Navigating South Africa’s Carbon Landscape: The Critical Role of Measurement and Verification

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South Africa’s recently enacted Climate Change Act 22 of 2024 (“the Act”) signifies a pivotal shift in the country’s climate change policy landscape. This Act introduces a range of Greenhouse Gas (GHG) mitigation measures planned for implementation. Perhaps most importantly, it serves as the basis upon which future regulation will be released meaning that we can expect to see more climate-related regulation in future. Key observations of the Act are given below:

Mandating Carbon Budgets: Provision is made in the Act for the introduction of mandated carbon budgets. Up till now, carbon budgets have been voluntary, with no associated penalties for exceeding approved voluntary carbon budgets. In fact, those companies voluntarily participating in the carbon budget process have been allowed claiming a 5% carbon budget allowance for carbon tax purposes. This will all change, and it is anticipated that now that the Act has been signed into law, regulation will be released governing who is subject to these mandatory carbon budgets, how the budgets are to be set, and the expected penalties to be incurred for exceeding the mandated carbon budgets. In the 2024 Budget Review, National Treasury made mention of a possible R640 penalty for every tonne CO₂e emitted above the allocated carbon budget, significantly more than the carbon tax rate. This penalty will most likely be incorporated into the Carbon Tax Act and the 5% carbon budget reduction or allowance currently in place for those with a voluntary carbon budget will be removed effective from 1 January 2025.
Mitigation Plans: Companies who have been allocated a carbon budget must prepare and submit a GHG mitigation plan to the Minister of the Department of Forestry, Fisheries and the Environment (“DFFE”) for approval. This plan should describe the mitigation measures which the company proposes to implement to remain within its allocated carbon budget. This will be linked to the existing Pollution Prevention Plans currently in place. However, there will probably be greater alignment between carbon budgets and mitigation plans in future.
Sectoral Emissions Targets: Some sectors will also be allocated sectoral emission targets. Within one year, the Minister of DFFE is required to list the GHG-emitting sectors and sub-sectors that will be subject to sectoral emissions targets. The Ministers responsible for the administration of these sectors or sub-sectors will be responsible for implementing the targets through planning instruments, policies and programmes. As such, companies in the affected sectors will probably see more emission reduction requirements in future.
Listed greenhouse gases and activities: The Minister of DFFE must publish a list of GHGs which the Minister reasonably believes cause or are likely to cause or exacerbate climate change. Those companies releasing these GHGs may be assigned a carbon budget if they exceed certain thresholds. They will also be required to submit mitigation plans to the Minister of DFFE.
Phase-down and Phase-out of Synthetic GHG Emissions and Declaration: The Minister of DFFE must declare certain GHGs to be synthetic GHGs and specify whether these gases are required to be phased out or phased down and by when. In addition, the Minister of DFFE can also prescribe thresholds for the use of these synthetic GHGs. The Minister of DFFE may also allocate a carbon budget to companies that conduct activities that result in synthetic GHGs.
Sector-Specific Collaboration: Within two years, the Minister of DFFE is tasked with developing a national adaptation strategy which requires collaboration with other ministries and departments such as water affairs; agriculture; forestry and fisheries; human health; energy; human settlements; and disaster management. Each sector will devise its own adaptation plans as part of a unified national strategy.
Transforming the Presidential Climate Commission (PCC): Under the Act, the PCC will transition into a statutory body which will oversee South Africa’s national climate efforts and ensure alignment with international commitments.
Role of Provinces and Municipalities: The Bill places more climate change obligations on provincial governments and municipalities. The Provincial and Municipal Forums on Climate Change would be tasked with coordinating climate change response activities within the relevant province or municipality. Each Municipal Forum on Climate Change would be required to provide a report on its climate change response actions to the relevant Provincial Forum on Climate Change. The Provincial Forums on Climate Change would then be required to provide a report to the President’s Co-ordinating Council regarding the climate change response actions and considerations in the various provinces.

In addition to the changes introduced through the Act, steep carbon rate adjustments were announced in 2023. The figure below shows the accelerated carbon tax rate increases announced in 2023, compared to the increases document in previous (pre-2023) legislation:

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The updated rates published in 2023 show an exponential increase in the carbon tax rate, with the intention published by National Treasury to increase the rates even further to up to 120 US dollars per ton of CO₂e in 2050. Coupled with the introduction of the Act, the steep carbon tax rate adjustments announced in 2023 will have a significant financial impact and emphasise the necessity and urgency for energy and carbon-intensive industries to reduce their GHG emissions. Measurement and Verification (M&V) is a critical component in the journey towards decarbonisation. It serves as the bedrock for tracking, evaluating, and validating the effectiveness of decarbonisation efforts. M&V is a process used to quantify the energy savings achieved through energy efficiency projects or other decarbonisation initiatives. It provides a systematic approach to measuring, collecting, and analysing data to determine the actual energy/carbon savings realised.

By accurately quantifying emissions, verifying GHG emission reductions, and optimising energy efficiency, M&V enables organisations to:

Establish baselines and set reduction targets: M&V provides the data needed to benchmark emissions and set achievable goals.
Ensure the credibility of decarbonisation initiatives: By verifying emissions reductions, M&V builds trust and confidence in decarbonisation tracking and reporting.
Identify opportunities for energy efficiency: M&V helps identify areas where energy efficiency improvements can be made. By quantifying savings, it provides a strong business case for investments in energy-saving technologies and practices.
Access tax incentives: Accurate M&V data is required to qualify for tax incentives related to energy efficiency such as the section 12L energy efficiency tax incentive.
Support policy development and investment: Reliable M&V data informs policymakers and attracts investment in low-carbon technologies.
Facilitate carbon trading: M&V is essential for verifying carbon offsets and ensuring the integrity of carbon markets.
Manage risks: M&V helps identify potential risks and challenges in decarbonisation projects, allowing for timely adjustments and mitigation strategies.

As South Africa navigates the complexities of decarbonisation, M&V emerges as an indispensable tool. M&V provides the data-driven foundation for informed decision-making, accountability, and progress towards a low-carbon future. By embracing accurate M&V, businesses can not only meet regulatory requirements but also contribute to a more sustainable and resilient future.

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Elizna du Toit

SAEEC Member

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Elizna is a versatile engineer with a master’s degree in mechanical engineering and a strong foundation in chemical engineering. As a Certified Measurement and Verification Professional (CMVP®), she excels in quantifying energy efficiency savings and has generated over R400 million in tax allowances through the Section 12L energy efficiency tax incentive. She is a Technical Signatory for Catalyst Solutions, a SANAS-accredited inspection body for the measurement and verification of energy savings.

As a Certified Energy manager (CEM®), Elizna is instrumental in helping organisations achieve ISO 50001 certification for Energy Management Systems. Her expertise extends to carbon management, where she assists clients in measuring, verifying, and reducing their carbon footprints to meet sustainability goals. Through tailored solutions, Elizna empowers businesses to navigate the complexities of climate change and achieve tangible greenhouse gas emissions reductions.

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Navigating the Energy Landscape: A Guide for New Entrepreneurs

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Inclusive Employment in the Just Energy Transition: A Game Changer for Women in the Energy Sector

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2024 19th Annual Conference Page

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