Sasol Climate Change Report 2023 - Book - Page 66
INTRODUCTION
GOVERNANCE
TRANSFORMING FOR RESILIENCE
CLIMATE ADVOCACY AND POLICY
DATA AND ASSURANCE
REGULATORY DEVELOPMENTS CONTINUED
European Union
RED AND ITS DELEGATED ACTS
Developed markets such as the European Union are critical
for growth of the green hydrogen sector in South Africa,
where the affordability and availability of incentives are
limited.
South Africa is in the early stages of developing the regulatory
and fiscal environment for green hydrogen deployment but is
doing so amidst competing national priorities of energy security
and addressing poverty and unemployment. Cross-border
enabling policy is therefore critical to stimulate green industries
and fetch product premiums to grow low-carbon jobs and realise
South Africa9s potential in this sector.
We are closely tracking opportunities emanating from the European
Union Renewable Energy Directive (RED) and its Delegated Acts (DAs).
However, we are concerned that the relevant DAs do not allow for
a flexible attributional Life Cycle Analysis (LCA) approach. Adopting
such an approach would allow the GHG benefits of incremental green
hydrogen to be apportioned to selected products such as sustainable
aviation fuel (SAF), see page 43. By mandating a standard (nonflexible) LCA, the directive effectively limits the volumes of SAF that
can be produced, impacting project economics. This undermines, in
our view, the European Union's need to maximise the volume of
certified renewable fuels available to its members and is in direct
opposition to its own recognition of South Africa9s just transition.
In addition, other requirements in the DAs also pose challenges for
renewable-energy deployment to support green hydrogen.
We have expressed our views on the challenges with current
regulations that disadvantage producers of renewable fuels of
non-biological origin (ie SAF) in developing economies, such as
ourselves, because of prevailing conditions in these countries.
Specifically, regulations on the timing and location of renewablefuels production and the generation of renewable electricity to
produce these fuels, as drafted, do not appear to take into account
non-European Union realities.
It is our position that, with suitable funding and appropriate
regulatory regimes, our 8brownfields9 Fischer-Tropsch (FT) facilities
in both Secunda and Sasolburg could be among the lowest-cost
producers of sustainable fuels in the world 3 and a boon to realising
the European Union9s low-carbon ambitions and targets. We have
also made the point that ecoFT projects inside the European Union
and elsewhere require supportive regulatory regimes to secure final
investment decisions (FIDs). In all cases, we have suggested
amendments to regulations and wording that we believe would not
detract from the intent behind European Union policy.
Sasol Chemicals, Italy
1. Trade and Industrial Policy Strategies: Policy Brief 1/2023, based on 2019 data.
SASOL CLIMATE CHANGE REPORT 2023
65
CBAM
The Carbon Border Adjustment Mechanism (CBAM) is a
proposed carbon tariff, linked to the price of allowances
under the European Union Emissions Trading System
(ETS), on certain imported carbon-intensive products.
Initial sectors to be covered are iron and steel, cement,
fertilisers, aluminium, electricity generation and
hydrogen.
Implementation of CBAM will be carried out in phases with the first
phase focused on reporting, running to the end of 2025.
Sasol is not impacted in the first phase; however exposure would
arise if organic chemicals and polymers are included 3 which could
occur at some stage during the mandatory phase, pending
resolution of calculation-methodology investigations. Depending
on the final agreement and pricing of the tax, we may need to
explore alternative markets for some of our chemical products.
Internal analysis is underway.
Of particular concern is the impact that CBAM will have on exports
from South Africa as a whole. Broadly, a number of studies have
indicated that CBAM is likely to have a severe impact on the
economy. South Africa's export products are, by and large, carbon
intensive because of the country's reliance on coal.
The European Union is one of South Africa9s major trading partners,
accounting for ~20% of total exports1. Given the potentially severe
impact on the country9s economy, we continue to support the
South African government's advocacy for European Union
policymakers to recognise the country9s NDC and the need for a
just transition. It has been publicly recommended that the
European Union seek alternative policies and measures to achieve
the same desired outcomes.
