2026 Budget Speech Highlights

Carbon tax & Energy

25 February 2026

Director Carbon Projects Africa

South Africa

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National Treasury’s 2026 Budget introduces measures that will affect carbon tax exposure, energy strategy, emissions compliance and wider climate planning for South African businesses.

Below is our summary of the most important developments:

Carbon tax rate and price path

The headline carbon tax rate rises from R236 to R308 per tonne of CO₂e from 1 January 2026 (a 31% increase, the biggest increase since the start of the tax in 2019).
Phase 2 of the carbon tax regime runs from 1 January 2026 to 32 December 2030.

Carbon fuel levy increase

Treasury confirmed an increase in the carbon fuel levy effective 1 April 2026:

Petrol increased by 5c/litre to 19c/litre
Diesel increased by 6c/litre to 23c/litre

Policy changes under consideration:

A clearer carbon fuel levy

Government proposes to separate the carbon fuel levy from the general fuel levy once SARS system upgrades are complete. This would be enabled through a new Part 5C in Schedule No. 1 of the Customs and Excise Act, with the aim of improving transparency and simplifying administration.

Reduced burden for backup generators

Treasury acknowledges that many organisations run diesel generators only during load-shedding and therefore emit relatively little. To reduce disproportionate compliance effort, it proposes replacing the current 10MW(th) capacity threshold for IPCC category 1A4a activities with a 25 000 tCO₂e annual emissions threshold, effective 1 January 2026.

Carbon budget refunds

Treasury is moving to clarify the carbon budget refund mechanism proposed in the 2025 Taxation Laws Amendment Bill. The intent is to remove uncertainty and align refunds with the five-year carbon budget cycle: refunds would be claimable in year 3 (covering the first two tax periods) and again in year 6 (covering years 3–5).

To support this, the Customs and Excise Act would be amended to allow claims beyond the current two-year prescription period. The effective date will be set by the Minister of Finance.

Modernising carbon offsets and market data

National Treasury is continuing work to strengthen and modernise South Africa’s carbon offsets regime, building on its 2025 consultation. Reforms are expected to improve market integrity, clarify rules and help unlock low-carbon investment.

Treasury also plans to pilot the Common Carbon Credit Data Model (CCCDM) in 2026 to improve data consistency and interoperability across carbon markets, with potential future integration into the domestic framework if the pilot is successful.

In Phase 2 of the carbon tax (i.e. from 1 January 2026) the carbon offset allowance has been increased by 5 percentage points from:

from 10% to 15% for fuel combustion emissions
from 5% to 10% for process and fugitive emissions

This increases flexibility to use offsets to reduce carbon tax payable for the 2026 year of assessment (submission due by July 2027), which may partially cushion the higher carbon tax rate.

Energy: reforms that shape corporate energy strategy

The Budget reaffirms government’s focus on stabilising electricity supply and accelerating private investment in clean energy infrastructure.

Electricity market restructuring: the National Transmission Company of South Africa has progressed key licensing steps. Further regulatory reforms are intended to support transparent grid access and enable broader participation by private generators in a more competitive market.
Renewable energy procurement: four new projects were announced under REIPPPP Bid Window 7, adding 890 MW and an estimated R16 billion in investment. In addition, five renewable projects reached construction completion in late 2025, contributing 440 MW to the national grid.

What this means for businesses

Plan for a step-change in carbon tax cost from 2026. Update carbon tax forecasts, budgets and internal carbon pricing assumptions.
Confirm your emissions ‘in-scope’ position early. If you have stationary combustion sources (including backup generation), reassess whether you may fall above or below the proposed 25 000 tCO₂e threshold and adjust your monitoring, data management and reporting approach accordingly.
Strengthen compliance evidence and audit readiness. Ensure metering, activity data, emission factors and calculation files are robust and traceable ahead of future verification or audit queries.
Revisit your offsets strategy for Phase 2. Confirm eligibility, availability, and retirement/registry requirements, and consider a forward plan for offset sourcing and contracting to manage price and supply risk (rather than relying on spot purchases close to submission).
If you have a carbon budget, align finance and ESG teams on refund timing. Map the proposed refund windows to your internal close cycles and ensure you retain the supporting evidence needed to substantiate claims when the rules take effect.
Use power sector reforms to sharpen your energy strategy. Reassess your options for PPAs, wheeling, on-site generation, storage and grid connection and prioritise actions that reduce cost, improve resilience and lower emissions.

How Anthesis can help

Anthesis helps clients respond to the Carbon Tax policy changes with practical, workable steps — with a particular focus on carbon offsets.

We can support you to:

develop an offsets approach aligned to the carbon tax rules, including eligibility screening and calculating how many credits you can use to reduce your carbon tax liability along with the likely tax savings.
quantify carbon tax exposure under the new rate, including scenario modelling and internal carbon pricing assumptions.
strengthen emissions measurement and reporting so your data, calculations and supporting documentation are robust and audit-ready.