Page 41 - Energize September 2022

VIEWS AND OPINION

ESG: Achieving net zero and the role of carbon tax

By Nirvasha Singh, Carryn Alexander and Amanda Nkwanyana, Webber Wentzel

A reduction in carbon emissions is integral to South Africa’s global commitment to achieve net zero.
The South African government strategically introduced carbon tax to combat global warming by encouraging

a low carbon economy. The structure of the carbon tax legislation incentivises compliance to convert to green
sooner rather than later – particularly those sectors which are typically heavy carbon emitters.

he extractive industry is South
Africa’s primary energy supplier.
TWhile coal has been Eskom’s
primary energy resource (making up
75% of South Africa’s energy supply),
its negative environmental, climate
and social impacts can no longer be
overlooked. Great strides have been
made by certain industry leaders to
move to clean energy by using hydrogen-
powered vehicles as part of their Amanda Nkwanyana Carryn Alexander Nirvasha Singh-Nogueira
mining equipment. Mining in a more
environmentally friendly manner will Carbon tax was introduced in a phased manner, starting with a relatively modest rate,
undoubtedly result in a reduction in together with transitional support and exemptions. Currently, companies are entitled to
carbon emissions and carbon tax liability. carbon tax allowances of up to 95% to assist financially in transitioning their operations to
However, these projects are notably low carbon and cleaner technologies. However, these allowances will not remain for all three
capital-intensive and will take some time phases.
to implement. In the 2022 Budget, Government announced its intention to ramp up the carbon price
In response to South Africa’s and strengthen the price signals to promote behaviour changes over the short, medium,
energy deficiency crisis, the South and long term. It proposed increases in the carbon tax rate for the 2023 to 2025 tax periods
African government took steps to by a minimum of US$1/tCO₂e, increasing gradually to US$20 in 2026 and at least US$30/
quickly prioritise the acceleration of tCO₂e in 2030.
renewable energy programmes to Additional short-term tax relief was introduced by Government through the energy
generate more electricity and ease the efficiency savings tax incentive, which provides a tax deduction equivalent to the monetary
demands on Eskom. This urgent focus value of actual energy efficiency savings (kWh) achieved, subject to a certificate of approval
by the government forces the extractive issued by the South African National Energy Development Institute (SANEDI).
industry not only to consider switching It is proposed that this incentive be available until 1 January 2026 for relief from the
to environmentally friendly production proposed higher carbon tax margin, to encourage companies to reduce greenhouse gas
processes, but also to re-look at the emissions and help stimulate new energy efficient practices and industries during this
minerals mined in South Africa. period. Companies must rapidly take advantage of this temporary relief by transforming
The new global clean energy their activities through investments in energy efficiency, renewables and other low-carbon
economy has made way for industrial measures with the aim of reducing their carbon footprint.
opportunities in strategic alternative Investing in low-carbon energy sources will help to fulfil any business’s environmental,
minerals such as platinum, vanadium, social and corporate governance (ESG) obligations. Commitment to ESG principles is
titanium, cobalt, copper, manganese, important for many reasons – including attracting investors and talent. ESG focused
chromium and lithium. The exploration investments can also help to reduce a firm’s carbon tax liability – and the savings are greater
of these alternatives would lead to a for early adopters.
reduction in emissions and pollution While paying extra tax is inevitably resented, monitoring and controlling carbon
levels, which would also lead to a emissions is more than just a tax obligation. It is fundamental to everyone’s commitment to
reduction in carbon footprint and thus, achieving South Africa’s sustainability through a low-carbon and circular economy.
a reduction in a business’s carbon tax
liability. Send your comments to rogerl@nowmedia.co.za

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