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Mines can’t ignore the carbon tax. But they can take control of it.
25 May 2020
Mines can’t ignore the carbon tax. But they can take control of it.

By Francois du Plessis, Operations Director at EDS Systems

According to Air Quality Expert at the European Environment Agency, Alberto Gonzalez Ortiz, the world has seen a dramatic drop in pollution due to the COVID-19 pandemic. But this is mainly due to the reduction in Nitrogen Dioxide emitted by road traffic in cities. Mines in South Africa, however, have been allowed to restart operations from 20 April 2020 at 50% during the lockdown period and as a result, continue to emit Greenhouse Gases (GHG).Mining is one industry that needs to gear itself for phase 2 of South Africa's Carbon Tax Act which will commence in mid-2022. Fortunately, this provides the industry with the time needed to prepare and gain control over its GHG emissions.


Why prepare now?

Adhering to the Carbon Tax Act and continually working towards reducing emissions is no simple task and this challenge has reached the doorstep of primary emitters as Phase 1 tax returns were due by June 2020, although this deadline has been pushed by three months. However, they will still need to provide the reports for the time period stipulated in Phase 1. 


With Phase 2 around the corner, mines are having to ensure that the entire organisation understands the Carbon Tax Act, in addition to the impact carbon emissions have on the environment, to assist in capturing accurate information in preparation of their deadline. They also have to prepare for the Acts impact in a cost-effective and sustainable manner.


If we consider that asbestos was once a common building material but now attracts massive penalties, carbon emissions are following the same route. It's a growing risk and tax liability that every organisation must get ahead of. The benefits of the tax might not seem very obvious at the moment, but those will develop over time as we pay it forward to the future.


It’s not all doom and gloom

The mining industry also needs to consider that the Carbon Tax Act was steadily introduced by the South African government and that they have been reasonable about their scope. There are free allocations that don't attract a tax. But if mining operations don't know their carbon emission levels, they can't look for those advantages or reduce liabilities. Nor can they capitalise on any long-term opportunities stemming from the act. Awareness of carbon emissions can also improve efficiency and productivity. 


These organisations also need to bear in mind that poorly calculated tax will cost more and provide a poor picture of guidance for mitigation and modernisation. In addition, mines need to be aware of their carbon footprint, as this will assist in lowering tax once emissions have been calculated.


Not all tax tools are equal

There are a few Carbon Tax tools in the market currently that can calculate carbon emissions. However, organisations should ensure these tools incorporate the South African Carbon Tax Act's parameters into consideration along with additional functionality that adds value such as also being able to establish a company’s carbon footprint.


Importantly, the tool should simplify carbon monitoring and tax calculations, be aligned with the South African Carbon Tax framework with local thresholds and be able to report, analyse and benchmark against these thresholds. This underpins the ability for the tool to calculate the exact figure - in Rands - that is liable at the end of each reporting period, simplifying a traditionally onerous exercise. Moreover, it needs to leverage modern digital technologies to create accessibility, better management of the tax's metrics, and engagement with the different levels of a business.


As the world becomes more aware of the impact mines have on the environment, lowering their carbon footprint becomes even more pertinent. Fortunately, there are tools that enable mining houses to take tax carbon tax by its horns by reducing complexity and adding value to the business and the environment.

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