Two of SA’s largest coal miners have both set targets to reduce their scope 1 and 2 emissions over the next few years by investing in renewable energy to help power their mining operations and lessen their reliance on Eskom’s carbon-intensive coal-fired power.
Both, however, still lack clear plans for reducing their scope 3 emissions, which present the lion’s share of total emissions.
Thungela, one of SA’s largest coal exporters, reduced its scope 1 and 2 emissions to 729,000 tonnes of carbon dioxide equivalent emissions (CO2e). This was down 2.5% compared with 2022 and an 11% reduction compared with the 2021 baseline (819,000 tonnes).
Scope 3 emissions declined 13.5% to about 32-million tonnes of CO2e due to the reduction in sales volumes.
Exxaro, one of the main coal suppliers to Eskom, reduced scope 1 and 2 emissions by about 1.8% from 970,000 tonnes to 953,000-tonnes CO2e.
The group’s scope 3 emissions were down about 9% from 74.5-million to 68-million CO2e.
For both companies, scope 1 emissions mainly comprise diesel and petrol usage for on-mine equipment and vehicles, and scope 2 emissions are from electricity purchased from Eskom.
Scope 3 emissions are mainly from the emissions generated from the burning of coal that was sold by these companies.
Thungela has set a target to reduce its scope 1 and 2 emissions by 30% by 2030 from a 2021 baseline. Its overall approach to net zero is guided by what company chair Sango Ntsaluba describes in its climate change report for 2023 as a “scenario-based approach”.
This entails that some of the group’s decision-making in terms of decarbonisation will be guided by global trends and how fast the rest of the world manages to transition to low-carbon energy.
Thungela has long held the view that SA’s and the global response to climate change (by lowering emissions) had to be cognisant of the need for economic growth and ensuring energy security.
As CEO July Ndlovu puts in the climate change report, “[We] believe that there is no silver bullet to achieving the goals of the Paris Agreement (which sets out to limit global warming to 1.5˚C) and that coal still has a significant role to play in the low carbon transition.”
The role of coal was not only to support renewables in ensuring energy security, but according to Ndlovu, coal was also critical in the manufacture of renewable energy equipment and accounted for 60% of the electricity used to manufacture solar panels.
He also pointed out that the investment required in electricity transmission networks, to enable more renewables to come online, posed a “bottleneck to clean energy transition”.
“Urgent and large-scale investment in electricity grids is required, with 80-million kilometres of grid infrastructure needing to be replaced or added by 2040. Without this, the prolonged use of fossil fuels will be required,” Ndlovu said.
To achieve its scope 1 and 2 emissions reduction target Thungela will invest in about 15MW of renewable energy, energy efficiency programmes, and several of its operations are projected to close before 2030, namely Isibonelo, Goedehoop, Greenside and Khwezela, which will result in a reduction in greenhouse gas emissions associated with those operations.
The reduction in its scope 3 emissions in 2023 was largely due to a drop in production and export sales due to the poor performance of Transnet Freight Rail’s coal line to Richards Bay.
Exxaro’s target for scope 1 and 2 emissions is to be carbon neutral by 2050, which will require reducing these emissions by 40% by 2026. Much of this will be achieved by investing in renewable energy projects at its mining operations, including a 68MW renewable energy project which alone will contribute an 18% reduction in total scope 1 and 2 emissions. The plant is expected to reach commercial operation in the first quarter of 2025.
The company does not have a clear strategy for tackling scope 3 emissions but broadly plans to “decarbonise” its portfolio by investing in “low-carbon transition minerals”.
Carbon tax
Both companies pointed out the risk posed by rising carbon taxes and the likely end to carbon tax allowances in 2026.
Thungela’s carbon tax liability for 2023 was about R4m compared with R4.1m in 2022, based on the carbon tax rate of R159/tonne of CO2e.
The nominal tax rate is R159/tCO2e, however, the government allows specific tax-free allowances which can reduce the rate to R8-R64/tCO2e.
Carbon taxes are expected to increase from R190/t in 2024 to R462/t by 2030.
The National Treasury has also announced that companies will have to pay a higher tax rate of R640 per tonne of CO2e on emissions exceeding allocated carbon budgets that will be put in place in line with the Climate Change Bill that was passed by the National Council of Provinces last week.
The department of forestry, fisheries & environment is expected to release draft carbon budget and mitigation plan regulations in 2024. On Friday the department released the draft sectoral emissions targets which sets out proposed emission reduction targets per sector and it will support the setting up of carbon budgets.
Exxaro said it expected the SA carbon price to increase in line with international trends and as the government increases its efforts to meet its global climate change commitments.
“Our calculations indicate that Exxaro’s carbon tax liability will increase going forward, with liability figures of R38.6m for 2026, R43.5m for 2027 and R58m for 2030, assuming that the current tax-free allowances will fall away from 2026 going forward,” the group said.
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