Categories: General News

by Peter

Share

Categories: General News

by Peter

Share

– Advertisment –

 by Eckart Zollner, EDS Systems

In pursuit of reducing greenhouse gas emissions, various countries have adopted the practice of carbon trading while others, like South Africa, have implemented a carbon tax to make carbon-intensive industries more environmentally conscious.

Eckart Zollner

These two frameworks are intended to compel enterprises to acknowledge their effect on the environment and encourage change; but does one system work better than the other? It is important to acknowledge that while both have their advantages and disadvantages, they’re both sides of the same coin. As such, it is imperative to focus on how organisations can ensure that they’re realistically transforming their operations to lower their emissions instead of getting distracted by which is the best theoretical way to do so.

Defining the differences

Carbon trading works by setting a blanket limit or cap on the quantity of emissions allowable from significant carbon sources. Once this overall limit has been determined, governments then issue permits for the limit which act as credits. These credits can be traded with other companies in the sector and, by reducing its own carbon output significantly, a company can then trade the excess on their permits.

However, where a company is unable to cut down their emissions, it may have to purchase additional permits to account for the difference. Part of the appeal of this framework is that as the limit is gradually reduced the number of credits is reduced, which will compel companies to adjust their operations to pollute less. On the other hand, carbon tax is a form of carbon pricing which sees a tax applied to carbon fuels or the output of carbon-intensive processes, placing a financial burden on entities that pollute. In this framework, companies have a choice: pollute and pay the tax or reduce emissions to avoid tax.

South Africa’s Carbon Tax Act

To meet our obligations in terms of the Paris Accord, the South African government has begun implementing the Carbon Tax Act which makes provision for a phased roll out of tax liability for carbon-intensive industries. One of the advantages of using carbon tax is that it represents a quantifiable source of revenue generation that can be controlled by government, along with providing an incentive to avoid the tax by reducing emissions. Furthermore, by making businesses and consumers alike aware of the environmental costs of production, consumption and investment decisions as they relate to emission initiatives, enterprises can be encouraged to adopt cleaner technologies and consumers can make more sustainable choices in how they spend their money.

The Carbon Tax envisages an incremental approach to imposing carbon tax liability, which is divided into three phases. In the first phase (which runs until the end of 2022), Scope 1 emitters will be liable to pay carbon tax for direct emissions from an owned or controlled source, such as emissions produced during the burning of fossil fuels. Whilst the Act imposes a tax liability it also provides relief in the form of emission allowances that range from 60 to 95% in the first phase. For example, there is a permissible basic tax-free allowance of 60% for all activities. For companies which use carbon offsets, it is possible to reduce their tax liability by up to 10%, and a further 5% budget allowance is given simply for meeting the Act’s reporting requirements. A further 10% allowance makes provision for trade-exposed sectors that might be liable to pay a carbon levy on import/export transactions.

Quantifiable thanks to technology

When it comes to quantifying carbon output, it is no longer a guessing game. Thanks to locally developed carbon tax analytics software, it is possible for organisations to accurately calculate and visualise their carbon footprint. To evidence compliance with the Carbon Tax Act, a carbon analytics tool can be used to generate an automated, accurate report which details emissions by source.

All it takes is for someone to input the process or emissions data into the software, to obtain an exact tax liability amount and a clear picture of the carbon footprint of the entire organisation. Once enterprises have a clear understanding of where their major carbon tax liabilities lie, they’ll be able to strategise on implementing carbon reduction frameworks across the value chain in a manner that properly acknowledges the urgency in reducing the carbon footprint of everything manufactured, traded, transported and consumed around the world.


STAY IN THE LOOP

Subscribe to our free newsletter.

Business Report 1 July 2012. Optimal Energy chief executive Kobus Meiring is a disappointed man. The company is the developer of South Africa’s electric car but it officially closed on Friday with the loss of about 60 jobs. This follows its failure to get further funding from the government and the Industrial Development Corporation (IDC)... http://www.iol.co.za/business/business-news/why-sa-s-electric-car-is-not-going-anywhere-1.1331580#.T_E37xcjGq8

Related Posts

  • After the Bell: The way people misunderstand renewable power is shocking  (Image: iStock) By Tim Cohen  Follow 13 Dec 2022  2 I can’t get away from the feeling that the constant, relentless defence of coal has a larger agenda somewhere behind it. Listen to this article 0:00 / 6:23 1X BeyondWords How do we comprehend the resistance among […]

  • Opinion: Koeberg life extension could flip switch on half a trillion rands of economic damage Graphic showing coal capacity factors and loadshedding 24TH NOVEMBER 2022 ARTICLE ENQUIRY      SAVE THIS ARTICLE      EMAIL THIS ARTICLE FONT SIZE: –+ In this opinion article, energy analyst and commentator Clyde Mallinson warns that, against the backdrop of persistent and erratic loadshedding, the economic cost of shutting the Koeberg nuclear plant for […]

  • A New Barefoot GuideFrom the Agroecology Series My Food is African Healthy soil, safe foods and diverse diets Télécharger – Français Download – E   A New Barefoot Guide From the Agroecology Series My Food is African Healthy soil, safe foods and diverse diets Télécharger – Français Download – English A publication of The Alliance […]

  •  > This edition | The voluntary carbon markets, explained in three figures        Read the last Dispatch | The dark matter of the emissions universe             Next Dispatch | What to do when portfolios hit the “value-carbon frontier”  Share Tweet Forward Carbon is a new global currency. If we're serious about stopping climate […]