The long awaited final regulations for Trade Exposure and Performance Benchmarks allowances to be used to reduce a companies carbon tax liability and a notice in respect of the Renewable Energy Premium values for electricity generators were published today, 19 June 2020.
The summary of the changes are:
Trade exposure - it has become clearer that where the trade exposure allowance has been calculated, this will include a self-assessment and supporting evidence will need to be provided in claiming the allowance. In addition, the main differences between the draft regulations and the final version is that the IPCC activity codes have been removed and the sub-sectors are classified by SIC codes only.
Performance benchmark - it has become clearer that the performance benchmark allowance includes a self-assessment approach which will need to be supported by evidence to claim the allowance. In addition, the main differences between the draft regulations and the final version is that additional benchmarks have been added for certain subsectors.
Renewable energy premium – the values to reduce the carbon tax liability for electricity generators who generate some electricity from renewable energy sources have been published.
A more detailed explanation is provided as follows:
TRADE EXPOSURE REGULATIONS PUBLISHED 19 JUNE 2020
- A taxpayer that must receive an allowance in respect of trade exposure in accordance with the table contained in Annexure A by matching the line in the column "Sector Name" with the percentage in the corresponding line of the column "Trade Exposure Allowance "
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The Sectors defined in the Annexure is categorised by their relevant SIC codes.
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If a taxpayer operates in more than one sector, a percentage allowance must be determined using the formula in Section 3 (using StatsSA data)
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If a taxpayer is of the opinion that the allowance determined in sub-regulation 2 does not reflect the extent of the trade exposure of the taxpayer, an alternative method can be used.
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Where a taxpayer determines their own trade exposure allowance, the data must be verified by an independent auditor.
GHG INTENSITY OR PERFORMANCE BENCHMARK REGULATIONS PUBLISHED 19 JUNE 2020
- The regulations outline the GHG intensity benchmarks for certain subsector in Annexure A the purposes of Symbol A in the equation in Section 11 of the Carbon Tax Act.
- Please note that changes with respect to the Annexure A (from the draft regulations) include the following additional benchmarks:
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Iron and Steel figure has been updated to 3.83 tonne CO2e/tonne crude steel. It was 4.02 tonne CO2e/tonne crude steel.
Ferroalloys figures have been updated to:
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Ferrochrome – 5.57 tonne CO2e/tonne ferrochrome (previously 6.48)
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Silicomanganese – 6.26 tonne CO2e/tonne silicomanganese (previously 7.43)
Coal mining has been differentiated between:
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Opencast: 0.014 tonne CO2e/tonne run of mine coal
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Underground: 0.022 tonne CO2e/tonne of run of mine coal
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Pulp and Paper no longer refer to mills for the different performance benchmarks but rather specific the type of process.
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Quicklime: 1.322 tonne CO2e / tonne quicklime
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Aluminium 16.13 tonne CO2e / tonne aluminium
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Ceramic tiles 0.3 tonne CO2e / tonne ceramic tile
A taxpayer must determine the measured and verified emissions intensity of that taxpayer for the purposes of symbol "B" in the formula prescribed by section 11(1) of the Carbon Tax Act for the sectors or subsectors of-
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iron and steel;
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ferroalloys in respect of ferrochrome and silicomanganese;
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clay brick manufacturing in respect of saleable brick;
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the cement sector, in respect of clinker;
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chemicals in respect of nitric acid;
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ilmenite industry in respect of titanium slag;
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sugar industry in respect of raw or white sugar;
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quicklime
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aluminium; or
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ceramic tiles;
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the mining sector in respect of platinum, gold and coal, in relation to the emissions intensity of ore mined;
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the pulp and paper sector;
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coal to liquid and gas to liquid petroleum;
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petroleum refining.
NOTICE IN RESPECT OF THE RENEWABLE ENERGY PREMIUM
Section 6 of the Carbon Tax Act, outlines the amount of carbon tax payable by a taxpayer. In certain cases the carbon tax liability has to be reduced for entities who generate electricity Eg Eskom and other power producers as they have already paid the electricity environmental levy and it has to be further reduced as some of the electricity they sell is generated from renewable sources. In the equation, a taxpayer may deduct the renewable energy premium which allows for the deduction of electricity generated from renewables.
The Notice which was published today, 19 June 2020 outlines the renewable energy premiums which represent ‘‘B’’ in the formula which represents the renewable energy premium in respect of a tax period, from the commencement of the tax period until 31 December 2022.
The following Renewable Energy Premiums were published for the tax period ended on 31 December 2019:
biomass R 2,09;
concentrating solar power R 4,11;
landfill gas R1,35;
onshore wind R1,23;
solar photovoltaic R 2,27;
hydro not exceeding 15 MW installed capacity R 1,61; and
hydro greater than 15 MW installed capacity R0,84, per kilowatt hour.