Authors: Justine Sweet and Amanda Hattingh

On Friday, 19 June 2020, under the Carbon Tax Act, 2019, the Minister of Finance (the Minister) published:

  1. The Regulations on the Greenhouse Gas Emissions Intensity Benchmark prescribed for purposes of section 11 of the Carbon Tax Act (the Emission Intensity Benchmark Regulations) (GN697 in GG43452);
  2. The Regulations on the Allowance in respect of trade exposure in respect of carbon tax liability under section 10 of the Carbon Tax Act (the Trade Exposure Regulations) (GN690 in GG43451); and
  3. A Notice in respect of Renewable Energy Premium for purposes of symbol “B” in formula contained in section 6(2) of the Carbon Tax Act (the Notice) (GN692 in GG43453). This notice provides the renewable energy premium in respect of various renewable sources including biomass, concentrated solar power, onshore wind, solar photovoltaic and landfill.

The Carbon Tax Act commenced operation on 1 June 2019 and provides that the first tax period ran from 1 June 2019 to 31 December 2019 with the first filing and payment of carbon tax due on 31 July 2020 (section 16(2)(a)). The filing requirement and the first carbon tax payment has however now been delayed to 31 October 2020 as a consequence of the COVID-19 induced National State of Disaster (see the SARS announcement here). This delay however, is not addressed under any of the above mentioned regulations or notices.

Emission Intensity Benchmark Regulations

The Carbon Tax Act provide that taxpayers which implement measures to reduce their greenhouse gas (GHG) emissions must receive an allowance of not more than 5% of the total GHG emissions of the taxpayer on their tax liability for a particular tax period.

Section 11(1) of the Carbon Tax Act prescribes the formula with which to calculate this allowance, namely:


Z represents the percentage to be determined (which cannot be less than zero)
Z = (A/B – C) x D A represents the sector or sub-sector greenhouse gas emission intensity benchmark as prescribed by the Minister or where no value is prescribed, the number zero.
B represents the measured and verified greenhouse gas emissions intensity of tax payers in respect of a tax period.
C represents the number one (1)
D represents the number one hundred (100).


The Emission Intensity Benchmark Regulations prescribe the procedure for determining “A” and “B” of the above formula.

In respect of “A” the Regulations provide 2 formulas: 1st is the formula to determine the correct sector or sub-sector greenhouse gas “emission intensity benchmark” and the 2nd provides tax payers a formula for determining emission intensity benchmarks in respect of more than one emission intensity benchmark for an activity.

For purposes of the determining “B”, the Regulations provide that taxpayers must determine their measured and verified emission intensity for the sectors or as prescribed therein.

Trade Exposure Regulations

Under section 10 of the Carbon Tax Act, a taxpayer must receive an allowance of up to a maximum of ten percent in respect of trade exposure as measured by value of exports plus imports divided by the total production by sector or subsector that must be determined in a manner prescribed by the Minister by regulation.

The Trade Exposure Regulations contain the Minister’s prescribed determination methodology and provides 2 formulas for this determination: 1st is the formula for calculation of the trade exposure allowance per sector or sub-sector and the 2nd provides tax payers a formula to calculate the trade exposure allowance where the carbon tax liability is the subject of more than one such allowances.

In instances where taxpayers are of the opinion that the trade exposure allowance calculated under Regulations 2 and 3 of the Trade Exposure Regulations does not accurately reflect the extent of trade exposure of that taxpayer, Regulation 4 provides an alternative method for calculating trade exposure.

Both the Emission Intensity Benchmark Regulations and Trade Exposure Regulations are deemed to have commenced on 1 June 2019.

For more information, please contact Mandy Hattingh or Justine Sweet or your usual Herbert Smith Freehills contact:

Justine Sweet
Justine Sweet
+27 83 399 2618
Amanda Hattingh
Amanda Hattingh
+27 10 500 2634