According to Tucker and Mandlana, Finance Minister Pravin Gordhan, in his 2009 budget speech, announced specific additional measures which South Africa will implement in responding to climate change. The proposals the Minister made require reforms of some fiscal and environmental legislation because some of the measures he announced are not currently provided for in law.

Tucker and Mandlana say Gordhan’s announcements flow from the 2006 draft policy paper titled: “Framework for Considering Market- Based Instruments to Support Environmental Fiscal Reform in South Africa” published in 2006.

This document contains a detailed theoretical and practical overview of the possible future use of MBIs to support environmental fiscal reform in South Africa and outlines the role that MBIs could play in supporting sustainable development and addressing climate change.

In every budget speech since 2006, the Finance Minister has announced tax incentives aimed at implementing measures to address climate change and sustainable development. For example, in the 2008 Budget speech, the Minister stated that there was much to be done to develop specific and practical measures to support sustainable development, both on the tax and the spending side of the budget.

These included:

• The introduction of an incentive for investing in energy-efficient equipment;

• Adjusting excise duties on motor vehicles in order to take into account carbon emissions; and

• The introduction of favourable tax treatment for income derived from the sale of certified emission reductions (“CERs”).

The adjustment on excises duties for motor vehicles became effective from 1 March 2010 and as they stand at the moment, do not affect commercial vehicles. However, fuel inefficient cars now become very expensive. For example, a vehicle producing more than 300g/km in emissions will incur an extra 12% in emissions tax. As a result, individual consumers and companies can be expected to utilise fuel efficient vehicles in future.

Tucker and Mandlana maintain there are two main objectives in adjusting excise duties on motor vehicles. The first is to minimize greenhouse gas emissions into the atmosphere and the second is to encourage the production and purchase of vehicles using cleaner technologies.

In an attempt to encourage South African companies to take advantage of the clean development mechanism established in the Kyoto Protocol, the Treasury proposes that income derived from the sale of primary Certified Emission Reductions ("CERs") be tax exempt, or subject to capital gains tax instead of normal income tax. Secondary CERs are to be classified as trading stock and taxed accordingly.

There is no specific time frame of when this tax reform will be implemented. Once it is implemented, it is hoped that trade on CERs will increase from its current low levels. More importantly, it is hoped that that increased trade in CERs will in turn reduce the emission of greenhouse gases into the atmosphere.