The Role Of Tax Incentives In Reducing CO2 Emissions Evidence From Vehicle Manufacturers

Johann Du Plooy,Rudie Nel

doi:10.19030/iber.v12i5.7830

Abstract

The objective of the study was to consider the role of tax incentives (deductions and allowances in terms of the South African Income Tax Act) in reducing carbon dioxide (CO2)emissions in the automotive industry. The objective was achieved in the light of qualitative empirical evidence obtained from South African vehicle manufacturers. A questionnaire was circulated to nine South African vehicle manufacturers and the responses were interpreted to establish whether current tax incentives provide an incentive to reduce CO2 emissions. Findings highlighted the importance of tax incentives in reducing CO2 emissions and suggest that vehicle manufacturers regard tax incentive-driven policies as the most effective tool in reducing CO2 emissions. However, since it is difficult to qualify for current tax incentives, this approach might not provide the necessary incentive to reduce CO2 emissions. It is recommended that tax incentive policies either be simplified or alternative initiatives be introduced to encourage investments in the reduction of CO2 emissions.

Highlights

IntroductionIn an attempt to reduce the CO2 emissions in the transport sector in South Africa, a separate vehicle emissions tax on passenger vehicles was introduced effective 1 September 2010 (National Treasury, 2010a:191)
T here is increased pressure on both the energy and transport sectors because these are the only sectors in which CO2 emissions are rapidly increasing (Van Essen, 2010:203). Hughes and Haw (2007:36) submitted that the transport sector showed large potential to save energy, but significant pressure from government on vehicle manufacturers, vehicle owners and public transport co-ordinators would be required.In an attempt to reduce the CO2 emissions in the transport sector in South Africa, a separate vehicle emissions tax on passenger vehicles was introduced effective 1 September 2010 (National Treasury, 2010a:191)
The objective of the study was to consider the role of tax incentives in reducing CO2 emissions in light of qualitative empirical evidence obtained from South African vehicle manufacturers

Summary

Introduction

In an attempt to reduce the CO2 emissions in the transport sector in South Africa, a separate vehicle emissions tax on passenger vehicles was introduced effective 1 September 2010 (National Treasury, 2010a:191). The objective of this vehicle emissions tax is to attempt to change consumer purchasing decisions by discouraging the acquisition of vehicles that emit high CO2 emissions. The South African automotive industry, represented by the Retail Automotive Industry (‘RMI’) and the National Association of Automobile Manufacturers of South Africa (‘NAAMSA’), has expressed concern about the possible negative implications of this vehicle emissions tax for employment in the vehicle retail, manufacturing and component industries. The focus of the vehicle emissions tax on consumers who may not always realise the impact of their actions on the environment has been identified as a possible weakness which could negatively affect its ability to reduce CO2 emissions (Nel & Nienaber, 2011)

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Conclusion