Greenhouse gas reporting regulations and carbon tax for business.

The purpose of the regulations is to introduce a single national reporting system for the transparent reporting of greenhouse gas emissions, which will be used:

• to update and maintain a National Greenhouse Gas Inventory
• for the Republic of South Africa to meet its reporting obligations under the United Framework Convention on Climate Change (UNFCCC) and instrument treaties to which it is bound; and
• to inform the formulation and implementation of legislation and policy.

These regulations (http://www.gov.za/sites/www.gov.za/files/40762_gen275.pdf) apply to the categories of emission sources listed in Annexure 1 to these regulations and a corresponding data provider as classified below:

• Category A: any person in control of or conducting an activity marked in the Category A column above the capacity given in the threshold column of the table in Annexure 1 of these regulations; and
• Category B: any organ of state, research institution or academic institution, which holds greenhouse gas emission data or activity data relevant for calculating greenhouse gas emissions relating to a category identified in Annexure 1 of these regulations.

Important considerations for business

Reporting Boundaries – Companies must define their reporting boundaries based on operational control, defined by the regulations as “the full authority to introduce and implement its operating policies at the company”.

Inclusion/exclusion of certain emissions – The regulations require companies to exclude emissions from mobile combustion (emissions from vehicles) as well as emissions from purchased electricity and refrigerants. Emissions from waste and waste-water treatment are included, provided you exceed the threshold.

Transitional Arrangements – Companies, may for a transitional period of up to five years from the date of commencement of the regulations apply lower tiers than those specified in the regulations, with tier 1 method being the minimum.

Thresholds per source category – The regulations provide thresholds per emission source, above which companies are required to report. In the energy sector this is typically 10MW for the energy sources and varies for other categories. It is important to note that the 10MW refers to the design capacity and not how much fuel you consumed. In addition, it is not linked to one piece of equipment larger than 10MW. The regulations provide an example of six 2MW boilers, equating to 12MW, which would then exceed the threshold. Likewise, if you have multiple sites all with back-up generators, and these exceed ten in number, then the 10MW threshold will be triggered, even if no diesel or gas was consumed.

Calendar year – Reporting needs to be done on a calendar year basis, regardless of when your financial year ends.

Timing – The Regulations state that companies must submit their returns by the 31^st March for the preceding calendar year ending 31^st December.

Registration – Companies will need to register their company and the facilities that exceed the threshold on the South African National Atmospheric Emission Inventory System (NAEIS) which will serve as the reporting portal for GHG data. The regulations require facilities to register within 30 days of publication of the regulations.

Record Keeping – A company must ensure transparency of the data submission by archiving all data, measuring reports, algorithms, procedures and technical references used to estimate greenhouse gas emissions. The data submission must be kept for at least five years and must be available for inspection by the competent authority.

Validation and verification – The regulations do not specify verified data, but if the competent authority deems the data not to be transparent, complete or correct, they may undertake on-site verification and validation for which the company will be liable for all costs.

Offences – A company commits an offence if that company provides false or misleading information to the competent authority or fails to comply with the regulations.

Penalties – A company convicted of an offence in terms of the regulations is liable in the case of a first conviction to a fine not exceeding R5 million or to imprisonment for a period not exceeding five years and in the case of a second or subsequent conviction to a fine not exceeding R10 million or imprisonment for a period not exceeding 10 years and in respect of both instances to both such fine and such imprisonment.

Carbon Tax

The foundation of the carbon tax, including its administrative system, has been laid down through promulgation of the above mentioned National Greenhouse Gas Emission Reporting Regulations. Key points to note:

• Carbon tax has been implemented with effect from the 1^st June 2019, with the carbon budgets imposed under a separate climate change bill starting out next year as voluntary before being made mandatory after 2020.
• South Africa’s carbon tax rate has been set at R120 per tonne of greenhouse gas emissions, and various percentage-based tax-free thresholds will be applied.
• The tax will affect virtually all areas of South Africa’s economy, covering most stationary and non-stationary sources and applying to fossil fuel combustion, fugitive emissions, and industrial processes.
• Waste, agriculture, forestry, and other land-use sectors are exempt from paying it or performing MRV until 2022 due to the difficulty in accurately measuring output from those sources.
• A basic tax-free allowance of 60% is offered to all emitters, with an additional 10% for having process or fugitive emissions.
• Another variable allowance of up to 10% is available for trade-exposed sectors, with an additional 5% available for above-average performance relating to sectoral benchmarks.
• Each emitter has an offset usage limit of 5% or 10%, depending on their sector.
• Beyond that, a further 5% can be applied by companies that have developed an annual carbon budget and report it to the government.

Next Step

Companies must register and familiarize themselves with the NAEIS and ensure that they are ready to report. The official deadline of the 31^st March 2018 has long since passed, so urgency is required if your company emits greenhouse gases above the stipulated thresholds.

Forvis Mazars can assist you with this and the entire greenhouse gas emission reporting and carbon tax process as we have internationally accredited Institute of Environmental Management & Assessment (IEMA) Carbon Footprint Analysts on hand to guide you every step of the way.