CONTRIBUTORS
INCORPORATING COLD CHAIN
Industry fears South Africa ’ s Carbon Tax Act lacks teeth
By Eckart Zollner , Head of Business Development at EDS
South Africa is already experiencing the adverse effects of climate change and faces multiple challenges in relation to this phenomenon over the next decade .
Creative Commons | Foto-Rabe
Since 1990 , South Africa ’ s average temperature has increased at a rate of more than double that of global increases , already resulting in more frequent droughts and extreme weather events .
Alarmingly , the country has seen a seven-fold increase in its fossil-fuel CO 2 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 carbon dioxide equivalent in 2015 .
Our reliance on coal contributes an average of 91.8 % of total carbon dioxide emissions between 2000 and 2015 , with other significant emitters being transport , livestock , and manufacturing waste . Greenhouse gases ( water vapour , carbon dioxide , methane , nitrous oxide , and ozone ) can absorb and emit radiation at a certain level , causing the ‘ greenhouse effect ’ which leads to the warming of the Earth ’ s surface . This has a major adverse impact on the environment , causing climate change , resulting in weather extremities like storms , flooding , and droughts , all of which impact farming productivity and food security .
TAKE RESPONSIBILITY As the world ’ s 13th largest emitting country 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 , gradually reducing emissionproducing activities and phasing in cleaner technology . With 15 coal-powered power plants across the country , it ’ s likely to be an extensive process to reduce dependence 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 , are intended to reduce Greenhouse Gas ( 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 ton of carbon dioxide equivalent ( CO₂e ) will be charged over the threshold of tax-free allowances .
The Act gives effect to the polluterpays-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 ’ operations , sources of GHG are classified according to the level of phases over making less emission intensive operational choices .
In the first phase , direct emissions from the stationary combustion of fossil fuels
( such as diesel generators ) are taxable , while the second phase will address scope-2 emissions , which is gases that escape through venting or from landfills , and 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 part of the Covid-19 relief mechanisms for taxpayers . Currently , the country ’ s heavy greenhouse gas 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 primary 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 .
LACKS TEETH This has raised concerns within the industry that the Carbon Tax Act – much like the Protection of Personal Information ( PoPI ) Act – 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 nonadherence by responsible parties to ethical use of personal information . The Act has faced criticism that , on its own , it lacks the legislative impact required to regulate technology
Organisations , regardless of size need to start gearing towards adherence as non-compliance with carbon tax laws will have detrimental effects on the environment and organisations ’ bottom line . companies in a time of unprecedented data collection and processing .
Similarly , it is questionable whether the Carbon Tax Act will be effective adhered to by industry , especially given that the entry threshold for liability is currently set so high that it essentially targets extremely large polluters and for the moment excludes “ medium-sized ” polluters . Furthermore , it has been argued that developing projects that comply with carbon credit regulations is a complex , time-consuming process .
However , organisations regardless of size need to start gearing towards adherence , as non-compliance with carbon tax laws will have detrimental effects on the environment and organisations ’ bottom line .
OPPORTUNITY FOR RELIEF The initial phase of the Act offers significant opportunity for relief in the form of tax-free emission allowances ranging from 60 % to 95 %, including a basic taxfree allowance of 60 % for all activities plus a 10 % process and fugitive emissions allowance . There is also a maximum 10 % allowance for companies that use carbon offsets to reduce tax liability , as well as a performance allowance of up to 5 % for companies that reduce the emissions intensity of activities .
Furthermore , a 5 % carbon budget allowance is provided for reporting compliance and a maximum 10 % allowance for trade exposed sectors . The legislature takes into consideration the need to balance aggressive measures to address climate change . This is coupled with the need to soften the financial impact on sectors such as manufacturing and heavy industry .
To take advantage of these discounts and allowances , and adequately calculate tax liability , businesses in the manufacturing sector will need to assess their emissions and get a clear picture of their carbon footprint . Fortunately , this is not something organisations need to figure out on their own , as there are numerous carbon tax analysis tools available on the market . If businesses haven ’ t already done so , it is advisable to look for home-grown solutions that are designed specifically for local conditions to make tax compliance easy .
Process or emissions data simply needs to be fed into the carbon analytics tool to generate an automated report that details emissions by source . The tool can also calculate an exact tax liability amount and provide a solid foundation for carbon reduction in manufacturing in a way that minimises the impact on the bottom line . CLA
34 www . coldlinkafrica . co . za COLD LINK AFRICA • October 2021