New Carbon Tax Requires a Holistic, Long-Term View

| 7 July 2019

The Carbon Tax Act has been signed into law by President Ramaphosa, and its first phase came into effect in June, levying a tax on greenhouse gases from fuel combustion and industrial emissions.

The new law brings South African companies in line with our country’s commitments to fight climate change, as a signatory to the Paris Agreement of 2016. It will also fundamentally reshape the business approach to carbon emissions.

The effects of the Act will not be felt significantly at first, as it is being implemented in a phased manner, but with time, taxes imposed on companies with carbon emissions above the predetermined thresholds will start to affect the bottom line.

With taxation levels set around R120 per ton of carbon emitted, and substantial allowances, the tax is  not likely to cripple companies operating in the service sector. But the effects of the tax are material, and it will rise over time. 

Companies will eventually face substantial tax obligations unless they take practical steps to minimise their net carbon impact. This can be done by reducing emissions at source through operational adjustments, or by purchasing carbon offsets.

Each sector has negotiated its own particular terms, in the style of sector B-BBEE charters.

The carbon tax is shaping up to become a real risk for companies, which must be mitigated strategically. Our company, Konica Minolta South Africa, has been carbon neutral for several years. With the tax coming into law, the best advice we can offer organisations looking to commit to carbon management is that it requires compliance auditing by qualified experts to ratify and measure the impacts.

The law defines what can be offset through initiatives such as tree planting. The incentive is for companies to reduce their actual energy consumption. We have been able to do this through tree planting, recycling, and other systems adjustments that use less fuel and electricity.

We have regularly worked with Chris Wild, Executive Director of Food & Trees for Africa, and he has helped us see the value of a company carbon audit. In future, this will also help companies to understand what the new Act will mean for their business.

“Getting a carbon assessment from a company like ours will certainly be useful,” says Chris. “But the best approach is to integrate the principles of sustainability into your organisation’s entire corporate strategy.”

Many companies will only begin looking at their carbon emissions now that the new Act is coming into effect. However, it takes a few years to integrate a carbon-neutral strategy into operations. In the late 2000s, we began conducting audits, launching pilot projects, planting bamboo, spekboom and other trees, recycling toner cartridges and building logistics efficiencies.

Over the years, we have gained an understanding of the issues, what works and what doesn’t, and established relationships with credible operators in the sustainability and greening space, such as Food & Trees for Africa.

We measure our carbon emissions every year and can lay claim to a certified carbon neutral status, which we are able to use in our marketing messages. We also look to strategically combine CSI initiatives with carbon-emissions projects and in this way, carbon awareness is seamlessly integrated into business strategy.

Chris tells me that building a carbon-conscious business is becoming easier. A new, tech-enabled African carbon standard will soon be launched, and looks likely to reduce the cost of carbon auditing by a factor of ten. The new technology will allow companies to measure impacts cost effectively and then strategise accordingly.

Our learning has been to take a holistic, long-term strategy on carbon emissions. The most effective approach to the new carbon tax would be to take a broad view, to audit and assess impacts, and then decide on a carbon response that may well improve business efficiency in the long run.