South Africa's carbon tax rises from 1 January 2026 to 308 rand per tonne of CO₂e

South Africa's carbon tax is, from 1 January 2026, 308 rand per tonne of CO₂ equivalent; in 2025 it was 236 rand. The increase results from the trajectory written into the Act: the tax came into force on 1 June 2019 at 120 rand per tonne, but with large allowances.

History of the rates

The Carbon Tax Act No. 15 of 2019 was signed by the president in May 2019 and introduced the first phase of the tax (from 1 June 2019 to 31 December 2022), covering direct emissions (scope 1). The initial rate was R120/t CO₂e, with allowances in the range of 60–95% depending on the sector (including a 60% basic allowance, 10% for process emissions and up to 10% for offsets), which meant that the effective burden was much lower than the nominal rate. In the first phase the rate rose every year by inflation plus 2 percentage points.

The current text of Article 5 of the Act gives a rate of R190/t for 2024 and R236/t for 2025, and then R308/t for the period from 1 January to 31 December 2026; the subsequent rates are R347 (2027), R385 (2028) and R424 (2029). The 2026–2029 path was written into the Act by the 2022 amendment (Taxation Laws Amendment Act No. 20 of 2022). After 31 December 2030 the rate is to be raised by an amount announced by the minister in the budget.

What about electricity

In November 2024 (the discussion paper of 13 November 2024) the National Treasury presented proposals for the second phase of the tax, which is to change the rules on allowances and offsets. SAICA's commentary shows that the paper assumed the impact on the electricity price would in principle be neutral, and that the effective rate for combustion emissions was to rise from R46/t in 2026 to R116/t in 2030. SAICA asked for an explanation of how this impact was calculated and criticised the too short consultation period (22 working days).

Why this matters for biogas

A rising price of CO₂ emissions changes the relationship between the costs of fossil and renewable fuels: the more expensive the emissions, the more competitive biogas and biomethane become as substitutes for coal, diesel or gas. For industrial customers in South Africa, e.g. plants with large boilers, buying bioenergy can reduce the tax liability. The impact depends, however, on the rules for counting emissions from biomass and on the allowances adopted, which are set by tax rules, not by the rate itself. In the European Union an analogous role is played by allowance prices in the ETS and ETS2; we write more broadly about the effect on the gas market in the article ETS2 and the gas market.

Outlook

The nominal rate is rising fast, but the actual cost depends on allowances and offsets. The next step is the details of the second phase and possible changes after 2026. For bioenergy investors in South Africa a recommended practice is to calculate profitability under several emission price scenarios.