RENEWABLE ENERGY
SA’s Carbon Tax Act
LACKS TEETH
South Africa is already experiencing the adverse effects of climate change and faces multiple challenges in relation to this phenomenon over the next decade. By Eckart Zollner*
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ince 1990, South Africa’s average temperature has risen at a rate of more than double that of global increases, already resulting in more frequent droughts and extreme weather events. Alarmingly, the countr y has seen a sevenfold increase in its fossil-fuel CO2 emission levels since 1950, with 80-90% of these emissions resulting from the burning of fossil fuels. When expressed as gross emissions per individual, each South African was responsible for emitting 9.8 tonnes of CO2e (carbon dioxide equivalent) in 2015. Our reliance on coal contributed an average of 91.8% of total carbon dioxide emissions between 2000 and 2015, with other significant emitters being transpor t, livestock and manufacturing waste. GHGs (greenhouse gases, which include water vapour, carbon dioxide, methane, nitrous oxide and ozone) can absorb and emit radiation at a cer tain level, causing the greenhouse effect, which leads to the warming of the ear th’s sur face. This has a major adverse impact on the environment, causing climate change that results in weather extremities like storms, flooding and droughts – all of which impact farming productivity and food security.
Take responsibility With the world’s 13th largest emitting countr y for fossil-fuel emissions and a domestic economy powered by coal, South Africa’s private sector needs to step up and take responsibility for its contribution. This involves complying with the Carbon Tax Act (No. 15 of 2019), gradually reducing emissions-producing activities and phasing in cleaner technology. With 15 coal-powered power plants across the countr y, it’s likely to be an extensive process to reduce dependence
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on coal, which only emphasises the need for private sector organisations to take charge in powering South Africa’s greener future. Effective as of 1 June 2019, the Carbon Tax Act, together with the Customs and Excise Amendment Act (No. 13 of 2019), are intended to reduce GHG emissions in a manner that is sustainable yet compelling. In a further attempt to encourage businesses to reduce their carbon emissions, an initial levy of R120 per tonne of CO2e will be charged over the threshold of taxfree allowances. The Act gives effect to the polluter-pays principle for large emitters and forces businesses to take these costs into account for future production, consumption and investment decisions, encouraging them to adopt cleaner technologies and production methods in the next decade.
Three phases Framed to roll out in three phases, the Carbon Tax Act will only be applicable to scope 1 emitters in the first phase. The first phase will run from 1 June 2019 to 31 December 2022, and the second phase from 2023 to 2030. In relation to a business’s operations, sources of GHGs are classified according to the level of phases over making less emissions-intensive operational choices. In the first phase, direct emissions from the stationar y combustion of fossil fuels (such as diesel generators) are taxable, while the second phase will address scope 2 emissions, which are gases that escape through venting or from landfills; the third phase will address indirect emissions. However, the outbreak of the global Covid-19 pandemic last year and subsequent lockdown saw the first filing of carbon tax returns for
the 2019 reporting period deferred by three months, to 31 October 2020, as par t of the Covid-19 relief mechanisms for taxpayers. Currently, the countr y’s heavy GHG emitters are scrambling to register for carbon-offset projects as the deadline looms for the payment of carbon tax in June this year. The pandemic did not permit carbon tax to be a primar y focus for businesses throughout last year, and it is expected that this year’s filing of carbon tax returns will likely feel like a hurdle to most businesses, as the economic climate remains tough and cash flows are constrained.
Lacking teeth This has raised concerns within the industr y that the Carbon Tax Act – much like the Protection of Personal Information (PoPI) Act (No. 4 of 2013) – lacks teeth to achieve its purported objectives. The PoPI Act has faced questions about its ability to fully protect individuals’ data privacy due to the evolving nature of technology, the continuous quantity of data created, advanced cyber fraud, and the non-adherence by responsible par ties to the ethical use of personal information. The PoPI Act has faced criticism that, on its own, it lacks the legislative impact required to regulate technology companies in a time of unprecedented data collection and processing. Similarly, it is questionable whether the Carbon Tax Act will be effectively adhered to by industr y, especially given that the entr y threshold for liability is currently set so high that it essentially targets extremely large polluters and for the moment excludes ‘medium-sized’
