SA advised to fight for 100% exemption for offsets in carbon tax law

By Sue Blaine

Industry in South Africa needed to fight for 100% tax exemption for its offsets of greenhouse gas emissions within the coming South African carbon tax regime‚ a carbon trade expert told an International Council on Mining and Metals (ICMM) event in Doha‚ Qatar‚ on Wednesday night.

Finance Minister Pravin Gordhan has said a carbon tax will be introduced in South Africa from next year‚ although the Treasury has yet to release its promised second discussion paper on the proposed tax.

"Carbon" has become a catch-all term for all greenhouse gases‚ linked by science to the overall increase in global temperatures.

According to the first discussion paper on the proposed tax‚ between 10% and 20% of carbon offsets could be claimed as tax exemptions‚ if the offset price was below the tax rate‚ proposed at R120 for every ton of carbon emitted‚ the founding senior partner of carbon trade advisory Perspectives‚ Axel Michaelowa‚ said at the event on the sidelines of the United Nations climate change talks.

Just short of 200 countries have gathered in Doha to thrash out a deal on their various responsibilities towards keeping global greenhouse gas emissions down to a level that will ensure the planet’s temperature does not heat up more than 2°C . This goal‚ however‚ may well be shot through‚ with the World Bank warning last week that the world was already on track to average warming of 4°C.

Dr Michaelowa said industry could drive the substantial generation of tax credits in this way. Because the effect of carbon emissions was global‚ so long as offset projects were credible it would not matter to the global climate if credit was generated in this way‚ he said.

A carbon offset is a reduction in greenhouse gas emissions made in one country or region to compensate for emissions made elsewhere. Offsets can be traded‚ via various mechanisms‚ on international carbon markets.

The ICCM event‚ aimed at showcasing how the mining and metals sector is contributing to a switch to a low-carbon economy‚ highlighted changes made by JSE-listed gold mining company Gold Fields in its quest to become a global leader in sustainable mining.

Gold Fields vice-president Jan du Plessis‚ who is also the group’s head of energy‚ carbon and water management‚ said its emissions reduction initiatives could save it 590‚000 tonnes of carbon on a recurring basis by 2016.

Electricity was responsible for 75% of its emissions‚ which was especially problematic in South Africa because of power utility Eskom’s reliance on coal‚ said Prof du Plessis‚ who also lectures at the University of Pretoria.

Eskom‚ which all but has a monopoly in South Africa‚ relies on coal for more than 95% of its power generation‚ and has said coal will be a strong part of its energy mix well into the future.

Gold Fields has total resources of 234.4-million ounces in mines across five continents‚ 85.1-million of which are proven reserves (1.7-million ounces in South Africa).

Prof du Plessis said Gold Fields was already subject to carbon taxes in many of the regions in which it operated‚ and had decided that carbon was "a good proxy for energy‚ especially in South Africa".

By managing energy consumption and carbon emissions‚ the group would be able to secure its future‚ especially because rising energy costs were causing a "margin squeeze" as mining Gold Fields reserves became increasingly complicated.

"Our mines are getting deeper ... (and that means) our energy consumption is going up‚" he said.

The multinational would have to invest $200m over the next four years to save 600‚000 tonnes of carbon by 2015‚ and its South African operations presented the biggest opportunity‚ with estimates that 430‚000 tonnes could be saved in South Africa by 2016‚ Prof du Plessis said.

He said that in 2011 Gold Fields implemented 12 projects with a potential total saving of 340‚000 tonnes of carbon a year‚ putting approximately R111m into this.

ICMM senior programme officer Simone Cooper said contrary to common belief‚ the mining and minerals sector had an integral part to play in a low-carbon economy‚ although the demand for specific metals and minerals was changing as technology changed. Minerals and metals were used in energy-efficient vehicles‚ solar panelling and wind turbines‚ for example.

The global industry was responsible for approximately 2% of global emissions‚ she said.

Sue Blaine is attending the talks on a scholarship from the United Nations Framework Convention on Climate Change.