* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download sectoral classification for the low carbon economy in south africa
Emissions trading wikipedia , lookup
Climate change and poverty wikipedia , lookup
2009 United Nations Climate Change Conference wikipedia , lookup
Climate change feedback wikipedia , lookup
Energiewende in Germany wikipedia , lookup
Climate-friendly gardening wikipedia , lookup
Economics of climate change mitigation wikipedia , lookup
Climate change mitigation wikipedia , lookup
German Climate Action Plan 2050 wikipedia , lookup
Citizens' Climate Lobby wikipedia , lookup
Views on the Kyoto Protocol wikipedia , lookup
IPCC Fourth Assessment Report wikipedia , lookup
Carbon pricing in Australia wikipedia , lookup
Politics of global warming wikipedia , lookup
Decarbonisation measures in proposed UK electricity market reform wikipedia , lookup
Carbon capture and storage (timeline) wikipedia , lookup
Biosequestration wikipedia , lookup
Carbon Pollution Reduction Scheme wikipedia , lookup
Mitigation of global warming in Australia wikipedia , lookup
I t ’s a jou r ne y towa rds a low ca rbon e conomy SECTORAL CLASSIFICATION FOR THE LOW CARBON ECONOMY IN SOUTH AFRICA oct 2012 TABLE OF CONTENTS Table of Contents ......................................................................................................................... 2 1. Background ......................................................................................................................... 3 2. Current State of Affairs........................................................................................................ 4 3. Classification Systems in Use and Under Development ......................................................... 6 3.1 National Inventory ......................................................................................................... 6 3.2 Standard Industrial C lassification.................................................................................... 8 3.3 National Treasury ......................................................................................................... 10 3.4 Private Sector Reporting Initiatives............................................................................... 11 3.5 Emission Offsets and Carbon Credits ............................................................................ 12 4. Auditing requirements ....................................................................................................... 13 5. Mapping of sectoral classifications ..................................................................................... 14 6. Conclusion ........................................................................................................................ 14 2 1. BACKGROUND The South African National Development Plan (National Planning Commission, 2012) states that “A low-carbon future is the only realistic option, as the world needs to cut emissions per unit of output by a factor of about eight in the next 40 years”. The Development Plan, approved by parliament, devotes a whole chapter 1 to the transition of the South African economy to a low carbon economy. This focus is the latest in a long line of actions aimed at converting the SA economy. The timeline of these actions is shown below: A Framework For Considering Marketbased Instruments To Support Environmental Fiscal Reform In SA (April 2006 ) Long Term Mitigation Scenarios (October 2007) 2006 2007 Carbon Tax Discussion Paper (December 2010) National Climate Change Response White Paper (October 2011) Defining South Africa’s Peak, Plateau & Decline GHG trajectory (June 2011) 2008 2009 National Development Plan 2030 (August 2012) Regulation 142 to the National Energy Act(34/2008) Mandatory provision of energy data (February 2012) 2010 2011 2012 Historic Likely introduction of carbon tax (2014-2015) Likely date for mandatory reporting (2013-2014) 2013 2014 1015 Forecast Figure 1: Timeline of SA's transition to a low carbon economy Transition to a low carbon economy will require intervention at almost all levels of the country’s economy. It is therefore important that the management of the economy is aligned with the low carbon transition plans. The classification of the activities in the economy stands central to the management of the economy. The classification is required for management, national and international reporting and verification/auditing purposes, with different requirements depending on whether it is for carbon 1 Chapter 5. 3 inventories or mitigation requirements. Classification is dictated in areas covering international relations and required in the domestic economy for both the private and public sectors. This report analyses the structure of the SA economy and the current sectoral classifications from a greenhouse gas accounting and management perspective. The importance of classification of activities involving carbon and greenhouse gasses stem from the fact that carbon cuts through all aspects of the social life and economy of the country. Conflict in the different sectoral classification mechanisms can cause much confusion if it is not properly addressed and explained. The report concludes that a number of different sectoral classification systems are currently in place and functioning well. These systems are deeply embedded and will be impossible to replace. The only workable option is to map these systems to each other, with respect to both greenhouse gas accounting also called carbon foot printing / inventories, and mitigation, in order to harmonise the different actions needed for the transition to a low carbon economy. 