What is the Carbon Tax Bill [B46-2018] and how can South African mines reduce their Carbon Tax liability?

The Carbon Tax Bill [B46-2018] was passed into law by the National Assembly with an effective implementation date of 01 June 2019.

The regulation applies to all industrial energy consumers who use more than 180 terajoules (TJ) of energy per year. So this affects the majority of mining operations within South Africa.

Complementing the implementation of the Carbon Tax Bill will be a package of tax incentives and revenue recycling measures. This will include the extension of the Energy Efficiency Savings Tax Incentive (Section 12L Income Tax Deduction) to the end of 2022 in order to support businesses investing in energy efficient equipment and practices.

In this blog post, the experts at Dust-A-Side, take a look at the basics of the Carbon Tax Bill as well as how mining operations can save millions after tax on their energy efficiency savings initiatives.

To being with, here are the basics of the Carbon Tax Bill…

What is a Carbon Tax?

This is a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions.

The Carbon Tax will be levied on the sum of the greenhouse gas emissions expressed as the carbon dioxide equivalent of the greenhouse gas emissions resulting from:

• Fuel combustion
• Industrial processes
• Fugitive emissions

The emission factors will be determined in accordance with a reporting methodology approved by the Department of Environmental Affairs.

Why is having a Carbon Tax Bill important?

In April 2016, South Africa was party to the Paris Agreement on Climate Change. Signed in that year, the terms of the Agreement included commitments to reduce greenhouse gas emissions by up to 42% by 2025.

The new Carbon Tax Bill is designed to help South Africa achieve this target.

The Carbon Tax will be introduced in two phases, phase 1 from 1 June 2019 to 31 December 2022 and phase two from 2023 to 2030. The initial Carbon Tax rate will be R120 per ton of CO2.

The carbon tax will:

• Be determined for a tax period ending 31 December 
• Be paid annually
• Require the annual submission of environmental levy accounts (as prescribed by the rules in the Customs and Excise Act)

What are the costs of the Carbon Tax?

The design of the Carbon Tax provides significant tax-free emissions allowances ranging from 60% to 95% for the first phase.

This has been done to provide sectors with sufficient time and flexibility to transition their activities through investments in energy efficiency, renewable and other low carbon measures.

The impact of the allowances will result in a net Carbon Tax rate ranging from R6 to R48 per ton of CO2 equivalent emitted for the first phase of implementation.

How has Dust-A-Side assisted their clients with reducing their Carbon Tax liability?

There are five Dust-A-Side Haul Road Performance Section 12L projects that have been registered with SANEDI which are currently being processed. These projects have a total value of 70.1 million kWh with a gross pre-tax benefit of R66.6 million. During the year 2018, through the Section 12L Energy Reduction Tax Incentive, Dust-A-Side has enabled its customers to register Energy Reduction Projects totalling R18 million after tax.

To be eligible for these tax benefits, verification and quantification of energy efficiency measures is required by an authorised Measurement and Verification Inspection Body. For these projects, Dust-A-Side worked with Energy and Combustion Services (ECS) which is one such authorised inspection body.

The verification and quantification of energy efficiency measures was approved as a result of Dust-A-Side’s DASMetrics solution.

DASMetrics is Dust-A-Side's Haul Road Condition Monitoring, Reporting and Workflow Management solution.

Through DASMetrics, Dust-A-Side is able to quantify the reduced diesel/fuel usage of all trucks and equipment on DAS roads, allowing clients to capitalise on the tax incentives.

Want to learn more about reducing your carbon tax liability and how Dust-A-Side’s DASMetrics can help your mine quantify and verify its energy efficiency measures?

Get in touch with the team at Dust-A-Side. We’re here to answer any questions on how you can reduce your Carbon Tax liability. Simply click here to schedule a no obligation consultation to show you how much you can quantify and verify your energy efficiency through our DASMetrics device.