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Carbon Tax Discussion

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Title: Carbon Tax Discussion


1
Carbon Tax Discussion
2
Agenda Item
  • Rationale for carbon tax
  • Example - energy efficiency implementation
    steel industry - NCPC
  • Reality of our GHG challenge
  • Dti suggestions/recommendations

3
Rationale for a Carbon Tax
  • National Treasurys Point of departure A carbon
    tax is being considered as a strategy to change
    behaviour in energy consuming sectors and not
    merely to raise revenues
  • Price signal to future investors to ensure
    investments are more climate resilient
  • Responsible global citizen
  • Behaviour change implies
  • Reduction in energy intensity (Total energy
    consumption per GDP) - Implement energy
    efficiency measures
  • Reduction in carbon intensity Reduce coal
    consumption as a of total energy consumption
    implement clean/er energy options
  • Structural change Produce goods that are less
    carbon intensive
  • Close carbon and/or energy intensive industries -
    smelters
  • The sectors that would be the hardest hit by the
    proposed tax could would be the ones not able to
    achieve behavioural change in the short to medium
    term
  • Largely due to technological and economic
    challenges

4
What does behavioural change mean
Behavioural Change
Reduction in energy intensity Electricity price already a strong motivator South Africa ranks as one of the highest in the world
Reduce carbon intensity South Africa ranks as one of the highest in the world IRP - The proposed carbon tax will mean that Eskom faces higher costs in its operations
Structural change Promote value adding, labour intensive and less energy intensive sectors Promote new Green Industries How long does structural change take realistically
Close carbon/energy intensive industries Can the SA economy afford to lose these industries in the medium term? The regret factor
5
National Cleaner Production Centre
  • Energy, resource, waste and cleaner production
    audits
  • Training of energy and resource efficiency
    experts and create awareness
  • Make recommendations that include
  • Waste heat recovery
  • Identification of leaks, insulation
  • Automation
  • Temperature control, EnMS
  • Plant layout
  • Equipment optimisation
  • Introduction of better technology
  • Etc
  • MCEP supports implementation

6
NCPC Case Study Steel Manufacturer
  • 45 of operational cost is energy cost
  • 10.6 MW av. Electricity demand saved against
    baseline
  • 92.67 GWh saved in 2012
  • Total 6.6 saving on baseline
  • Electricity Saving value R51m (including R28m
    from load-shedding)
  • LPG Saved 3218 t or 20 with value R39m
    compared to 2011.
  • Overall saving of 41 compared to 2010 baseline.
  • Reduced Energy Consumption from 25.1 to 23.7 GJ/t
    HRC.
  • Fifteen energy projects completed
  • EnMS ISO 50001 internal audit score 94.
  • Total Value of savings in 2012 Approximated at
    R127m

7
Key Success Factors
  • 1. There must be an Energy Strategy and Energy
    Management Program with
  • Management commitment.
  • Understanding potential and opportunities and
    having an implementation plan.
  • Allocating resources to energy management.
  • 2. WCM (World Class Manufacturing program)
    assisted in energy efforts
  • Having reliable operations made optimisation
    possible.
  • IEE Programs hosted by NCPC (UNIDO, DTI and DOE)
  • Affordable training from world class experts to
    assist and guide improvement programs and
    initiatives.
  • Sustainability can only be achieved through
  • ISO 50001
  • Management Infrastructure (MI) - closing the
    loop with control items in routine meetings.

8
South Africa is in a difficult position
Climate change mitigation is an imperative from
both a climate and trade and industry
perspective SA production and trade will become
increasingly vulnerable to carbon sensitive
policies and private standards, some of which are
being deployed with protectionist intent.
9
Top 20 CO2 emitting countries by absolute CO2 -
EIUG
South Africas total 2020 Copenhagen Savings
will be emitted by China in less than 68 Hours
lt1.2 of total global CO2 emissions
10
South Africa's Greenhouse Gas Mitigation
Potential Analysis Technical Summary Draft 1.7,
12 July 2013 - DEA
  • The best available information at present in
    South Africa
  • Provide a reference case projection of national
    greenhouse gas emissions
  • Identified 123 mitigation measures under a
    balanced scenario
  • Project national greenhouse emissions into the
    future Without Measures and base year 2000,
    With Existing Measures since 2000 and with
    additional measures)
  • 5 key sectors are
  • Energy
  • Industry
  • Transport
  • Waste and
  • Agriculture, Forestry and Other Land Use.

