C A R B O N TA X – I M PA C T O N S A C A R M A N U FA C T U R I N G I N D U S T R Y Silvana Claassen, Senior Carbon Advisor Port Elizabeth, 19 September 2018
Climate Neutral Group: Local knowledge & Global reach
Introduction • Rationale • Carbon Tax in a nutshell • History of Carbon Tax Bill • Carbon Tax design • Impact on car manufacturers • How to respond • FAQs
Paris Agreement
Vulnerability of Southern Africa • Faster warming • High dependence on agriculture • Increase mosquitos – malaria • Africa cannot follow the carbon intensive industrialisation path
Global contributions: two perspectives 12000 10000 8000 6000 4000 2000 0 China US India Russia South Africa
Global contributions: two perspectives 12000 18 16 10000 14 8000 12 10 6000 8 4000 6 4 2000 2 0 0 China US India Russia South Africa
SA GHG profile other waste industrial processes 4% 5% agriculture 7% transportation electricity & heat manufacturing & construction energy 84%
Carbon Tax in a Nutshell
History of Carbon Tax in South Africa 2009 – 2006 – draft Copenhagen – 2011 – National November 2015 – environmental commitment to Climate Change first draft Carbon fiscal reform policy reduce GHG by Response White Tax BIll paper 34% by 2020 and Paper 42% by 2025 - BAU
History of Carbon Tax in South Africa February/March April 2017 – 2018 – draft promulgation of November 2016 December 2017 carbon tax bill National GHG – SA ratifies – second draft enters Emission Paris Agreement Carbon Tax Bill parliamentary Reporting process Regulations
Carbon Tax – Design/Phased Approach Phase 1 Phase 2 Period 2019 – 31 Dec 2022 1 Jan 2023 - ... Rate R120/tCO2e Revision of R120/tCO2e Annual increase = CPI + 2% Greenhouse Gases CO 2 , CH 4 , N 2 O, HFCs, PFCs, SF 6 Unknown Covered Emissions included Scope 1 emissions Unknown but possibility to include scope 2 Excluded sectors - Some waste categories Likely inclusion of AFOLU and all waste - Agricultural activities activities - Livestock - Other Land Use - Some industrial processes including: electronics, refrigeration Tax-free thresholds Percentage based thresholds from The tax-free thresholds willbe decreased 60% tax-free allowance progressively – replacement with absolute thresholds is considered
Carbon Tax – Design Direct/Scope 1 emissions only • Fuel combustion • Process emissions • Fugitive emissions Annexure 1 of NGHGERR • Listed activities only • Closely linked to the 2017 National Greenhouse Gas Emission Reporting Regulations
Intermezzo – Reporting Regulations
Intermezzo – Reporting Regulations • OFFENCES 16. A person commits an offence if that person─ (a) provides false or misleading information to the competent authority; or (b) fails to comply with regulations 5(1), 5(2), 6(1), 6(3), 7(1), 7(3), 9, or 13. • PENALTIES 17. A person convicted of an offence in terms of regulation 16 of these Regulations is liable in the case of a first conviction to a fine not exceeding R5 million or to imprisonment for a period not exceeding five years and in the case of a second or subsequent conviction to a fine not exceeding R10 million or imprisonment for a period not exceeding 10 years and in respect of both instances to both such fine and such imprisonment.
Carbon Tax – Impact on SA Vehicle Sector
Carbon Tax – Impact on SA Vehicle Sector Recovery of ore, petroleum, limestone, rubber, etc. Steel, Aluminium, Glass, Rubber, Plastic Casting, Stamping, Plating, Paintshop
Carbon Tax – Impact on SA Vehicle Sector Recovery of ore, petroleum, Fuel combustion emissions limestone, rubber, etc. Steel, Aluminium, Glass, Process emissions Fuel combustion emissions Rubber, Plastic Casting, Stamping, Plating, Fuel combustion emissions Paintshop
Carbon Tax – When are you liable? IPCC Code Activity/Sector Threshold 1 ENERGY 1A Fuel Combustion Activities 1A2 Manufacturing Industries and Construction 1A2a Iron and Steel 10 MW(th) 1A2b Non-Ferrous Metals 10 MW(th) 1A2f Non-Metallic Minerals 10 MW(th) 1A2g Transport Equipment 10 MW(th) 1A2h Machinery 1A2i Mining and Quarrying 10 MW(th) 1A3d Water-borne Navigation 100 000 litres/year
Carbon Tax – When are you liable? IPCC Code Activity/Sector Threshold 2 INDUSTRIAL PROCESSES AND PRODUCT USE 2A Mineral Industry 2A3 Glass Production None 2C Metal Industry 2C1 Iron and Steel Production None 2C2 Ferroalloys Production None 2C3 Aluminium Production None 2C ... ... None
Features of SA car industry • Many western (European and US) car – brands (including Mercedes, Volkswagen, Toyota, Nissan, etc. Manufacture their vehicles in SA • Nearly 60% of vehicles exported to overseas EU, Asia and America • 7 % of SA GDP • Around 600 000 vehicles per annum • Over 100 000 Employment • Local components manufacturing
Risks / How to respond • Additional costs • Start capturing emissions data • Calculate your footprint • Set target to reduce • Educate suppliers and request disclosure • Assess applicability of additional allowances
Allowances • Basic tax-free allowance (60-70%) • Trade-exposure allowance (10%) • Performance allowance (5%) • Carbon budget allowance (5%) • Offset allowance (10%)
Allowances • Waterfall graph
How does carbon tax impact SA automotive industry • The purpose of the carbon tax is to change greenhouse gas emitting behavior • South Africa’s vehicle industry will be affected during each “ schakel ” of the supply chain • The processing of raw materials, including glass and iron will be impacted as carbon emissions are generated both as a result of fuel combustion and industrial processing • Both at assembly-stage but also upstream, interventions must be done to reduce emissions • Unavoidable emissions can be offset by a maximum of 10% of the total carbon footprint → Climate Neutral Group is here to help!
The Carbon Tax – In Conclusion “SINCE the causality of the increasing of anthropogenic greenhouse gas emissions in the atmosphere and the global climate change has been scientifically confirmed; AND SINCE it has consequently become necessary to manage the inevitable climate change impact through interventions that build and sustain South Africa's social, economic and environmental resilience and emergency response capacity; AND SINCE it has also become necessary to make a contribution to the global effort to stabilise greenhouse gas concentrations in the atmosphere at a level that avoids dangerous anthropogenic interference with the climate system within a timeframe that enables economic, social and environmental development to proceed in a sustainable manner; AND SINCE the costs of remedying pollution, environmental degradation and consequent adverse health effects and of preventing, controlling or minimising …”
T H A N K Y O U A N D Q & A Silvana Claassen, Senior Carbon Advisor Port Elizabeth, 19 September 2018
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