FEATURE | Greening our Economy

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“The future will either be green or not at all”

– Bob Brown, former Australian politician, medical doctor and environmentalist


The stage is set

In his June State of the Nation address, President Cyril Ramaphosa observed that it was time to step up the country’s adaptation to and mitigation of the effect of climate change. He indicated the effort required a partnership between government, private sector, labour and the international community.

The stage for acceleration of our green economy, is well set. South Africa’s vision for an effective climate change response and just transition to a climate-resilient and lower-carbon economy, is set out in the National Climate Change Response Policy (NCCRP) of 2011 and the National Development Plan (NDP) – Vision 2030.

In the global arena, the country ratified the Paris Agreement, which falls within the United Nations Framework Convention on Climate Change, in 2016. It has also adopted the UN Environment Programmes 17 Sustainable Development Goals (SDGs), seven of them expounding environmental objectives. Regionally, it supports the African Union’s Agenda 2063, which, says Barbara Creecy, Minister of Environment, Forestry and Fisheries, “stresses the need for Africa’s natural resource base to be managed sustainably and in such a way that the needs of all our continent’s people can be met.”

Legislatively, environmental lawyers note a solid body of laws, flowing from the overall framework statute of the National Environment Management Act (NEMA) 107 of 1998. Sandra Gore, director and head of Environmental, Mining and Regulatory Law at Cliffe Dekker Hofmeyr, and Associate Alecia Pienaar, are unable to pin an exact number on the extensive body of environmental legislation that impacts business and industry.

The Carbon Tax Act, passed into law after a 9-year consultation period, is perhaps most topical, imposing a tax on entities that emit greenhouse gases (GHG) above specified thresholds at a rate of R120 per ton of carbon dioxide equivalent. To soften the blow, the tax is however imposed in phases, the first being electricity neutral and providing for numerous tax-free allowances. While this includes allowances for carbon offsets, the necessary regulations were, at press time, yet to be gazetted.

Expected to have far-reaching impact is the Climate Change Bill, on which there has been little movement since it was published for comment in June 2018. In its present form, says Pienaar, it gives a wide discretion to the Minister to publish regulations in relation to any matter necessary to give effect to South Africa’s obligations in terms of international agreements on climate change. And, while the Carbon Tax Act has introduced levies on carbon emissions, this bill proposes the mandatory allocation of carbon budgets to cap an entity’s emissions and subject defaulters to stiff penalties.

While our corporate sector is often at the foreground of championing a green business environment, negotiating the legislation can be onerous, particularly for an economy under strain. Government, for its part, often lacks the resources to implement its regulations, and its levels of inter-departmental co-operation are often wanting.

The mining industry is one sector that feels the brunt of this. Mining houses incur significant costs in meeting numerous regulatory requirements, imposed by multiple arms of government, all of which can be streamlined, says Gore.

An example is the Financial Provisioning Regulations published in 2015, for the rehabilitation and remediation of environmental damage caused by prospecting, exploration, mining or production operations. They include the provision that mines have financial security in place for rehabilitation (such as groundwater pollution) after mining operations cease, making them liable for environmental issues even after closure. The content of the regulations is, however, subject to some confusing tussling between the Departments of the Environment, Forestry and Fisheries and Mineral Resources, as amendments currently out for public comment reveal.

The interests of greening the economy and sustaining the economy represent a delicate balancing act. The Air Quality Act is one instance, says Pienaar; its regulations set stringent compliance standards on a fossil-fuel dependent, developing country where aging infrastructure is already a challenge.

The oceans are another example of contested territory as offshore oil and gas prospectors, fisheries and marine protection bodies battle for rights, more so since French oil company, Total, revealed South Africa’s first significant deep-water offshore gas condensate discovery in February. The contents of a Petroleum Resources Development Bill, currently being developed by the Department of Mineral Resources, are eagerly anticipated to clarify regulatory and policy uncertainty.

With non-governmental organisations (NGOs) becoming particularly active in the environmental protection arena, corporate entities are facing additional pressures in having to move away from conducting their operations on a “business as usual”, note the CDH team.

Increased pressure, too, is expected from shareholders. “We recently saw the first climate-change risk resolution tabled in South Africa by one of Standard Bank’s shareholders, with overwhelming shareholder support when compared to similar international resolutions tabled, and business is now being forced to respond to shareholder activism in the environmental space,” comment Webber Wentzel Associate Paula-Ann Novotny and Candidate Attorney Jeanique Pretorius.

Indeed, in the international arena, much focus in now placed on climate risk disclosure, with bodies such as the Task Force on Climate-related Financial Disclosures (TCFD) encouraging voluntary disclosure to investors, lenders, insurers and other stakeholders. The concept, established by the international Financial Stability Board (FSB), is taking hold around the world.