11
National GHG emissions under the reference case
(WEM) projection, showing a breakdown per sector
(2000-2050)
12
National GHG emissions under the reference case
(WEM) projection, showing a breakdown per sector
(2000-2050). Electricity emissions are allocated
to end use sectors.
13
Contribution of electricity intensive sectors to
export
Source the dti, Genesis workings
14
Desired South African Mitigation Outcome
15
National-scale GHG emission reductions under the
Balanced Weighting scenario, per sector, showing
the reference With Existing Measures (WEM) and
With Additional Measures (WAM) curves.
16
All Mitigation OptionsSavings in ktCO2eq
2020 2030 2050
Non-power Energy sector 13,230 23,484 52,290
Power Sector 28,819 140,617 406,527
Industry 21,095 33,393 63,516
Transport 11,823 44,199 153,993
Agriculture, Forestry and Other Land Use Sector Results
Waste and Agriculture 10,033 22,204 39,773
17
Policy Adjusted Scenario
18
Adapt to climate change
  • Adapting to climate change requires a massive
    technological shift in the SA economy from a
    capital intensive resource dominated economy to a
    relatively more value-adding, labour intensive
    and less carbon-intensive economy.
  • It is a transition that will not happen
    automatically with the introduction of 'one size
    fits all' instruments across the economy.
  • It will require more instruments than a carbon
    tax and carbon budgeting with a need to
    'front-load' measures to promote relatively
    value-adding, labour intensive and lower
    carbon-intensity manufacturing.
  • It will also require measures to manage the
    transition of our traditional resource-processing
    sectors so that they do not collapse under
    increasing electricity prices and a carbon tax.

19
Suggested approach
  • Focus on the electricity generation sector and
    increase the non coal - base load energy
    generation after 2030
  • Promote a move from road freight to rail freight
    this will improve our logistics cost challenge
    as well
  • Finalise GHG mitigation analysis - DEA
  • Based on GHG mitigation options, affordability
    and implementability determine desired emission
    reductions for energy intensive industries (MEC)
  • Use carbon tax to penalise companies that exceed
    the emissions cap but allow rebates or credits
    for
  •  introduce globally leading mitigation technology
    and processes
  • support downstream sectors shifting relative
    prices in favour of less carbon intensive sectors
    which are more labour intensive and value adding,
    in particular a shift to the pricing of
    intermediate inputs such as steel, polymers and
    aluminium at considerably below import parity
    levels.
  •  invest themselves in diversification into green
    technologies and sectors

20
Suggested approach
  • Introduce fiscal support measures that promotes
    expansion and growth of higher value-adding,
    labour-intensive and less energy-intensive
    sectors (e.g. clothing, footwear, textiles agro
    processing plastics fabrication, metal
    fabrication  capital equipment transport
    equipment furniture)
  • Manufacturing is required as the growth engine
    for the economy, creating millions of jobs and
    reducing massive inequality
  • Fiscal and other mechanisms to promote rapid
    growth of new industries
  •  Investment in green energy, industrial energy
    efficiency and demand side management linked to
    localisation
  •  Componentry into green electrical generation,
    and demand side management equipment
  •  Goods and services related to industrial,
    commercial property and household energy
    efficiency. (e.g. SWH's)
  •  Support RD and commercialisation of green
    products and materials such as organic food,
    bio-composites etc.
  • Expand fiscal support measures to incentivise
    companies to reduce emissions and/or improve
    efficiency NCPC already has a number of great
    success stories MCEP already caters for this

21
Summary
  • A carbon tax regime needs to take into account
    key structural features of the economy if it is
    to avoid the real risk of shrinking or even
    closing existing energy intensive sectors.
  • This requires concurrent support measures linked
    to the carbon tax which purposively promotes
    structural change.
  • A carbon tax should be levied in such a way that
    it allows for offsetting allowances or deductions
    that recognise
  • Investments in plant and equipment that mitigates
    carbon emissions.
  • Shifting relative prices in favour of less carbon
    intensive sectors which are more labour intensive
    and value adding, in particular a shift to the
    pricing of intermediate inputs such as steel,
    polymers and aluminium at considerably below
    import parity levels.
  • Investments in RD, innovation and
    commercialisation of green technologies, products
    and services to be undertaken in South Africa.

22
Thank you
  • Gerhard Fourie
  • Chief Director
  • Green Industries
  • Gfourie_at_thedti.gov.za
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