Carbon Tax Act 15 of 2019 and its practical implications on the South African mining sector

Abstract

While the mining sector as an energy-intensive industry has made a significant contribution to the South African national economy, it has equally contributed much to the climate change challenges in the country. The National Climate Change Response paper proposes market-based instruments such as Emissions Trading Schemes and carbon taxation as appropriate to reduce emissions and combat climate change. Further, the carbon tax is the preferred market-based instrument. This is regulated by the Carbon Tax Act 15 of 2019 which came into effect on 1 June 2019, and has adopted the gradual implementation approach consisting of two phases. The first phase allows allowances, rebates, and exemptions whereas the second is largely dependent on the success of the first phase. Since its enactment, the Carbon Tax Act 15 of 2019 has been the topic of conversation within the mining sector due to its uncertainties. The Act imposes a tax on CO2-eq GHG emissions and it aims to facilitate a structural transition to a low-carbon economy however, it is not entirely certain what mining companies should do to reduce their emissions and contribute to the transition to a low-carbon economy. Therefore, the current study aimed to uncover the practical implications of the Act on South African mining companies and the sector in general. In this instance, the study submits that mining companies should first recognise the urgent need to transition to a low-carbon economy and therefore, commit to the environmental aspect of the ESG. The study further submits that mining companies have to implement changes within their operations that can reduce their emissions, accordingly, escaping their carbon tax liability and contributing to the global effort to transition to a low-carbon economy.