Tag: Carbon tax
ESG: Achieving net zero and the role of carbon tax
A reduction in carbon emissions is integral to South Africa’s global commitment to achieve net zero. The South African government strategically introduced carbon tax to combat global warming by encouraging a low carbon economy. The structure of the carbon tax legislation incentivises compliance to convert to green sooner rather than later – particularly those sectors that are typically heavy carbon emitters.
By Nirvasha Singh, Partner, Carryn Alexander, Partner & Amanda Nkwanyana, Associate at Webber Wentzel
The extractive industry is South Africa’s primary energy supplier. While coal has been Eskom’s main resource (making up 75% of South Africa’s energy supply), its negative environmental, climate and social impacts can no longer be overlooked. Great strides have been made by certain industry leaders to move to clean energy by using hydrogen-powered vehicles as part of their mining equipment. Mining in a more environmentally friendly manner will undoubtedly result in a reduction in carbon emissions and carbon tax liability. However, these projects are notably capital-intensive and will take some time to implement.
In response to South Africa’s energy deficit crisis, the South African government has also taken steps to quickly prioritise the acceleration of renewable energy programmes to generate more electricity and ease the demands on Eskom. This urgent focus by the government forces the extractive industry not only to consider switching to environmentally friendly production processes, but also to re-look at the minerals mined in South Africa.
The new global clean energy economy has made way for industrial opportunities in strategic alternative minerals such as platinum, vanadium, titanium, cobalt, copper, manganese, chromium, and lithium. The exploration of these alternatives will lead to a reduction in emissions and pollution levels, which will also lead to a reduction in carbon footprint and thus, a reduction in a business’s carbon tax liability.
Carbon tax was introduced in a phased manner, starting with a relatively modest rate, together with transitional support and exemptions. Currently, companies are entitled to carbon tax allowances of up to 95% to assist financially in transitioning their operations to low carbon and cleaner technologies. However, these allowances will not remain for all three phases.
In the 2022 Budget, government announced its intention to ramp up the carbon price and strengthen the price signals to promote behaviour changes over the short, medium, and long term. It proposed increases in the carbon tax rate for the 2023 to 2025 tax periods by a minimum of USD 1, increasing gradually to USD20 in 2026 and at least USD30/tCO₂e in 2030. Additional short-term tax relief was introduced by government through the energy efficiency savings tax incentive, which provides a tax deduction equivalent to the monetary value of actual energy efficiency savings (kWh) achieved, subject to a certificate of approval issued by the South African National Energy Development Institute.
It is proposed that this incentive be available until 1 January 2026 for relief from the proposed higher carbon tax margin to encourage companies to reduce greenhouse gas emissions and help stimulate new energy efficient practices and industries during this period. Companies must rapidly take advantage of this temporary relief by transforming their activities through investments in energy efficiency, renewables, and other low-carbon measures with the aim of reducing their carbon footprint.
Investing in low-carbon energy sources will help to fulfil any business’s ESG obligations. Commitment to ESG principles is important for many reasons – including attracting investors and talent. ESG focused investments can also importantly reduce your carbon tax liability – and the savings are greater for early adopters.
While paying extra tax is inevitably resented, monitoring, and controlling carbon emissions is more than just a tax obligation. It is fundamental to everyone’s commitment to achieving South Africa’s sustainability through a low-carbon and circular economy.View more
Cova Advisory partners with Climate Legal to offer a comprehensive Carbon service
There is now a one-stop-shop for SA companies seeking a full range of consultancy services on the complexities of the Carbon Tax.Continue reading View more
Green and clean: The SME cloud
Words by Xavier Nel, Head of Product at CloudGate
The environment can be very expensive for the company that isn’t paying attention.
In South Africa, the Carbon Tax Act came into effect on 01 June 2019. The tax is levied on greenhouse gas emissions from fuel combustion, industrial processes and fugitive emissions, according to Deloitte. And the total is determined by sum, the reporting methodology, and the business. That’s one way that not going green can cost you. The other is in reputation. Sustainability practices, good environmental processes and a solid green platform stand most companies in good stead when it comes to consumer spending. A recent report by Nielson found that sustainability sells and that consumers, globally, are more interested in brands that care about the environment.
