DOE sells energy savings incentives

Energy savings incentives panacea for carbon tax….

NelisiweMagubaneDepartment of Energy (DoE) director-general, Nelisiwe Magubane, has said that the proposed new energy savings incentives will help reduce the effect of the forthcoming carbon tax due to be implemented next year.

The regulations on the “Allowance for Energy Savings” in terms of Section 12l of the Income Tax Act now announced will be linked to the tax process of the South African Revenue Service (SARS) and are aimed at encouraging businesses to continuously scale-up or intensify energy efficiency enhancements.

Magubane was announcing government’s promulgation of “pioneering regulations that will provide tax incentives for businesses that can prove verified energy savings as a result of purposefully implemented energy-reduction measures.”

Carrot and stick

The DG said, “It is important to note that, as government, we view the opportunity presented by the energy efficiency tax incentives as the proverbial ‘carrot’, as it is one of the key mechanisms [to be introduced] that will soften the impact of the ‘stick’, which is of course the proposed Carbon Tax Policy, due for implementation in 2015,” she said in her statement re-produced on the DoE website.

Treasury, in the meanwhile, noted that the incentive would calculate the energy saved expressed as a kilowatt-hour equivalent, which would then be used as a deduction against a business’ taxable income.

Forty five kilowatt-hour cents per hour would be sufficient to meet the savings requirements in terms of the regulations but this had to be verified by the South African National Energy Development Institute (Sanedi) with whom businesses searching for such savings must register.

The full regulations are to be published explaining implementation and for three months commencing January 2014, Treasury, Sanedi and SARS will “roll out a series of national workshops to assist businesses in acquainting themselves with the registration process and overall implementation”.

Energy savings strategy set at 12%

A government strategy is now ready for submission to Cabinet setting out a national target of energy intensity reduction of 12% by 2015.

Specific targets are a 10% reduction in energy consumption by the residential subsector; a 15% reduction by the mining and industrial sector; a 9% reduction by the power generation sector: a 15% reduction by the commercial and public buildings sector and a 10% reduction in energy consumption by the transport sector.

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