Climate change and all its associated effects are going to have
an effect on South African businesses. It is expected that
Government will commit to a carbon emission reduction programme at
a global meeting of nations in Copenhagen, scheduled for December.
The summit, which is expected to be more widely accepted than its
predecessor, the Kyoto protocol, will lead to the implementation of
new laws that will have an effect on South African businesses.
There is at present little doubt that an agreement will be
reached. The only uncertainty is the shape or form the global
agreement and the resulting legislation will take. The consequence
is that South African companies are at present in the uncomfortable
position of choosing whether to hold off making changes until the
new legislation is implemented and play catch-up with those who
have; or to start predicting the likely changes which are going to
have to be implemented. In addition to this, international markets
are becoming more environmentally conscious, affecting the
expansion efforts of South African companies with large carbon
The UN summit in Copenhagen will try to reach global agreement
on how to tackle climate change. During the build up to the summit
we have seen and are likely to hear of political wrangling and
manoeuvring between developed and developing nations, with each
trying to guide the agreement to meet their own agendas as well as
to impose the least stringent measures on themselves while trying
to get everyone else to do as much as possible.
The amount by which each nation will have to reduce their
omissions is likely to be debated strongly, preceding the summit
and at the summit itself. The general consensus in academic
writings is that the "rich" nations, besides having to
reduce their own omissions, will have to assist, both financially
and technologically, the developing countries in order for them to
support the agreement and address global warming and its
Currently, in South Africa there are no regulations obliging
companies to report on greenhouse-gas emissions. This is one area
in which South African companies are going to have to develop. Most
companies view environmental reporting as a largely reputation
enhancing exercise, rather than as part of a strategy to reduce
emissions. But that is expected to change after the UN summit,
which will likely require mandatory reporting of all significant
It is estimated that South Africa's greenhouse-gas emissions
rank in the top 20 in the world, and contribute approximately 1,8%
to global emissions as well as being responsible for 42% of
Africa's emissions. Government has, however, indicated its
intention to reduce emissions, promising to assist businesses that
take-up the environmental challenge with tax incentives and
In considering international trends, an idea of what the
potential new legislation may look like may emerge. The USA, one of
the major polluters who previously did not sign the Kyoto protocol,
has recently affirmed its commitment to the global agreement in
having passed the American Clean Energy and Security Bill. The
Bill, once in force, is expected to have "profound changes in
many sectors of the economy, including electric power generation,
agriculture, manufacturing and construction" (Legal Brief
Environmental). The legislation sets limits on the overall
emissions of heat-trapping gases, but allows emitters to trade
pollution permits or allowances, otherwise known as carbon credits,
among themselves. The limit will then be reduced over the years,
increasing the value of the carbon credits and requiring companies
to use more renewable resources in order to obtain their
In a similar move, Australia plans to introduce a carbon trade
scheme, which is aimed at 1000 of Australia's biggest
polluters. The Australian government has indicated its intention
for carbon trading to start in July 2011, thereby forcing business
to pay for polluting. The Senate is expected to vote on the package
of 11 Bills later this year.
A proposed measure that is being suggested in a number of
jurisdictions, which could have significant effects on South
African companies' ability to export, is cross-border carbon
adjustments. The aim would be to create import fees which would be
levied by carbon-taxing countries on goods manufactured in
countries without taxes on carbon.
Companies will have to remain vigilant regarding potential
legislative changes which could result in significant financial
consequences and legal compliance issues for their businesses.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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