Colombia’s carbon tax: is South Africa next?

In June 2017 Colombia, as the third developing country in the world after Mexico and Chile, has successfully passed new environmental and carbon tax legislation. This new scheme allows Colombian organisations to offset 100% of their tax liabilities. What does the Colombian carbon tax entail and what type of carbon offset projects are allowed to participate? We compare and contrast the Colombian carbon tax with South Africa’s proposed carbon tax bill and offsetting rules, with the objective to discuss the importance of a carbon tax law in South Africa.

Colombia’s commitment to climate change

Colombia has successfully ratified the Paris Climate Agreement, committing to reduce emissions by 20% by 2030, 30% below Business-as-Usual (BAU), with international support. President Juan Manuel Santos, who was inspired by Al Gore’s words, has been debating the introduction of the carbon tax since 2011. The Colombian government admitted that more than 70% of Colombian territory is vulnerable to global temperature rises. To be more precise, the majority of the population lives in the elevated Andes, where water shortages and land instability are already a reality, and on the coast, where the increase in sea level and floods can affect key human settlements and economic activities.

While many critics have expressed their scepticism regarding the sincerity of Juan Manuel Santos’s administration concern for environmental sustainability, the Colombian Government ultimately approved a tax on fossil fuels (Part IX, Impuesto Nacional al Carbono) equivalent to approximately US$5/tCO2e payable by producers and importers of fuels in December 2016. Furthermore, in June 2017, the Colombian government finalised the rules and conditions of carbon offsetting to allow high-quality carbon credits to be used against the carbon tax obligations. Unlike South Africa, where the use of carbon credits is proposed to be capped at only 5% to 10%, Colombian entities can offset 100% of their tax liability by investing in carbon offset projects. In addition, carbon credits generated outside of Colombia are eligible until the end of 2017, after which only Colombian carbon credits can be used. By allowing a cap of 100% as well as non-domestic credits during the first few months of the scheme, helps boost market liquidity – crucial in the early stages of any new domestic carbon scheme.
We have briefly reviewed the carbon tax and offset rules in Colombia and compared them to South Africa in the table below:

Colombia and South Africa are considered upper middle-income countries. Both countries are rich in natural resources (e.g. gold, silver, platinum, oil and coal). Although Colombia faces a number of challenges, such as armed conflicts, illegal drug problems, disjointed urban and rural contexts, and limitations in subnational administrative capacity, the country has stepped up the fight on man-made climate change. It has followed the example of other Latin American countries, such as Mexico and Chile, who also put a price on carbon and make fossil fuel industries accountable for their emissions.

Where does South Africa stand?
South Africa is an important and active player in global climate change negotiations. The country has a very strong national climate change response agenda and a highly advanced regulatory and law enforcement framework. Nevertheless, the country faces political instability and corruption that unfortunately is delaying the enforcement and implementation of environmental regulations, and discourages private investment and the uptake of low carbon technologies. The delay in the signing of the power purchase agreements of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) is one example of many.
The South African carbon market is currently in limbo and if the carbon tax bill does not become law sooner rather than later, the country will miss the opportunity to ensure a much needed, and overdue, transition to low carbon economy which will help generate more employment and make South Africa more globally competitive. Therefore, it is crucial that the revised carbon tax bill, which was supposed to be tabled in Parliament mid-2017, is released as soon as possible. Whilst Colombia has transparent and straightforward carbon tax rules and offsetting legislation, South Africa is still in process of clarifying and simplifying the procedures. How long will it still take South Africa to sign the carbon tax into law? The government has a chance to follow the example of Latin American countries and to become a role model for all African countries in cutting its emissions. The challenge the South African government faces is not only to design and to implement an effective carbon tax and carbon offset regulations but also to carefully balance the energy needs, development priorities and environmental objectives.

Author: Jana Hofmann, Leading Researcher, Climate Neutral Group. For more info, contact Jana at jana.hofmann@climateneutralgroup.com

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Greenhouse Gas Emissions reporting rules a fact

5/4/17 (InfrastructureNews) – South Africa’s National Greenhouse Gas Emissions Reporting Regulations were implemented by environmental affairs minister Edna Molewa in April 2017. The first reporting deadline is 31 March 2018.

The regulations aim to introduce a single national reporting system for the transparent reporting of Greenhouse Gas (GHG) emissions, which will be used predominantly to update and maintain a National Greenhouse Gas Inventory.

It will also be used to assist South Africa in meeting its international obligations in relation to climate change mitigation. Law firm Webber Wentzel has compiled a breakdown of the new regulations, including how the regulations work in practice and what they mean for you.

An integrated GHG reporting system

The rationale for an integrated Greenhouse Gas Emissions reporting system is based on the imminent imposition of the carbon tax for identified affected sectors in South Africa. These sectors will be identified based on their GHG emission concentrations.

The Greenhouse Gas Emissions Reporting Regulations are one of the implementation tools which will be used to regulate the reporting of data and information from identified point, non-point and mobile sources of atmospheric emissions to the National Air Emission Inventory System (NAEIS) with a view to compiling atmospheric emission inventories to inform the proposed carbon tax.

Although still in draft form, the declaration of GHGs as priority air pollutants (which will require persons conducting an activity within a designated GHG emission threshold to prepare a pollution prevention plan in accordance with the proposed National Pollution Prevention Plans Regulations) will, once finalised, and when combined with the GHG Reporting Regulations, complete the regulatory regime for the mandatory reporting of air emissions to the NAEIS housed on the South African Air Quality Information System.  This all means that the dominos are slowly being lined up for the carbon tax to be formalised.

How will the GHG Reporting Regulations work in practice?

The GHG Regulations differentiate between Category A data providers (which include persons controlling or conducting activities which emit GHGs) and Category B data providers (which include public bodies and academic/research institutions which hold GHG emission data for the purposes of calculating GHG emissions).

These data providers are required to report on GHG emissions activities at their facilities in line with the identified categories of emissions sources set out in Annexure 1 to the GHG Reporting Regulations.

The reporting obligations imposed on Category A data providers are more stringent and comprehensive than for those in Category B, as they are based on operational control and must cover all process, fugitive and combustion emissions from all GHG emission sources and source streams belonging to listed activities.

The methods for reporting GHG emissions data are set out in the “Technical Guidelines for Monitoring, Reporting and Verification of Greenhouse Gas Emissions by Industry” for each tier specifying the relevant emission sources.

Category A data providers must submit the GHG emissions and activity data for all of their facilities and in accordance with the data and format requirements specified in Annexure 3 for each preceding calendar year, to the competent authority by 31 March of each year (or the next working day). The competent authority has 60 days following a submission to approve a Category A data provider’s data or to request that such data be validated and verified. Category B data providers, on the other hand, must submit emissions and activity data collected only when requested to do so by the competent authority.

What does this mean for you?

At this stage, all designated data providers, whether Category A or Category B, will be required to register their facilities on the NAEIS or with the competent authority where activities at their facilities exceed the thresholds listed in Annexure 1 by 7 May 2017 or within 30 days after commencing such an activity if at a later stage.

Webber Wentzel said it is a criminal offence for a data provider to provide false or misleading information to the competent authority or to fail to comply with its registration, reporting and record-keeping obligations as set out in the GHG Reporting Regulations.