Sasol Climate Change Report 2023 - Book - Page 67
INTRODUCTION
GOVERNANCE
TRANSFORMING FOR RESILIENCE
CLIMATE ADVOCACY AND POLICY
DATA AND ASSURANCE
REGULATORY DEVELOPMENTS CONTINUED
South Africa
CLIMATE CHANGE BILL
The Climate Change Bill is undergoing
extensive consultation through the
parliamentary process.
Sasol participated in the consultation process in
late 2022 and submitted our view that a dedicated
Climate Change Act is needed to govern South
Africa9s climate change response, including
mitigation and adaptation activities.
Sasol supports South Africa9s COP26 NDC, a key
driver of the Bill. Our reduction targets support
the NDC.
In addition, we highlighted a few areas we believe
should be improved to strengthen application of
the instruments in the Bill and better navigate the
realities that the country is facing:
" Better recognition of the key principle of
varying mitigation potential across sectors
in allocating the carbon budget. Government
has completed a Mitigation Potential Analysis
which details mitigation opportunities across
sectors and is indicated as a key input into
the budget allocation process. It is important
that the Bill fully acknowledge companies9 and
sectors9 mitigation potential, their ability to
transition as well as their inability to transition
at pace because of factors beyond their control.
These well-entrenched principles are included in
legislation across the globe and acknowledged
by the South African government.
" Carbon budget exceedances should be penalised
through a carbon tax, which is the intent of
government but, because of legal challenges,
has not been included in the Bill.
" Incentives should be introduced into the draft
legislation including green funds, tax breaks
(extension of existing ones such as the Income
Tax Act9s section 12L and the introduction
of new incentives) as well as subsidies for
decarbonisation investments. At present,
the Bill only notes that incentives 8may9 be
introduced.
CARBON TAX
PCC JUST TRANSITION FRAMEWORK
In 2023, post culmination of the 2022
consultation process, National Treasury
gazetted tax law amendments detailing
increased headline carbon tax rates to 2030,
indicating that there is no 'sunset clause'
applicable to allowances. Once applied, from
2026, these rates (see page 24), will result in
higher carbon tax obligations for Sasol.
Further, National Treasury has indicated that a redesign
of allowances could be undertaken. However, at this
stage, government has not provided any further
information 3 which remains a concern. The 2023
Taxation Laws Amendment Bill was also silent on
the matter.
We participated in the consultation processes ahead
of promulgation of the higher rates and put forward
our view that we support carbon pricing and believe
that carbon taxes are an important part of policies and
measures to achieve effective decarbonisation, if set at
the appropriate rate. Our additional views were:
" Carbon taxes, if too high, will prematurely shut down
businesses and negate a just transition; if set too
low, they will be ineffective in reducing emissions.
The original tax-rate proposals made by National
Treasury were set higher, without allowances, which
would have had devastating impacts. Closure of
our business processes would have been inevitable,
impeding a just transition and running counter to
the Future Sasol strategy.
" Allied to the 8stick9 of carbon tax should be the
8carrot9 of incentives to more actively encourage
the uptake of low-carbon technologies and the
development of new green sectors. We recognise
that we compete with other countries which have
similar natural endowments to our own but are
driving low-carbon development through incentives.
In 2022, the President and Cabinet approved
the national Just Transition Framework. The
Presidential Climate Change Commission
(PCC) is advancing work on the development
of a just transition implementation plan
that is yet to be published.
Sasol welcomed the Framework and its intended
aims and is currently embedding the just transition
principles and the Framework in its own just
transition approach. Sasol participated in the
2022 consultation process and put forward the
following views:
" Role players9 responsibilities and their
accountabilities should have been clearly spelt
out. In particular, the Framework needed to
stress the importance of addressing potential
fragmentation, misalignment and duplication
of effort between role players. We expect that
the Framework's implementation plan will take
forward this concept in more detail.
" The PCC should introduce mechanisms that
go beyond tax penalties and incentives. These
mechanisms should include grants, subsidies,
loans and the establishment of renewable and
green special economic zones.
" The shift to cleaner energy sources and lowcarbon products will necessitate different skills,
their development requiring necessary policy
and regulatory interventions.
Securing international support for South Africa9s
just transition is an imperative that extends
beyond sourcing funds. This means that the
PCC9s Just Transition Framework will still need to
spell out support in the implementation phase
for technology transfer, capacity building, trade
cooperation and partnerships.
" Alignment of the carbon budget with the carbon tax
remains critical and must be advanced in legislation
through a design that encourages development and
reduces GHG emissions.
In December 2022, a draft green
hydrogen commercialisation strategy
(GHCS) was released for public
comment. The GHCS builds on the
foundation laid by the Hydrogen Society
Roadmap (HSRM), released in
February 2022.
The GHCS supports an approach of creating
commercial opportunities to foster an
internationally viable green hydrogen industrial
sector. It is envisaged that this sector will be
able to service both export markets as well as
stimulate domestic demand by 2050. Green
hydrogen opportunities for South Africa are
dependent on end-use cases for clean energy
carriers, which include derivatives such as
green ammonia, green methanol, SAF and
green steel.
The GHCS focuses on national ambition,
objectives for prioritising green-hydrogen
sectors, demand drivers, technical value-chain
definitions and related delivery supply chain
options.
Sasol has actively participated in, and
commented on, the development of the GHCS.
We support the development of the hydrogen
sector but there are some risks and challenges
that impede the large-scale deployment of
green hydrogen projects in South Africa.
These include:
" significantly high costs;
" infrastructure limitations, particularly
logistics;
" lack of incentives; and
" availability of continuous, uninterrupted
basic utilities.
These key positions were put forward as part
of our submission on the GHCS.
Sasol9s net carbon tax payment for 2023 on calendar
year 20229s GHG emissions, after offsets and electricity
levies, was R1,138 billion.
SASOL CLIMATE CHANGE REPORT 2023
GHCS
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