Carbon taxes, as proposed by the Treasury, are too high and could make mining companies in SA less competitive if they do not act fast enough to cut their emissions, says Niks Lesufi of the Minerals Council SA.
“[Mining companies] are price-takers and do not have an opportunity to pass higher costs on,” Lesufi said at a media briefing on the second day of the African Mining Indaba in Cape Town on Tuesday. Mines will be “really squeezed” by the added cost of carbon taxes if they don’t take action to reduce emissions and cut their carbon tax liability, said Lesufi.
However, according to Martin Preece, executive vice-president of JSE-listed gold mining company Gold Fields, the industry does not need “a stick”, like the prospect of having to pay carbon taxes to make it transform energy usage and make operations less carbon intensive. The industry would transform on its own accord “because it is the right thing to do”, he said.
SA introduced the first phase of the carbon tax in June 2019 as part of the government’s broader climate change mitigation policy and to help the country achieve its climate goals by penalising businesses that fail to reduce their emissions and incentivising investment in low-carbon technologies.
This first phase, during which carbon taxes are being levied only on companies and state-owned enterprises emitting more than a certain level of emissions, makes provisions for companies to receive 60%-95% tax allowances such as rebates or exemptions. It was scheduled to end in 2022, but the Treasury extended it by three years to the end of 2025.
Over the next few years, the carbon tax rate will be progressively increased every year to reach $20 a tonne (R300) by 2026. In the second phase from 2026 onwards, the carbon tax rate will have larger annual increases to reach at least $30 by 2030, accelerating to higher levels of about $120 beyond 2050, and the allowances will then rapidly fall away.
According to Lesufi, the council believes that climate change is a critical global challenge and the mining industry has to contribute to mitigation efforts.
To reduce emissions and to become less reliant on Eskom’s carbon-intensive and unreliable electricity supply, mining companies in SA have committed to 4GW of renewable energy projects worth R65bn in new investment.
Preece said 93% of Gold Fields’ emissions relate to the electricity used at its mines, which is why the company is investing in renewable energy projects.
Thanks to projects such as the 50MW solar facility at its South Deep operation near Westonaria in Gauteng, which cost R700m to build, the company expects that by 2025 more than 22% of all its electricity will come from renewables.
Lesufi said the council acknowledges that SA is still significantly dependent on coal in the power generation sector and that for some mining companies, climate change mitigation efforts pose an existential threat.
“Climate change is a threat to society, but energy is critical for every aspect of human development and coal is still used as the dominant energy source in SA,” he said.
Coal also makes an important contribution to the country’s economy and supports “millions of livelihoods”.
Coal mining contributes 60% of total mining GDP and accounts for 45% of employment in the sector.
Given its importance to the SA economy, Lesufi said it is unfortunate that coal mining projects faces a “hostile investment environment”.
Some of SA’s major banks, including Nedbank and Standard Bank, have announced they would no longer be funding any new construction of coal-fired power plants or the expansion in generating capacity of existing coal plants.
In addition, Nedbank’s energy policy commits the bank to not providing financing to thermal coal mines outside SA in the short term, and to no new thermal coal mines, regardless of jurisdiction, from 2025.
“We have tried to engage with banks from the perspective that they may not want to be involved in funding new [coal] projects, but they should make provision for investment in new [clean] coal technology to assist with the transition to cleaner energy,” Lesufi said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.