Without robust climate regulation, polluters won’t pay

In the current version of the massively-delayed Climate Change Bill – intended to enable South Africa’s just transition to a low-carbon and climate-resilient economy – there is only one offence that big carbon emitters can commit. That is for the failure to submit (not to implement, mind you) a greenhouse gas (GHG) mitigation plan to the Minister for Forestry, Fisheries and the Environment.  Every company allocated a carbon budget – which is how the Minister divvies up the country’s GHG emissions to be “spent” by its corporate emitters – must submit a GHG mitigation plan setting out how it intends to remain within its allocated budget.

The Bill, introduced in Parliament in February 2022, is undergoing a second round of public consultation at the Parliamentary Portfolio Committee on Forestry, Fisheries and the Environment.  It cannot hope to achieve its aims unless the chief GHG emitters drastically reduce their emissions. That is not controversial.

Each company allocated a carbon budget must submit and implement a GHG mitigation plan, monitor its implementation, and report annually to the Minister on progress against the allocated carbon budget. If this reporting indicates that the company “has failed, is failing, or will fail to comply with the allocated carbon budget”, the company must describe the measures to be implemented to remain within the budget.  There is, however, no provision in the Bill for how to address the situation where the company has already failed to comply with the budget. Nor is there any penalty attached to this failure.

The Bill also does not set out any consequences for a failure to “implement” the GHG mitigation plan – which creates the laughable result that simply submitting the plan is good enough to avoid committing an offence. There is also no penalty for failing to report, monitor or effect remedial action if there is non-compliance with the plan.

It’s not as if there is only one criminal offence in the Bill, and other instances of non-compliance are penalised in some other way: say through administrative fines or personal director liability or revocation of licences. No, there is only one penalty of any nature in the Bill, and it is not even for the very egregious contravention of failing to comply with a carbon budget, which could have severe consequences for climate action – especially if the non-compliance is significant and/or ongoing.

Corporate anti-climate lobbying to blame

There is no doubt that years of skilful anti-climate lobbying by the fossil fuel industry and its industry associations have played a major role in delaying ambitious climate policy and legislation like this Bill. Fossil fuel companies have been shown, through independent research, to have significant influence over government climate policy – both directly and through industry associations like Business Unity South Africa (BUSA), the Minerals Council of South Africa, and more recently, the Energy Council of South Africa (ECSA).

The lack of lobbying regulation and the lack of voluntary lobbying disclosure by corporates have allowed certain companies and their industry association representatives to employ various tactics to undermine South Africa’s climate change response for over a decade. The Bill and the Carbon Tax Act (CTA) have been particular targets for this approach.

An anti-climate advocacy technique that has been remarkably successfully deployed by corporates is the assertion that climate regulation must be delayed until there is “alignment” between carbon budgets and the carbon tax (implemented by national Treasury in terms of the CTA). This strategy has been instrumental in ensuring multi-year delays both in the implementation of an effective carbon tax and in the promulgation of a robust Climate Change Act. Although it is carefully designed to sound eminently reasonable and practical, there is no evidential basis to support this argument.

The short version of an extraordinarily-convoluted justification appears to be that carbon budgets, and the carbon tax should have “integrated” or “aligned” incentives, “mitigation mechanisms” and “penalties”. This, according to BUSA, the Minerals Council, ECSA, Business Leadership South Africa and the Energy Intensive Users Group, “will create greater business confidence and investment opportunity”.

It is unclear what business means when it talks about “enabling incentives” to comply with a carbon budget, but there is no reason why these “incentives” would have to be “integrated” or “aligned” with the carbon tax. Paying less tax is obviously a strong incentive in circumstances when a carbon tax is set at a rate related to GHG emission reductions commensurate with the best available climate science. There is strong consensus that taxing carbon emissions is a powerful tool to change behaviour by altering economic incentives.

Of course what industry calls “mitigation mechanisms” would be connected, in that both carbon budgets and carbon tax are related to the size of a company’s GHG emissions: reduced emissions mean that compliance with the carbon budget is easier and less tax is payable. Again, mitigation of GHG emissions can and should happen independently in the carbon budget and carbon tax processes. No “alignment” is required.

Insofar as alignment of penalties is concerned, this claim also does not make sense in circumstances where there are no penalties applicable for non-compliance with the carbon budget. In any event, even if there were penalties for non-compliance – as there very clearly should be – there is again no basis for any alignment arguments to hinder or delay implementation (this has been confirmed by the Department of Forestry, Fisheries and the Environment and National Treasury). In any event, to avoid paying penalties and/or excess carbon tax, companies need only comply with their carbon budgets.

Upon interrogation, this nebulous claim disintegrates: there is no need for alignment or integration before climate legislation can be implemented.  This is just another example of the prevalent and harmful lobbying narrative that has served to delay climate action and preserve vested interests.

Organised business also asserts that no existing authorisations should be impacted by a Climate Change Act. For example, industry contends that carbon budgets cannot limit the ability of any existing industrial facility to continue operating at its full capacity. These untenable arguments demonstrate very starkly how industry intends to continue “business-as-usual” emissions for as long as possible. The only way to prevent this is to create proper incentives for emission reductions, by implementing a stringent carbon tax and significant penalties for failing to comply with obligations introduced by the Climate Change Act.

Regulation is meaningless if non-compliance benefits the offender

Would-be offenders of the Climate Change Act are corporate entities, and substantial benefits can accrue to an offender that contravenes its provisions. Indeed, substantial benefits have already accrued to fossil fuel companies, which have never, to date, been penalised (apart from a low carbon tax) for their GHG emissions, while all of the negative impacts of those emissions have been externalised onto the rest of us.

As is starkly demonstrated by multiple other instances of corporate non-compliance, unless significant penalties are attached to the failure to comply with a carbon budget (for instance), companies will simply “budget” for any excess tax rate or other fine that may yet be imposed, and then happily exceed those budgets. The costs of breaking the law have to exceed the benefits, in order to avoid the Climate Change Act being toothless and failing to achieve its aims.

It is overwhelmingly clear from the current dire state of the climate that voluntary measures by governments and emitters to reduce GHG emissions, and low (if any) penalties for excessive emissions, have dismally failed to achieve their goal. Global emissions continue to rise and the timeframe to take meaningful climate action to avoid the worst impacts of the climate crisis is rapidly narrowing.

The long-overdue Climate Change Act cannot afford to be weak on compliance and enforcement, particularly given the country’s significant emissions and the severe climate risk we face. It is essential that it be amended to ensure accountability for those who contribute significantly to the climate crisis, and who currently do so with impunity.

This article was first published in the Daily Maverick on 7 June 2023.

By Robyn Hugo

IMAGE: Daylin Paul

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