Climate change response policy will bring about radical changes

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Companies listed in the JSE Top 100 have participated in the Carbon Disclosure Project on a voluntary basis. This initiative is a comprehensive climate change reporting platform that looks at all climate related risks and opportunities and includes a full disclosure of the greenhouse gas emissions of the reporting company.

The practice of voluntary action and reporting is set to change in a number of different ways. Regulation is catching up with what has been happening on the ground and the implementation of government's climate change response policy is set to bring about a number of radical changes.

On a national level, South Africa's transition to a low carbon economy is guided by the country's vision for 2030, as detailed in the 2011 National Development Plan and the National Climate Change Response White Paper published in 2011.

Long-term strategies

South Africa has outlined long-term strategies for both adapting to the effects of climate change through adaptation policies and reducing its carbon emissions to a sustainable level through mitigation policies to achieve this vision.

The mitigation efforts are based on mandatory reporting of greenhouse gas emissions, the implementation of a carbon tax and the implementation of a possible carbon budget. The carbon budget might be implemented through a set of desired emission reduction outcomes (DEROs). DEROs aim to set greenhouse gas emission targets for sectors, sub sectors and, in some cases, companies.

South Africa has seen a recent increase in activity, with a number of draft regulations and documents published for comments. However, there seems to be limited alignment or consistency between the various requirements set by the different government departments.

South Africa's current greenhouse gas emission level is just over 580 million tons of carbon dioxide equivalents. These emissions have to be managed and ideally reduced in accordance with the trajectory promised to the international community and as outlined in the National Development Plan.

Largest contributor

The largest contributor to South Africa's 2010 national greenhouse gas inventory was the energy sector, contributing to 85% of the overall emissions. Prior to 2010 three main activities effectively reduced the national inventory. The three main mitigation initiatives are the Sasol fuel switch project, the combined group of registered and implemented carbon credit projects under the Clean Development Mechanism and the Eskom Demand Side Management Programme.

If the country is to meet its emission reduction commitments and pledges, these projects have to be sustained and new initiatives have to be added. The biggest concern for companies lies in the high degree of uncertainty regarding the detail of implementation of the new developments.

Many questions exist in this uncertain environment. There are uncertainties in the threshold at which companies will start paying carbon tax, how the electricity tariffs and liquid fuels prices be impacted and which projects will qualify as suitable offset projects. These questions remain unanswered.

With the public comment period on the mandatory mitigation actions as well as the greenhouse gas priority pollutant regulations closed and the comments on the proposed offset paper due by 30 June 2014, there is still no oversight of the interconnections between all these various pieces of proposed legislation. In addition, some essential elements such as the basic design and functionality of the DEROs are still in the initial drafting stage. The possible reporting burden could be indeed very high.

Proactive management

Many companies are proactively managing the regulatory climate change risks though a number of actions. One example is to draft a carbon footprint for the past ten years and review the trend. This allows companies to set a baseline from which engagement with the authorities and planning for the future can be done.

Another action is to collect information on greenhouse gas reduction projects already implemented and review the impact that those already had on reducing the carbon footprint. Many companies are signatories of the Energy Efficiency Accord. These companies should review the effectiveness of the actions taken in terms of the accord. All these actions will help companies to identify additional projects that could be implemented in the short, medium and long term.

Climate change was only an idea for environmentalists five years ago and an issue for the sustainability team two years ago. It is now a strategic imperative for companies to remain competitive in the low carbon economy.