National Treasury defends cost of fuel

NATIONAL Treasury says South Africa’s recent Nationally Determined Contribution (NDC) commitments under the Paris Climate Agreement require that the country significantly reduces its energy emissions including greenhouse emissions from the transport sector, which accounts for nearly 11 percent of the country’s total greenhouse gas emissions.

“The carbon tax on emissions from fuel (the carbon fuel levy) is an important policy tool to internalise the costs of emissions into fuel prices and encourage changes in the behaviour of fuel users towards energy efficient, lower carbon fuels, alternate electric vehicles, use of public transport and alternate transportation modes,” said the Treasury.

Treasury, in an interview with Business Report, said that on an international scale, South Africa was somewhere in the middle in terms of the size of its levies.

“Aside from the levies, the price of fuel is mainly driven by the oil price in international markets and the rand/dollar exchange rate. Levies are applied by many countries internationally considering the impact on the environment and the emanating greenhouse gas emissions.”

Last month saw the petrol price hiked to record highs, rubbing salt in the wound of overburdened consumers. Motorists using petrol-pumped vehicles started paying R18.20 a litre for 95 unleaded petrol while 93 unleaded petrol increased by 91 cents a litre and diesel by 55.58 cents.

The current fuel taxes imposed in the country include the general fuel levy (GFL), the Road Accident Fund (RAF) levy, what the department described as a small impost to fund the marking of paraffin (to limit the mixing of diesel and illuminating paraffin), a carbon fuel levy and a relatively modest excise duty that was included in the Southern African Customs Union (SACU) revenue pool.

Treasury said these were imposed as both a revenue raising instrument for general government expenditures and to compensate victims of vehicle accidents and as a means to address the negative externalities of fossil fuels and vehicle usage.

It added that the main negative environmental externalities associated with fuel combustion was emissions of greenhouse gases and local air pollution and the social costs associated with road use which included congestion, noise and injuries and loss of lives as a result of road accidents.

Treasury said the government did not adjust its taxes or levies based on daily or monthly movements in the price of fuel.

Each year, it received numerous requests on specific tax rates or levies to be lowered or increased. “Such requests are assessed, before the annual Budget in February each year, on whether they fit in with policy and revenue objectives as any announcement on rates is only made on Budget Day.”

In the case of fuel levies, budget documentation for past budgets stretching over many years showed there were a multiplicity of objectives with the many levies that impacted on the price of fuel to the motorist. This included the need to build and maintain road infrastructure and reduce carbon emissions.

Last month, the Department of Mineral Resources and Energy told Business Report that the maintenance of a high crude oil price by oil producers had hit most economies and this high price was not based on economic fundamentals but the dictates of the markets.

– BUSINESS REPORT