In a world increasingly attuned to environmental sustainability, South Africa's manufacturing industry finds itself at a crossroads. The looming threat of the European Union's Carbon Border Adjustment Mechanism (CBAM) adds an additional layer of complexity to an industry already grappling with various challenges, including South Africa’s current power constraints.
The impact of CBAM
The EU CBAM is currently in its assessment stage, with methodology for indirect emissions to be drafted and reviewed by January 1, 2026. The scheme aims to tax imports into the EU based on their carbon content, ensuring fair competition with locally produced goods subject to EU carbon pricing.
South African companies, particularly those reliant on carbon-intensive practices, face potential carbon border adjustment tariffs linked to Scope 3 emissions under the EU's CBAM scheme. Scope 3 emissions encompass indirect emissions associated with a company's value chain, a factor that adds an extra layer of complexity for businesses.
The challenge for South Africa
South Africa's carbon-intensive electricity generation, distinguished by an over-reliance on coal-based power, puts its products at risk of higher CBAM tariffs. Given the carbon intensity of the country's electricity generation, R27.4 billion worth of South African exports to the EU may attract higher border tariff adjustments.
The EU CBAM is just the beginning. As more countries contemplate similar carbon border adjustment schemes, South Africa's delay in transitioning to lower-carbon or renewable energy could have long-term economic repercussions.
How can South African exports remain viable?
To mitigate the risks posed by CBAM and enhance the overall competitiveness of South African exports, the country’s manufacturing sector needs to urgently accelerate its decarbonisation efforts. For instance, companies using less carbon-intensive energy sources than Eskom power immediately gain a competitive advantage.
Along with exploring the self-generation of electricity and the adoption of renewable power sources to secure a favourable position in international trade, the manufacturing industry can employ smart energy management technology to help reduce its carbon footprint.
The role of smart energy management in carbon footprint reduction
Smart energy management technology provides transparent consumption insights to help businesses make actionable and impactful changes in mitigating carbon emissions.
Energy management platforms like Centrica’s PowerRaderTM give businesses the flexibility to control and manage all their energy data using a single, holistic view of their energy footprint. PowerRadar™ offers a user-friendly, cloud-based platform that ensures accessibility and data security. Harnessing the intelligence of this system equips businesses to devise informed, data-driven energy strategies to reduce their energy consumption and carbon footprints.
Thoho Energy is bringing PowerRader’sTM potential to South African manufacturing businesses to help them increase efficiency and reduce their carbon emissions by allowing them to:
- Visualise real-time energy consumption for informed decision-making
- Comprehensively understand energy footprints with device-level monitoring
- Track asset performance, energy generation, savings, and carbon emissions in real-time
- Make data-driven decisions for better return on investment (ROI) on energy investments
- Reduce energy costs by curbing operational waste
- Simplify energy compliance and reporting
- Foster awareness and accountability among staff for energy conservation
- Optimise energy-intensive assets for increased reliability and longevity
Decarbonisation is the only way forward
The imperative for South Africa's manufacturing industry is clear: decarbonise or face the consequences. Thoho Energy's innovative solutions, when coupled with proactive government policies and industry initiatives, can position South Africa as a leader in sustainable manufacturing, ensuring global competitiveness and environmental responsibility in the years to come.
Learn more about how THOHO Energy can help you take control of your energy consumption and carbon footprint.
About THOHO Energy
When you don’t have enough information about your energy consumption, you can’t make informed decisions to reduce spend and improve operational efficiencies. An energy insights solution with real-time data from THOHO Energy will allow you to holistically manage your consumption so you can put a stop to escalating energy bills and start making more profit.