Carbon Tax: Legal Assessment Guide For Companies

Carbon Tax: Legal Assessment Guide For Companies

By Ayanda Msimang

The much anticipated and long overdue Carbon Tax Act came into effect on 1June 2019 – this after president Cyril Ramaphosa signed the Carbon Tax Bill into law in May. During the Minister of Finance’s budget speech in February 2019 it was announced that a carbon tax levy on fuel will be levied at 9c/litre on petrol and 10 c/litre on diesel effective from 5 June 2019, a burden to be carried by both companies and consumers.

1June marked the commencement of the first phase of the Carbon Tax Act, which will continue up until 31 December 2022. The second phase will commence thereafter which will start in 2023 and end in 2030. These phases have been aligned with South Africa’s National Determined Contributions targets to reduce greenhouse gas emissions, determined in accordance with the Paris Agreement. The goal is to reduce greenhouse gas emissions by at least 34% by 2020 and 42% by 2025.

How will carbon tax work?

According to the Act, any person that conducts an activity and emits greenhouse gas emissions (fuel combustion, industrial processes, and fugitive emissions) in the Republic above the prescribed threshold will be liable to carbon tax. However, the thresholds have mostly been set for the energy, manufacturing, construction and transportation sectors, this includes heat and electricity recovery from waste. But will exclude the Waste sector and Agriculture, Forest and other Land Use sectors.  

The initial marginal carbon tax rate on a taxpayer’s greenhouse gas emission has been set at R120 per ton carbon dioxide equivalent. However, due to South Africa’s struggling economy, the carbon tax will range between R6 – R48 per ton carbon dioxide equivalent during the implementation phase which is much lower than the initial rate of R120 per ton carbon dioxide equivalent. The implementation model is basically complemented by tax incentives and revenue recycling measures to allow a smooth business transition with minimal economic impact. The Act creates the following allowances: basic tax-free allowance, fugitive emissions allowance, trade exposure allowance, performance allowance, carbon-budget allowance and offsets allowance. Thus, during the implementation phases the total tax-free allowance could reach a high of up to 95 per cent.

Does carbon tax apply to my company, and if so, how do I go about assessing my position?

In order to have a holistic understanding of the Act’s legal and fiscal implication, it is suggested that companies should perform their assessments in the following manner:

Step one – Applicability

Companies must first determine whether the Act actually applies to their operations. Thereafter, it is imperative for companies to establish the practical implications of the Carbon Tax Act or the effect of the Act on a company’s business operations.

Step Two – Quantum

Companies should determine and establish how much carbon tax will be levied in respect of the companies’ total greenhouse gas emissions. This aspect will require someone with technical knowledge who will calculate the amount of carbon tax to be levied from a company.

Step Three – Financial Ramifications

Once a company has established that the Act applies to its operations and how much carbon tax will be levied from such company, the company should then proceed with seeking a broader understanding of the Act’s fiscal or financial implication.

In essence, the company will then require someone with tax, customs and commercial expertise to conduct a holistic financial assessment of the company’s financial position as far as the impacts of carbon tax are concerned.

It is recommended that companies should seek expert advice on the consequences of the Act to avoid unwarranted confusion when the Act actually kicks in and to attain proper understanding of the relevant regulatory requirements.

Source: Construction World

Carrot And Stick Approach To Cut Carbon Emissions

Carrot And Stick Approach To Cut Carbon Emissions

The Clay Brick Association AGM & Conference held in May 2019 focused on topics that improve sustainability in both clay brick production and the built environment.

Carbon Tax has taken a long time to come to fruition, but it is here in South Africa from 1 June 2019.

The clay brick sector is committed to playing their part in meeting Government’s targets to reduce carbon emissions. The Clay Brick Association of South Africa (CBA), a member-based non-profit organisation, supports and builds capacity in the national clay brick supply chain,

The CBA is driving several integrated sustainability initiatives to give stakeholders access to accurate, locally-relevant research,” explains Mariana Lamont, executive director of the CBA.

We are engaging with both formal and informal brickmakers, the public sector and construction professional like architects, quantity surveyors and construction buyers. We keep the industry informed on legislation and opportunities for improved energy efficiency in both brick manufacturing and the built environment.

Vertical shaft brick kiln technology (VSBK) technology uses hot
exhaust gasses for the gradual preheating of the unfired bricks in
a continuous process, thus reducing energy consumption and CO2
emissions by up to 50% compared to the more commonly used clamp
kilns. Image: Rowe Group

We are proud to announce that over the last 5 years, the CBA’s programmes have resulted in a 10-15% reduction in the clay brick industry’s greenhouse gas emissions,” she concludes.

Carbon Tax

At the CBA’s recent annual conference, Lisa Reynolds of Green Building Design Group (GreenBDG) advised CBA members on Carbon Tax legislation.

Carbon Tax is for Scope 1 emissions – “polluter pays principle”. It calls for R120/tonne of Co2 equivalents, but with the allowances, the actual liability is between R6 to R48 per tonne of CO2e. A fuel levy of 9/10 cents will be imposed on petrol/diesel due to the Carbon Tax. Payment of the Tax will be done via the Customs and Excise Act. Misinformation submitted will result in substantial fines.

As part of its Switch Africa Green programme funded by the European Union, the CBA has established an online portal that will benchmark the industry and assist in calculating some Carbon Tax allowances. The consolidated, anonymous reporting identifies where real savings are being achieved by members, and provides accurate, local research for potential future mitigation projects.

SANS 10400-XA

SANS 10400-XA (Version 2) on energy-efficiency in buildings is on track for publication this year.

The construction industry professional will be pleased to hear that it is more user-friendly and there is no reference to SANS 204. The reference building route to compliance exists in the Regulation and will thus be scrapped from the standard, leaving only two routes to comply: The tables and the “recipe” route. An important change is the map revised by the CSIR. The new map reflects energy zones (rather than climatic zones) that consider the energy (and humidity) needed to achieve thermal comfort inside a building.

The energy efficiency performance requirements within this standard are being made slightly more stringent. While the regulations for non-masonry walling remain unchanged, there will be a higher thermal performance requirement for masonry walling. This means that concrete and brick walling will require some kind of thermal intervention – such as a cavity wall– which is more difficult to construct.

The thermal performance requirement for walling will further depend on the type of building and the hours of day the building is used.

I believe the biggest impact of the revised SANS 10400-XA in the market will be in terms of masonry walling,” reports Lisa Reynolds.

The previous standards were quite low. In poor communities cavity walls are a challenge, and developers will need to consider composite walling with insulation in order to comply.”

Energy Efficiency Tax Incentives

The tax rebates for energy efficient projects – Tax 12i and Tax 12L – were launched in 2013 as incentives to save energy and thereby reduce Carbon emissions. Tax 12L offers a rebate of 95 cents per verified kWh saved (confirmed by a SANAS accredited, independent body). The sunset clause for the Tax Incentives has been extended to 2022 in alignment with the Carbon Tax.