A carbon tax has been mooted for South Africa for some time now and has been delayed on a number of occasions. A focus on greenhouse gas emissions gained momentum since COP15 (Climate Change gathering of world leaders) in 2009. The target that South Africa committed to in 2009 was a national reduction of greenhouse gas emissions by 34% by 2020 and a further 42% by 2025 – this would be a reduction in the anticipated future emissions which were estimated to increase.
As yet, the tax has not been implemented however it seems quite likely that it will come into force 1st of January 2017. This will be the 3rd year that it has been anticipated. Until it gets passed into law, it seems as if a number of organisations are prepared to ‘wait and see’ what the final outcome will be. As I shall explain below, this approach is akin to sticking one’s head in the sand and hoping the ‘problem’ will just go away. Seeing as this is a corporate tax, those directly unaffected don’t really have a sense of what the impact might be. Consider that Eskom is by far the largest greenhouse gas emitter in the country (almost 50%). A R120/tonne tax imposed on Eskom could mean an additional 10c to 12c/kWh which could easily result in a 15% increase in tariffs.
Who do you think is going to foot the bill for their portion of the tax? We all are.
One constant since the carbon tax was first suggested, is the price of carbon at R120/tonne for Scope 1 emissions (in short, fossil fuel combustion emissions, industrial processes and product use emissions and fugitive emissions) and excluding grid supplied electricity (i.e. Eskom). The one variable that offers some respite to emitters are the tax-free thresholds available for the first phase. The amounts can depend on the nature of the business, but in short, the threshold starts at 60% of the R120/tonne so effectively R48/tonne to start and capped at a 95% tax-free threshold. The second constant is that this tax will be targeted at large emitters (at least to begin with), i.e. entities with a thermal capacity of around 10MW.
To determine what an organisation’s Carbon Tax risk is, a comprehensive Carbon Footprint needs to be undertaken. This is not to be taken lightly as discussed in a previous article, ‘A Carbon Footprint can help you identify inefficiencies, and opportunities within your business.’ however offers an insight into how you can start to reduce your greenhouse gas emissions. Waiting for the tax to come into effect means foregoing the savings that could (should) have been achieved earlier by simply understanding your risk and implementing changes. Some of the changes include switching fuel systems or optimising production equipment (think HFO – Heavy Fuel Oil – boilers) take time and planning. The incentives should not only be to reduce potential carbon tax liability, but to be more efficient and sustainable as a business and improving the working environment.
Regardless of when the carbon tax gets implement, considering the time it takes to implement changes and reduce greenhouse gas emissions, it makes sense to be pro-active and to start preparing before the hammer falls.
Call us to find out how we can help you understand your risk: 021 300 1620 or 011 569 0768.