Vis Reddy - Chairman, Partner and Principal Environmental Chemist, SRK Consulting South Africa
The draft National Greenhouse Gas Carbon Budget and Mitigation Plan Regulations – for which the window for public comment will close ‘ on 30 September – highlights the need for companies to plan exactly how they will reduce their carbon emissions. Companies that emit over 300,000 tonnes a year of carbon dioxide equivalents will be required to quantify the real targets they will be legally obliged to meet, and explain their strategies for doing this.
The identified companies will need to provide their greenhouse gas (GHG) emission inventories as a baseline, which will be rigorously verified. From this basis, they will be required to draft time-bound plans for reducing their emissions – plans which the Department of Forestry, Fisheries and the Environment (DFFE) will review and approve.
When the DFFE assesses these plans and targets, it is not obliged to accept the proposals; rather, it can choose to set its own benchmarks for each applicant. This could pose a significant risk to companies, who may be required to meet more demanding carbon reduction targets than they had expected.
National emission targets
The carbon budget regulations are aligned with South Africa’s commitments to reduce emissions, which it outlined in its Nationally Determined Contributions (NDCs) under the Paris Agreement. In its updated NDCs submitted in 2021, South Africa aims to have achieved annual GHG emissions of 398-510 Mt of carbon dioxide equivalents in 2025, and 350-420 Mt in 2030.
Comparing the GHG emissions generated by South Africa between 2000 and 2022, these commitments equate to a 0-22% reduction by 2025 and a 18-32% reduction by 2030. Sector-specific reduction targets have not yet been issued and could require reductions above the country average for high emitters.
The latest regulations are the next logical step from the country’s carbon tax system, which requires emitters to report GHG emissions for tax purposes. They go much further, however, stipulating that companies not achieving the legally required reductions could face fines, jail time or both.
Philippa Burmeister - Partner and Principal Environmental Scientist, SRK Consulting South Africa
Demonstrating progress
The process is that, after a company is issued with a final carbon budget, it will have six months to report on the action that it plans to take to meet these targets. The regulations will work on five-year cycles during which a company must monitor and demonstrate its progress toward the targets. In this way, the regulations give an added boost to the Climate Change Act of 2024, by further driving the country’s main emitters towards measurable reductions in carbon emissions.
The advancing regulatory process sends a strong signal to corporations that South Africa takes its global commitments seriously. It has been important, therefore, that stakeholders have engaged with the draft regulations constructively. Hopefully they are giving valuable feedback that could flag any aspects that could make implementation difficult or unreasonable.
Public comment is vital in crafting final regulations that can be reasonably applied and enforced. Good regulations enhance certainty and clarity of purpose, allowing companies to plan ahead in good time – as many will have to make considerable financial commitments to upgrade systems or improve infrastructure related to emissions.
Decisive action
The five-year horizon of initial expectations in the regulations represents a relatively tight timeline for the scale of investments and technological advancements that companies will need to make to improve their environmental performance. A key benchmark in this process will be to understand what a company’s carbon budget will comprise. In truth, most industry players really need to have built up some momentum on this issue by now, and should be in a position to act decisively without delay.
Most companies affected by the regulations are familiar with the process of reporting their emissions. There may still be some, however, that are yet to effectively quantify their emissions; they may face significant challenges when looking for opportunities to reduce their emissions.
The regulations are not yet clear on exactly how the budget determinations will be calculated and applied. They could be applied on a case-by-case basis for each company, for instance, or through minimum reduction requirements for each industry or sector. Whatever the case, the regulations highlight the need for proactive planning and action, if companies are to stay ahead of these carbon-related business risks.
