There is now very little doubt that, following on an announcement from the Minister of Finance, Pravin Gordhan in this year’s budget speech, the South African government will implement a carbon tax by 2014. The current proposal on the table is R120 per ton for all the CO2e (carbon dioxide or its equivalents) in emissions that organizations are responsible for, above the recognized threshold levels, says Peter Flynn of The Environmental Law Consultancy, a company that assists organisations with management system based approaches to knowing and meeting their legal obligations. This, he says, has become obligatory following South Africa’s formal commitment to the UN Framework Convention on Climate Change to reduce its emissions by 34% less than the current levels by 2020 and by 42% by 2025 – a gargantuan task, which many believe is too ambitious to achieve. He however suggests that one effective way to reduce Carbon Tax liability may lie in the implementation of management standards, specifically the ISO 50001 Standard.
What is more, says Flynn, this proposed tax is set to increase by 10% per annum. Although South Africa’s emissions (at roughly 500 metric tons per annum) are not generally considered high in relation to those of such major polluters as China and the USA, they make us the worst atmosphere polluters in Africa and they put us among the top 20 largest CO2e emitters in the world.
Flynn stresses that this is very definitely a challenge to top management of large corporations because the top 40 companies in South Africa, meaning those that qualify for the JSE Securities Exchange All Share Index, are together responsible for 97% of all CO2e emissions in South Africa. These companies, he says, mostly operate in six sectors, namely: basic resources, oil and gas, food and beverages, industrial goods and services, fuel and commodities.
“The new tax,” says Flynn, ”will put a further brake on the already unsatisfactory South African growth rate, now well below 3%” – but, he says, ”it is unavoidable.”
“Europe, with all its economic problems, has already travelled considerable distance on the road towards reducing carbon emissions and developing countries like South Africa simply have to follow suit,” says Flynn. “It has been estimated that the implementation of these reforms will cost South Africa 3% of its total GDP between now and 2021. Another important dynamic to consider is that there are already some noises coming from trading territories such as the EU, about trading with countries who have high carbon emissions, and who are seen to be doing little about it. The EU is a major trading partner of South Africa.”
“All companies with carbon-intensive supply chains,” he adds, ”are likely to be concerned about maintaining competitiveness against lower carbon sector rivals or those who do not yet price carbon at all – but this, too, is a challenge which has to be accepted in view of the long term general benefits that the reduction of carbon emissions hold for the globe as a whole, and the huge environmental and social cost of continuing with business as usual”.
“Controlling emissions,” he says, “is often seen as a technical problem, concerned primarily with more efficient energy production methods in the wider production process, starting source, which is most commonly electricity production.
Nearly all of South Africa’s electricity is generated by Eskom, and Eskom’s electricity production infrastructure is highly dependant on the burning of fossil fuels, especially coal. This means that, for the foreseeable future, South African industry will be almost solely reliant on a highly carbon intensive source of energy in its production process.”
As a result, in order to reduce carbon emissions in the short and even medium term, industry will need to look at energy efficiency – rather than at the changing of energy production processes or energy providers – as the major component of its carbon emission reduction strategy.
“At The Environmental Law Consultancy, we are advocating a systems based approach for the management of energy efficiency, in order to reduce carbon emissions,” says Flynn. This involves conducting baseline studies of energy usage in the organisation and then following a management system approach to continually improve the efficiency of energy usage in the organisation over time.
“In 2011, The South African Bureau of Standards published the SANS ISO 50001 standard for Energy Management . We see this is a very good management system for tackling the issue of reducing carbon emissions” he adds. ”To take just one example, in 2010, South African pilot projects working on the SANS ISO 50001 standard principles in industry achieved huge energy savings in the agro-processing, chemical and liquid fuel production, mechanical engineering, automotive and mining sectors.”