The Role Of Tax Incentives In Reducing CO2 Emissions Evidence From Vehicle Manufacturers

Abstract

The objective of the study was to consider the role of tax incentives (deductions and allowances in terms of the South African Income Tax Act) in reducing carbon dioxide (CO₂)emissions in the automotive industry. The objective was achieved in the light of qualitative empirical evidence obtained from South African vehicle manufacturers. A questionnaire was circulated to nine South African vehicle manufacturers and the responses were interpreted to establish whether current tax incentives provide an incentive to reduce CO₂ emissions. Findings highlighted the importance of tax incentives in reducing CO₂ emissions and suggest that vehicle manufacturers regard tax incentive-driven policies as the most effective tool in reducing CO₂ emissions. However, since it is difficult to qualify for current tax incentives, this approach might not provide the necessary incentive to reduce CO₂ emissions. It is recommended that tax incentive policies either be simplified or alternative initiatives be introduced to encourage investments in the reduction of CO₂ emissions.