South Africa is party to the following main international environmental treaties:
Heritage
  • The 1972 UNESCO Convention for the Protection of the World Cultural and Natural Heritage, which obliges countries to protect listed heritage sites.
Biodiversity
  • The 1992 Convention on Biological Diversity, which emphasises the equitable sharing of benefits with the country from which resources are taken.
  • The 1983 Convention on the Conservation of Migratory Species of Wild Animals (Bonn), which obligates 52 countries to protect endangered and wild animals that migrate between them.
  • The Convention on Wetlands of International Importance especially as Waterfowl Habitat (Ramsar Convention).
  • The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
Waste
  • The 1989 Basel Convention on the Control of Transboundary Movements of Hazardous Waste and their Disposal.
Atomic Energy
  • The 1991 Nuclear Non-Proliferation Treaty, preventing the spread of nuclear weapons and weapons technology, promoting cooperation in the peaceful uses of nuclear energy, and furthering nuclear disarmament.
Marine
  • The 1982 Law of the Sea Convention 1982.
  • The 1959 Antarctic Treaty Regime.
Climate change
  • The United Nations Framework Convention on Climate Change (UNFCCC), August 1997.
  • The Kyoto Protocol, July 2002.
  • The Paris Agreement 2016, committing to nationally determined targets to reduce (GHGs).
Green legislation/regulations affecting business and industry in South Africa:
  • Carbon Tax Act, 2019 and the supporting GHG reporting regulations published under the National Environmental Air Quality Act, 2004.
  • The National Pollution Prevention Plan Regulations, governing plans to be submitted by all operators conducting a prescribed production process involving the emission of GHGs in excess of 0.1 Mt annually.
  • The National Energy Act, 2008; its objectives include promotion of diverse energy supplies from various sources.
  • The Electricity Regulation Act 2006, which also has among its objectives diverse energy sources and energy efficiency. The Electricity Regulations on New Generation Capacity promulgated in terms of this Act in 2011 apply, inter alia, to new renewable energy generation projects.
  • The National Energy Act 2008 regulates on the allowances for energy efficiency savings and tax credits. Recently, draft regulations were also published under this act for the mandatory display and submission of energy performance certificates for certain classified non-residential buildings.

Although no legislation has been enacted to establish energy efficiency targets in South Africa, the Green Building Council South Africa in 2008 launched the Green Star SA Environmental Rating System for commercial buildings,  to measure design and construction compliance against its objectives, which aim to reduce environmental and human health impacts.

Information provided by Webber Wentzel


Microgrids yield impressive savings

The world is currently obsessed with renewable energy, and South Africa, too, has made some advancements. Indeed, the country’s first progress report on the United Nations’ SDGs presented in July reveals that between 2012 and 2018, electricity produced from renewable sources (SDG7) increased considerably from 16.1GWh to 8,800GWh.

But few would disagree that South Africa’s commitment to renewable energy is surpassed by the concerns of providing a functioning state power utility to provide energy in the first place. However, it is widely recognised that reducing our 90% reliance on coal-powered energy is integral to the Eskom solution (triggered too by a need to decommission aging power stations, and the reluctance of banks to finance new coal-based projects).

In May, City Press reported that a unique financing vehicle based on reducing carbon emissions was under development by an Eskom sustainability task team appointed by President Ramaphosa. It aims to raise R150 billion – R200 billion from climate change mitigation funding, at discounted interest rates, in return for an Eskom shift away from coal-fired stations.

The deal, which has drawn interest from major development finance institutions in Europe and the UK, will also include the unbundling of the SOE into separate generation, transmission and distribution units, as Ramaphosa has stated.

Seydou Kane, Managing Director at power management company Eaton Electric South Africa, believes a large-scale conversion of sub-Sahara’s energy sector to renewable is not an unrealistic ambition, should it be supported by efficient and cost-effective storage of large volumes of electricity.

“A drop in costs and improvements in solar cells, solar panels and battery technology, are making storage more affordable and renewables more reliable, capable of deployment to small, remote locations”, he states.

Kane is an advocate of decentralised power supply models made up of localised generation-to-distribution nodes with shorter transmission lines. Decentralisation is conducive to the employment of renewables in microgrids equipped with battery units, he points out.

A commercial microgrid was commissioned at Eaton’s own voltage systems manufacturing facility at Wadeville, Germiston, in March last year. It operates either independently or alongside the primary utility grid, easing the burden on the national grid and regional infrastructure. In its first full year of operation it has yielded a reduction of over 30% in energy costs and total operational cost savings of 56.5%. Production losses worth more than R1.2m were avoided as stored energy enabled operation even during grid power outages.

Siemens South Africa, having installed a microgrid at its Midrand headquarters 14 months ago, tells a similar tale. It has enjoyed uninterrupted power over this period and has saved 2.4GWh (and 2 460 tons of CO2) – some 50% of the office park’s normal consumption and the equivalent used to power 50 average households.

The Distributed Energy System (DES) is built around a 1MW photovoltaic (PV) solar plant strategically positioned to take full advantage of the sun. Captured solar power is then integrated into the microgrid controller. Excess energy is stored in a 140KWh battery with the entire system monitored, visualised and controlled via an Internet of Things (IoT) energy platform.

“One of the most exciting aspects of a microgrid system is the potential for storing and exchanging power. For example, an office park that generates a lot of power during the day could pass that stored power along to a nearby residential community to be used at night,” comments Sabine Dall’Omo, CEO of Siemens Southern and Eastern Africa. “Depending on the setup, any power generated by the community overnight can in turn be transferred back to the office park for use during the day. Such symbiotic relationships between business and communities could result in massive savings across the board and make huge leaps toward a cleaner energy environment in SA.”

Solar and wind sector expands

REN21, a global network of stakeholders committed to a sustainable energy future, has been publishing an annual Renewables Global Status Report (GSR) since 2005, built on information from 900 contributors. According to the 2019 report solar (PV) systems and wind are now mainstream.

In South Africa, with its good resources of both, new projects indicate the sector is on the march. Enel Green Power RSA, operator of both solar and wind plants, has commenced construction on the Garob wind project near Copperton in the Northern Cape, a 140MW wind farm. At an investment of over €200m, it is the group’s fifth South African wind project in the country and the third one to be launched this year. When fully operational by the first half of 2021, the 46-turbine Garob wind farm is expected to generate around 573GWh per year, replacing an annual emission of around 600,000 tons of CO2.

According to…

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Read this Feature on GREENING OUR ECONOMY by Michelle Colman, as well as a host of other topical management articles written by professionals, consultants and academics in the August/September 2019 edition of BusinessBrief.


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