that the increase in the price of the variable factors should result in a decrease in the price of the fixed factors
The decrease in the quantity employed of the variable factor will result in a fall in output, which will result in a fall in gross domestic product at market prices

Summary

Introduction

The South African government has achieved remarkable results in the fiscal management of the country over the past decade. This achievement was the twofold result of broadening the South African tax base and prudent fiscal management. Much success has already been achieved, a number of concerns remain. Environmental reform and the high level of unemployment constitute major aspects. South African policy makers will have to consider the objective of increasing future economic growth within a framework that ensures the sustainability of the current economic achievements. Sound management of natural resources is becoming an integral part of the South African policy maker’s responsibility

Results

Discussion

Conclusion