By Peggy Schoeman
The National Greenhouse Gas (GHG) Emission Reporting Regulations came into effect on April 3, 2017, under the National Environmental Management: Air Quality Act 39 of 2004.
The regulations provide for a data collection mechanism in terms of which certain companies and organisations are, as of April 3, obliged to report on their GHG emissions. This data inventory will then be used for two purposes: firstly, to enable South Africa to report on its emissions as a country, in accordance with the dictates of the United Nations Framework Convention on Climate Change’s Paris Agreement, which South Africa ratified in November 2016, and, secondly, to pave the way for a carbon tax regime. In this way, what is reported on in terms of these regulations will be used by the South African Revenue Service in the near future to compute a carbon tax.
Broadly, the regulations are focused on GHG emissions from three sources:
- energy production activities, namely the burning of fossil fuels (coal, gas and oil) to produce heat and electricity;
- industrial processes and activities in the minerals, chemicals and metals industries, such as the process of making cement; and
- waste activities, which include landfills and waste treatment operations.
The regulations apply to what are termed Category A data providers. This refers to companies and organisations that are in control of, or conduct, certain GHG-emitting activities that fall within the three broad categories of energy, industrial and waste activities, and, critically, above a specified capacity threshold. The question of capacity is key and relates to an operation’s ability to produce, as opposed to actual production. For example, for a brick manufacturer, the regulations will apply where the operation is capable of making four-million bricks in one month, even if, in reality, the company makes fewer bricks.
The capacity threshold is a total figure which must include all facilities. By way of example, the energy capacity threshold in the commercial sector is 10 MW of thermal energy. If a company owns five shopping centres, each of which has a backup generator of 2 MW in the basement, then that company meets the threshold (five generators × 2 MW = 10 MW) and the regulations apply to the company.
In some instances, though, there is no capacity threshold, and the regulations apply irrespective of the size of the operation or its capacity to produce. For example, coal mines, glass producers and ammonia/nitric acid (fertiliser) manufacturers are included, irrespective of how much coal/glass/fertiliser can be produced or is produced.
If the regulations apply to your business, you have three broad obligations:
- you must have registered each of your facilities by May 3, 2017 (or within 30 days of starting an activity);
- you must report on the GHG emissions from all of your facilities for the period April 1 to March 31 each year, with the first report due on March 31, 2018; and
- you must keep records of all the information you use to estimate your GHG emissions (including annual reports) for a period of five years.
Registration and reporting are to take place on the National Atmospheric Emission Inventory System (NAEIS), an Internet-based system that is a component of the South African Air Quality Information System and can be accessed at http://www.saaqis.org.za. The GHG emissions portal on this website has not yet become operational. Until such time as it is operational, the relevant forms must be submitted by email to the Department of Environmental Affairs’ National Inventory Unit. It is important to bear in mind that the reports are technical in nature and specialist expertise is required to compile them.
The regulations impose significant criminal penalties where there is noncompliance. On a first conviction, you may pay a fine of up to R5-million or can be sentenced to a term of imprisonment of up to five years, or both penalties may be imposed. On a second or subsequent conviction, a fine of up to R10-million or imprisonment for up to ten years, or both, may be imposed. Offences include failure to register, failure to report and failure to keep records, as well as reporting that is inaccurate, incomplete or misleading.
Two further pieces of related legislation came into effect on July 21, 2017, namely the Notice Declaring Greenhouse Gases as Priority Air Pollutants and the Pollution Prevention Plan Regulations. These impose additional obligations for many of the same GHG-emitting activities cited in the above regulations, such as glass, cement and coal production. In other words, if the GHG regulations apply to your company, these may well also apply (although the GHG regulations have a wider scope of application).
The following additional obligations are imposed as a result of these further pieces of legislation:
- the requirement to submit a pollution prevention plan, which must be submitted by December 21, 2017 (or within five months of starting an operation); and
- the requirement to submit annual progress reports (monitoring the implementation of the approved pollution prevention plan) by March 31 for the preceding calendar year.
Similar penalties apply where there is failure to submit a pollution prevention plan or annual progress reports.
While carbon tax legislation has not yet come into effect and, at this stage, a revised Draft Carbon Tax Bill is only anticipated later in 2017, there can be little doubt that this is the next step planned by government. In this respect, what is reported on in terms of the GHG regulations will eventually compute into a tax liability, bearing in mind that the current (albeit still to be revised) Carbon Tax Bill prices 1 t of carbon dioxide at R120. In other words, be accurate in your reporting and start factoring this price into your business.
Schoeman is an associate at law firm Warburton Attorneys. She provides advise on environmental, health and safety, mining and energy legal matters.