Q&A with Andrew Gilder on climate change in SA, senior associate in environmental law at ENS Africa
1. Where do we currently stand with regards to climate change regulation in SA?
The climate change legal regime is a work in progress – with the commencement of that progress being pegged on theClimate Change Response Strategy of September 2004. There have been various policy and legislative developments, all of which are linked to climate policy but are also components of broader environmental policy. For example, the operationalization of the National Environmental Management: Air Quality Act No. 39 of 2004 (“NEMAQA”).
While NEMAQA evolves the air quality management regime in the country it is also the instrument through which government will implement a greenhouse gas measurement, evaluation and reporting regime that will be the foundation for the proposed carbon tax. This linkage demonstrates the relationship between environmental, climate and commercial considerations – effectively, that they are all part of a single continuum.
The most recent, formal statement of climate change policy is the National Climate Change Response Policy, November 2011 (“NCCRP”). The NCCRP is driving rapid climate policy development and the fact that the NCCRP is dated November 2011 should not be construed to mean that government has done nothing on climate policy since then. On the contrary, recent developments include: the establishment of the National Greenhouse Gas Inventory, progress on the carbon tax, and completion of Phase 1 of the Long Term Adaptation Scenarios which will inform future industrial development and spatial planning.
Finally, while there is still some debate on whether government intends to promulgate a comprehensive climate changestatute, it seems more likely (and this is the statement from the Department of Environmental Affairs (“DEA”) Green Paper on climate change of September 2010), that there are sufficient legal mechanisms throughout the suite of statutes administered by the DEA to permit the creation of legal regime necessary to support South Africa’s response to climatechange. The NEMAQA reference above is one example of how this might work.
Bear in mind that the following are current examples of law that seeks to support the response to climate change:
- The electricity levy
- The renewable energy allowance – section 12L of the Income Tax Act
- The Renewable Energy Independent Power Producer Procurement Programme
- Compliance requirements for emissions from motor vehicles
- The establishment of the South African Designated National Authority for the Clean Development Mechanism
2. Are the regulations confusing; or are they well drafted?
South African law is generally well-drafted and it is not in the drafting that difficulties arise. Hurdles to full implementation of the letter and spirit of the law come in a range of forms, including:
- The administrative infrastructure required to implement that law is not yet established, and it is not operating sub-optimally.
- Other legal developments are required to support the existing law (or legal idea), e.g., the legal idea of the carbon tax must be supported by the still-to-be-developed monitoring, evaluation and reporting process for greenhouse gas emissions currently being devised by the DEA in terms of NEMAQA.
3. Who do the climate change regulations favour?
The overarching premise of climate change policy is to keep the national economy competitive over the long term and as the world economy moves into a period of increasing carbon-constraint. In short, South African goods will become unviable for trade in the international arena should we continue with the excessively dirty production baseline with which we currently work. Climate policy seeks to strip the carbon out of the economy. This stripping might come in the form:
- Of the carbon tax, which seeks to incentivise production that is less carbon intensive (and punish that which is more carbon intensive); or,
- The development of Carbon Capture and Storage technology which would permit ongoing use of our coal reserves (it is naïve to think that South Africa will not use its coal reserves) while the carbon emissions are sequestered underground.
4. How is the regulatory environment currently impacting on how companies respond to climate change?
At the moment the major drivers for companies’ response to climate change is not from the regulatory regime but from perceived imperatives in the CSR space. For example, many South African companies participate in the Climate Disclosure Project (“CDP”) (https://www.cdp.net) and in the subsidiary activities of the CDP, including supply chain and water disclosure. To date, it has been quite difficult to convince companies that climate regulation is pending and that they would enjoy an advantage if they acted upon this knowledge sooner rather than later.
Some companies and municipalities have taken advantage of the Clean Development Mechanism as an incentive to reduce greenhouse gas emissions.
5. Should companies be investing in climate change strategies? If so, what type of changes should they be considering?
Yes, most definitely.
Investments should be informed by the direction of climate change policy development. The first area to consider is the company’s exposure to the carbon tax and the information that we have (from the 2014 Budget Speech) that the DEA’s monitoring, evaluation and reporting framework for greenhouse gas will be used to inform the operation of the carbon tax. The dynamic between the pending regulation, exposure to carbon tax and the measures that can be implemented to manage carbon tax exposure should be investigated.
6. With regard to the Minister’s Budget address, is there a danger of complacency in light of the delay in the Carbon Tax?
The recent announcement of a postponement in the implementation of the carbon tax should be understood against the relevant national and international legal background and should not be taken at face-value.
In addition to the postponement, the announcement indicates a better defined, more rigorous and multi-layered set of carbon tax obligations, the implementation of which will require industry to develop a range of systems and expertise. In addition to these carbon tax design elements, government’s potential to postpone implementation of the carbon tax indefinitely is limited.
The combination of this complexity of design and the time-squeeze on government means that there is a greater urgency for industry to self-assess its carbon tax liability, the reporting obligations that will be imposed and the strategic and other measures that can be taken to manage and mitigate exposure to the carbon tax.