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Carbon tax - what it means for the property sector

Newman said that the National Treasury had shown a preference for a carbon tax, rather than a cap-and-trade system, as a tax had some degree of certainty in terms of revenue collection and was significantly simpler to administer than a cap-and-trade system.

Speaking at the Green Building Council of South Africa (GBCSA) convention in Cape Town, Newman said that the carbon tax would have a significant impact on the South African property sector.

Initial indications are that the tax, if implemented, would be set at R100/t of carbon dioxide, creating a carbon tax bill of R45-billion a year, of which the property sector would be responsible for 23%, or R10.4-billion.

If the carbon tax were to rise to about R750/t, the property sector’s carbon tax bill would reach a staggering R77.7-billion a year.

“These numbers can be scary; the reality is that a carbon tax is coming in some kind of form and it’s important to understand how that impacts the whole property supply chain,” cautioned Newman.

However, he said that currently the real impact that a carbon tax would have on the property sector was largely unknown as there was uncertainty over who will end up paying. But Newman added that it would likely affect all involved from the concrete supplier through to the investor, contractors, landlords and tenants.

He averred that GBCSA stakeholders should ask whether it would assist the business case for green building design and retrofitting and whether the carbon tax implications would affect tenant migration patterns away from developments with large operational carbon footprints.

Development manager David Waldren from Grocon, in Australia, added that the uncertainty in the sector was problematic.

“By and large the certainty is the thing we want. I’m not going to advocate R100 or R700, I’m not going to advocate for a tax or something else. What I would advocate as a developer is ‘give me certainty’, because the projects that we’re involved in are three to five year exercises with 20 to 40 year lives.”

In Waldren’s view, a carbon tax would not be a negative thing for the property development industry as it would create an additional revenue pool in the economy and “that just spells opportunity”.

He said the industry could ignore the issue but in his opinion developers were good at making use of possibilities. “You can say there is opportunity in here somewhere, and I just need to apply my thinking power to finding where the opportunity is,” he concluded.


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