In short, going green is good business practice.
It’s also not exclusively wrapped up in carbon emissions and sustainable practices around packaging and process. It’s also part and parcel of technology investment.
Cloud technology helps organisations cut costs, shifting their business technology investment away from the CAPEX model to the OPEX one as they get all the benefits of high-end performance and capability with none of the hardware on the ground. It has proven results in cost savings and in improving business efficiencies as it allows for organisations to only pay for what they use, to scale on demand, and to streamline their infrastructure right down to what they really need. Cloud also happens to have a major impact on the small to medium enterprise (SME) carbon footprint.
Cloud is a solid step for any SME considering a move towards a more sustainable way of running the business. The technology is accessible and cost-effective, and it has been steadily evolving alongside global demand for increasingly green approaches and practices. Companies such as Amazon, Microsoft and Google – the giant hyperscalers that get Cloud to the people on the ground – have focused on eco-friendly measures and approaches designed to minimise the carbon impact of their datacentres and systems.
In a recent analysis undertaken by Wired magazine in 2019, the three hyperscalers were stacked up against one another to see which one had the greenest credentials. Google has 100% renewable energy across all of its operations, including its datacentres, which is a remarkable achievement no matter how you look at it. Microsoft has been carbon neutral for more than eight years and also has 100% renewable energy alongside some impressive initiatives focused on cutting its footprint even further. Amazon Web Services (AWS) is behind its competitors but has committed to changing its tactics over the past few years with investment into wind and solar farms and a net-zero carbon emission commitment for 2040.
As these are potentially the beasts that hold the cloud services that your company purchases, these green credentials go a long way towards bolstering your own. If the SME looks at investing into solutions such as Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), data and infrastructure are remotely hosted so there’s no need to invest into software or high-end hardware or to spend anything on required maintenance. Remote services also allow users to eliminate the space and energy requirements of on-site servers and hardware which is an almost immediate benefit to the green bottom line (and the financial one).
SMEs that run their own environments can find that their server use rates sit at around 10% which is a highly inefficient expense. The money is being spent on the hardware, infrastructure, energy and maintenance, but up to 90% of the capacity is lying dormant. In the cloud, the dynamic shifts considerably – utilisation rates rise to around 70% and shared data centres can employ fewer machines to get the same capacity equivalent. Cloud providers also use more efficient layouts, have the right resources to upgrade to energy-saving equipment and systems, and are consistently focused on optimisation and deliverables. These factors have contributed to numerous positive statistics that show how much a company can cut in carbon emissions if it moves to the cloud.
There’s also the fact that the basic technology used by companies to handle the day-to-day has undergone a significant change. Mini PCs, which have small form factors yet plenty of features, offer a tiny carbon footprint and they use a fraction of the power that traditional PCs use. Being so energy efficient, small, powerful and low-cost, they shrink any company’s` emissions footprint as effectively as they do the amount of desk space that they take up. CloudGate’s range of Mini PCs is designed to provide the environmentally-conscious SME with a solid investment into technology that can be used in any location at a fraction of the usual price – both in budget and footprint.
Then, of course, no green cloud conversation can be complete without looking at how it can fundamentally change the way people work. This has already been deeply felt over the past few months as companies have leaned heavily on technology to get their people working remotely. It has also been felt by the environment. A recent study published in ScienceDirect found a correlation between the virus and improved air quality and environmental noise pollution and highlighted the fact that climate experts have predicted that greenhouse gases could drop to levels not seen since World War 2. Remote working has multiple benefits for the business, its people and the planet, and it is powered by the ubiquity of the cloud. Ultimately, the SME benefits immensely from any cloud investment no matter what their end goal. Be it efficiencies, cost savings, productivity improvements, or the environment, Cloud manages to, very successfully, tick every, single box. For more information, visit www.cloudgate.co.zaView more