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Understanding South Africa’s Carbon Tax

Despite the economic slowdown caused by the coronavirus pandemic, 2020 remained the hottest year on record globally, tied with 2016. It's clearer than ever that now is the time to act against climate change. 

Mining Truck

It was with this understanding in mind that the South African government introduced the Carbon Tax, which came into effect on 1 June 2019. This tax applies to all entities with a thermal input capacity of 10MW or more, at a rate per tonne of CO2 emissions of R 120 in 2019 and R 127 in 2020, with the tax escalating annually. 

This has introduced a host of new challenges for businesses, not least in terms of how to reduce their carbon footprints through greater energy efficiency and sustainable power sources. 

Although Astron Energy voluntarily developed a carbon budget long before the Carbon Tax was introduced, and has been reporting emissions both as part of their majority shareholder’s global disclosure and to the Department of Environment, Forestry and Fisheries (DEFF), they found that the introduction of the Carbon Tax required close collaboration between the finance and environmental departments in order to manage what is anything but a conventional tax. The majority of the technical data required to calculate the tax is not typically driven by the finance department, and SARS requires documentation to be submitted in particular, potentially unfamiliar formats. Thankfully, Astron Energy's finance and environmental teams have taken advantage of training sessions hosted by SARS that unpack the reporting process, which is integrated into the SARS e-filing system.

Although the tax is only paid once a year, it's important to engage with the guidelines published by the DEFF. In its first phase, the Carbon Tax includes a number of allowances, beginning with a baseline 60% tax-free allowance. There is also a maximum 5% allowance for performing more efficiently than the sector benchmark, which Astron Energy is working to achieve through an energy efficiency and management programme at its Cape Town refinery. 


Furthermore, depending on the sector, there may be up to 10% process and fugitive emissions allowances. Petroleum refining, for example, does not receive a process allowance. The maximum allowances per sector are specified in the Carbon Tax and related regulations. There is also a maximum 10% allowance based on trade exposure, a 5% allowance for organisations that have developed a carbon budget with the DEFF, and a maximum 10% allowance for those that engage with carbon offset projects. 

Astron Energy considers the latter an effective mechanism for leveraging its CSI programme. Purchasing carbon credits from eligible projects has the effect of both reducing an organisation's liability and supporting initiatives that have social benefits. The Carbon Offset Administration System (COAS), which is administered by the Department of Mineral Resources and Energy, is a platform where companies can buy and sell eligible carbon credits. Although these credits can be purchased through vendors, COAS is a good place to see what is on the market. Registration on this system is uncomplicated and seamless.  There are offset programmes in various sectors and parts of the country, so companies can find ones that align with their CSI vision and overall values. 

Astron Energy serves a customer base spanning a wide spectrum of commercial operations. Many of our customers are also working to reduce their carbon footprints, with the goal of becoming carbon neutral.  Our subject matter experts continue to work with customers and prospects to make directionally relevant changes to their efforts in this important area.

As a leading role-player in South Africa’s petroleum industry, Astron Energy remains committed to growing the country’s economy while protecting our planet and its people. For further information or assistance, please complete the “partner with us” form.