Was Greta right about us? – GHG, coal power and the IRP

Was Greta right about us? – GHG, coal power and the IRP
09 Dec 2019

On 23 September 2019, sixteen-year-old climate change activist, Greta Thunberg, gave an emotionally charged speech at the United Nations Climate Action Summit wherein she condemned world leaders for failing to adequately address climate change. Whilst her speech received mixed reviews with many questioning the substantive facts underpinning her impassioned plea or her credentials to pronounce on the issue, it is worthwhile to reflect on South Africa’s position, in light of recent legislative and policy developments, to understand whether her claims are entirely justified.

Integrated Resources Plan, 2019

On 18 October 2019, the Minister of Mineral Resources and Energy, Mr Gwede Mantashe, approved the long awaited the Integrated Resource Plan (IRP) for 2019. In essence, the IRP is the blueprint of the country’s energy needs and the corresponding resource allocations necessary to meet those needs. The importance of the IRP from a climate change perspective relates to the makeup of country’s energy resources and the direction the country has chosen to adopt.

Since the promulgation of the first IRP of 2010, a total of 18 000 MW of new generation capacity has been permitted comprising 9 534 MW of coal power, 1 332 MW of hydro power, 6 422 MW of renewable energy by independent power producers and 1 005 MW of open cycle gas and diesel turbines.

At the press briefing for the release of the IRP, it was revealed that South Africa’s energy sector contributes close to 80% towards the country’s total Greenhouse Gas (GHG) emissions, of which 50% of those emissions arise from electricity generation and liquid fuel production.

Perhaps the most disheartening outcome of the IRP was the acknowledgment of the crucial role that coal would continue to play for the foreseeable future. It was advised that coal would remain South Africa’s dominant energy supply contributing 39% of the energy volumes required to meet demand with calls for an increase in generating capacity by 1 500 MW with half coming on-line in 2023 and the second 750 MW in 2027.

In addition to increased coal generating capacity, the IRP provides for additional capacity as follows:

  • Hydro – 2,500MW;
  • Solar PV – 6,000MW
  • Wind – 14,400MW;
  • Nuclear – 1,860MW;
  • Storage – 2,088MW;
  • Gas & Diesel – 3,000MW; and
  • Other distributed generation, co-generation, biomass and landfill technologies – 4,000MW.

The continued reliance on coal power stations to meet Eskom’s baseload requirements will continue to obfuscate our commitments towards reducing our GHG emissions, particularly considering Eskom’s flagrant disregard and unwillingness to comply with the prescribed Minimum Emission Standards (MES) under the National Environmental Management: Air Quality Act 39 of 2004.

In addressing potential (read imminent) non-compliance with the MES, the Minister has proposed that a balance be struck between energy security, the adverse health impact of poor air quality and the economic costs associated with plants shutting down. With the IRP being based upon a “least-cost electricity supply and demand balance”, it is foreseeable that coal fired power stations will continue to be the chief contributor towards our GHG emissions with no meaningful reduction anticipated anytime soon.

Carbon Tax Act, 15 of 2019

On 1 June 2019, the Carbon Tax Act 15 of 2019 (“the Act”) came into operation. The Act is designed to provide for the imposition of a tax per tonne of carbon dioxide (CO2) equivalent emitted.

The primary objective of the Act is to reduce GHG emissions in a sustainable, cost effective and affordable manner.

The Act will initially only apply to the scope 1 emitters in the first phase with the first phase being from 1 June 2019 to 31 December 2022 and the second phase being from 1 January 2023 to 31 December 2030.

The Act contains a basic tax-free threshold of approximately 60% of the emissions and further allowances for specific sectors. As a result, the Act carries the potential for tax exemptions up to 95% of all emissions during the first phase. The Department of National Treasury has advised that this will equate to a carbon tax rate arranging from between R6 – R48 per tonne of CO2 equivalent emitted.

Whilst the Act is a significant milestone in South Africa’s attempts at reducing its GHG emissions, the Carbon Offset regulations under the Act have yet to be promulgated. These regulations are an intrinsic part of the Act as they make allowances for companies to reduce their tax liability through investment in approved carbon offset projects.

The perceived benefit of the proposed Carbon Offset regulations is the belief that they will promote the reduction of GHG emissions in sectors not directly covered by the Act.

From a theoretical standpoint, the Act is certainly a positive step towards meeting our international obligations towards addressing the issues of climate change. However, the implementation of the Act and its effectiveness in reducing GHG emissions remains to be seen.

National Environmental Management: Air Quality Act, 39 of 2004 – National Greenhouse Gas Emissions Regulations

On 3 April 2017, the Minister of Environmental Affairs published the National Greenhouse Gas Emission Report and Regulations (“GHG Regulations”) which requires companies to report on their emissions which exceed a predetermined threshold.

The GHG regulations are aimed at providing a single national reporting system which will not only aid South Africa in achieving its international climate change obligations, but also provide for determination of taxpayer liability under the Act.

A failure to register, report or keep records in terms of the GHG regulations constitutes an offence amounting to a fine of up to R5 million or 5 years imprisonment for first time offenders and R10 million or 10 years imprisonment for second and subsequent offenders.

A proposed amendment to the existing regulations was published on 6 September 2019 and is currently open for public comment.

Concluding Remarks

Whilst not exhaustive of the recent policy and legislative steps taken by South Africa in addressing the issues of climate change, the above represents the legislative and policy which will determine whether we are able to meet our international obligations.

The energy sector’s continued reliance on traditional coal power stations remains the country’s biggest stumbling block in reducing its GHG emissions. Unfortunately, the IRP suggests that this issue will persist for the foreseeable future. Furthermore, effectiveness and speed at which the legislative and regulatory interventions can serve to reduce GHG emissions is uncertain at this stage.

So, as far as South Africa is concerned, one might suggest that Greta Thunberg is probably vindicated by her views.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
Glynn Kent
Glynn Kent

Glynn Kent is a senior associate in the Environmental and Sustainable Development Team and Litigation departments at Eversheds KZN. He has a general commercial practice with a keen interest in...

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