From Paris With Love

The implantation and execution of The Carbon Tax has seen a postponement for a further six months until the first of June this year instead of its initial planned implementation which would have taken place yesterday on the 1st of January 2019, According to the Minister of Finance Tito Mboweni.

The Medium Term Budget Policy Statement was tabled in the National Assembly earlier this October, where the Minister progressed to claim that the Governments undertaking of the decision to the postponed implementation of the Tax correlated to the solicitudes and concerns which had been raised by both labour and business and made known throughout the Parliamentary hearings.

The alignment of the carbon budgeting system and the carbon tax will be achieved by imposing a higher tax rate penalty system for emissions that exceed the proposed carbon budget it was revealed.

Deemed as operating for the Paris Agreement the Carbon Tax’s designated intent is to empower South Africa to adhere to its nationally-determined contribution (NDC) set of commitments. As stipulated in accordance with the terms of the 2015 Paris Agreement on Climate Change, whilst simultaneously creating a reduction in the country’s greenhouse gas emissions hence meeting the National Climate Change Response Policy and National Development Plan.

In November 2016 South Africa ratified the Paris Agreement, and moreover endorsed its NDC, which stipulate that its greenhouse gas (GHG) emissions peak in 2020 to 2025, then plateau for a decade from 2025 to 2035 and afterwards decline from 2036 onwards.

The Good, The Bad and The Ugly

The bill’s potential benefits, detriments and other implications were discussed by Candice Gibson, a senior associate in the tax team at Norton Rose Fulbright, during her Business Day TV  interview as seen above.

One of the points touched upon was, that in the terms of the agreement and South Africa’s commitments, one of which is the reduction of greenhouse gas emissions up to 42% by 2025, a seriously substantial quantity, amounting to almost half the greenhouse gases that they want to reduce by 2025.

For those who are unsure of the realities and repercussions of the tax, with it’s impending implementation, any person, partnership, trust, community, municipal entity or public listed entity, who conduct an activity that results in the emission of greenhouse gases above the allowed threshold, would be liable to pay the carbon tax, furthermore the tax is not part of standard corporate tax, but rather an addition, however, it is only set to be applied to companies who undertake an activity that exceeded the carbon emissions threshold allotted to that specific activity.

The benefits and the drawbacks are essentially that, from an environmental point of view, the bill could contribute towards improving sustainable development, not just by South Africa, but as a global effort.

From a financial aspect, non-compliant companies – or companies which exceed the allowed threshold of carbon emissions would have to pay the carbon tax, resulting in an additional government revenue stream. Essentially the intention of the bill is not primarily to raise tax revenue, but rather to comply with the Paris Agreement, and to ensure people find alternatives to carbon-intense business practices.

There is a measure of legislation, which seems of importance. The act provides for a few allowances, so the taxpayer can reduce their carbon tax liability. Secondly, as of December 31, 2022, the carbon tax – currently at R120 per tonne – will increase at a rate of inflation +2%.

A Glance at Global Communities

If we look at global developments and track the slow, but steady implementation of carbon legislation across the world it becomes clear that it’s not a matter of “if” there will be a carbon tax but rather “when” it will come into force and how onerous it will be on the economy and businesses’ internal resources.

As the debate rages on, one has to wonder about the positive impacts that this new carbon tax legislation would have on the job market in South Africa for qualified Carbon Footprint Assessors. This new breed of specialist professionals will be needed to assess company carbon emissions baselines and help these companies to meet their legal obligations. It is as of yet unclear how many companies will be asked to be part of the mandatory reporting on greenhouse gas emissions but indications can be taken from countries like the UK and Australia.

On the 1st of July 2012, the Australian Carbon Tax came into effect and under this legislation around 300 businesses would pay a fixed price of $AUD23/tonne for carbon emissions until 2015, when the market would set the price.

And on the 20th of June 2012, the United Kingdom’s government confirmed its introduction of mandatory carbon reporting, requiring around 1,800 of the countries largest listed companies to report their greenhouse gas emissions annually.

If we use these two examples to guide us then South Africans can expect a substantial number of the largest organisations in the country to fall within the mandatory reporting net which was first brought to light in the White Paper on the National Climate Change Response published in 2011. In this report, it was said that any company with a carbon footprint of 100,000 tonnes of CO2 or more would be required to report on their emissions. As a current estimate, this level of production would include anywhere from 200 – 350 South Africa companies and judging from the aggressive expansion of the UK carbon tax we could expect this to grow substantially.

Which highlights the following dilemma?

Are there enough experienced Carbon Footprint Assessors in South Africa to provide the level of service that will be required? The unanimous answer to this question is an emphatical no. Luckily the actual process of conducting a carbon footprint is not a difficult one, so upskilling individuals within an organisation to play this role is feasible. That said there is no substitute for experience, so it will be important to begin the process of upskilling promptly so that by the time the mandatory reporting requirements come into effect you have a team of experts who can handle this exercise competently. You also have the option to have your footprint independently verified by an expert firm to ensure it is accurate. Verification would have to take place in accordance with international best practice by utilising standards such as the ISO 14064-3:2006 as outlined in ISO 14065:2007 for carbon footprint verification.

In essence, it’s clear that Carbon Taxation Legislation is imminent. It’s also clear that South Africa today does not have enough experienced Carbon Footprint Assessors to handle the scope of work that will be required. This gap in the job market presents a diverse opportunity for up-skillers, or job seekers who are looking to make a career in this new and exciting service offering. Whether you intend to use this skill as a way to differentiate yourself in your new job or to create your own consultancy it is quite clear that the need for these services is not likely to dry up any time soon.

For further information relating to Carbon Footprint Analyst training, contact Terra Firma Academy on 011 568 0768 or info@terrafirma-academy.com who run nationwide courses which are internationally approved with the IEMA or who can assist with in-house training for groups of ten people or more.