2. CURRENT STATE OF AFFAIRS This section describes the state of affairs with respect to the classification of activities in the economy and how it impacts on the path required for a transition to a low carbon economy. The role players in the sectoral classification of economic activities are summarized below: Table 1: Role Players and mandates in the SA economy, relating to climate change. Role Player Mandates Inter-Ministerial Committee on Climate Change (IMCCC) The IMCCC is responsible is responsible for the implementation of the White Paper and must publish the National Climate Change Response Policy within three years from the publication of the White Paper 2 (Oct 2014) Department of Environmental Affairs (DEA) DEA is responsible for the following: 2 • to prepare the annual GHG Inventory. The inventory system will form part of the National Atmospheric Emission Inventory component of the South African Air Quality Information System (SAAQIS). • to compile the country’s National Communication for the UNFCCC National Climate Change Response White Paper (Republic of South Africa, October 2011) 4 Role Player Mandates Department of Energy (DoE) The DoE is involved as there is a very close link between the GHG emissions and energy consumption. The DoE is responsible for the implementation of the Flagship Programmes identified in the White Paper. It is also responsible for the Integrated Energy Plan (IEP) and Integrated Resource Plan (IRP) The DoE has published regulations that empowers the Minister of Energy to demand disclosure of GHG emissions by all public and private entities. Department of Trade and Industry (DTI) The DTI must co-operate with the National Treasury in implementing the carbon pricing policy. The DTI is the custodian of the South African technical infrastructure institutes which include: • • South African Bureau of Standards (SABS) where ISO standards for GHGs has been adopted as national standards, and South Africa Accreditation System (SANAS) who regulates accreditation for GHG validators and verifiers. National Treasury The National Treasury must implement the carbon pricing policy in cooperation with the DTI Stats SA Stats SA is responsible for the recording of the official statistics of the country The timeline current state of development of the climate change related regulatory environment in SA is summarised below: Table 2: Development of regulating environment. 2000 2006 2010 Initiative/Document Initial National Communication A Framework For Considering Market-based Instruments To Support Environmental Fiscal Reform In South Africa Carbon Tax Discussion Paper 2010 International commitment to a GHG target in Copenhagen 2011 National Climate Change Response White Paper 2011 Second National Communication Contents South Africa published the Initial National Communication under the UNFCCC in October 2000 Published April 2006, this document forms the basis of the environmental tax legislation in SA This document was published in 2010 and built on the 2006 publication and started setting the scene for the introduction of carbon tax South Africa has committed itself to a 34% reduction of its CO2 by 2020 and a 42% reduction by 2025, subject to international assistance. The White paper published in October 2011 spells out the distribution of responsibilities for the alignment of the South African economy with the low carbon targets. South Africa published the Second National Communication under the UNFCCC in 2011 5 2012 2012 3. Initiative/Document R. 142 National Energy Act (34/2008): Regulations: Mandatory provision of energy data National Development Plan 2030 Contents This regulation, published in February 2012, empowers the Minister of Energy to demand GHG disclosure from any entity operating in South Africa. Its publication duplicates this mandate which, according to the White Paper, places the responsibility to perform this function on DEA The National Development Plan was published and approved by Cabinet in August 2012. Chapter 5 of the document is focussed on the transition of the SA economy to a low carbon economy. CLASSIFICATION SYSTEMS IN USE AND UNDER DEVELOPMENT This section describes the classification systems currently in use as well as the developments in sectoral classification that we are aware of. 3.1 NATIONAL INVENTORY The National Inventory is the carbon footprint of the country. The UNFCCC requires that this be submitted on a biennial basis – once every second year. The lead agency for the National Inventory is the Department of Environmental Affairs The UNFCCC requires that reports are submitted in the Common Reporting Format (CRF) which is based on the IPCC guidelines for national GHG inventories. Following these guidelines, only direct process emissions are required from companies, as other direct emissions and electricity related emissions are obtained directly from the energy industry. The result of the country’s National Inventory is shown in Figure 2 below. The Department of Environmental Affairs published the 2000 South African National Inventory on this classification as indicated below: Table 3: The IPCC Division of Emission Sources into Four Broad Categories Sectoral scope 1 2 3 4 Description Energy Industrial Processes and Product Use Agriculture, Land Use, Land Use Change and Forestry Waste South Africa‘s total GHG emissions measured using these guidelines in the year 2000 are estimated to be 461 178,5 GgCO2 equivalents (461 million tons CO2 e). 83% of emissions were associated with energy supply and consumption with 7% from industrial processes, excluding fuel combustion or electricity consumption, both reported as Energy; 8% from agriculture excluding fuel combustion reported as Energy and Sewage; and 2% from Waste; as shown in the diagram below. These figures exclude emissions or sinks from land use, land use change and forestry (LULUCF) activities within the Agriculture, Forestry and Land Use (AFOLU) sector. 6 These AFOLU activities contribute 2 057 GgCO2 e as a source but also provide a sink of 20 751 Gg CO2 e to provide a net sink of emissions of 18 694 GgCO2 e. Figure 2: Total greenhouse gas emissions by sector in South Africa in 2000, without land use, land use change and forestry (GgCO2 equivalents). The reporting requirements of the National Inventory conflicts with other reporting structures in the following way: • Institutions reporting under the National Inventory only report their direct emissions, whereas • when companies report their carbon footprints in terms of the guidelines of the GHG Reporting Protocol or ISO-14064-1, they report all direct emissions (fuel and process emissions) and emissions related to electricity usage. The National Climate Change Response White Paper mandates DEA to develop a system of mandatory GHG reporting using the Section 29(1) of the Air Quality Act. This system is currently under development as part of the air pollutant reporting system. The custodian of the data will be the South African Weather Service. The initial design of the system is shown below: 7 Figure 3: Proposed Emissions Inventory System (Department of Environmental Affairs, 12 October 2011) 3.2 STANDARD INDUSTRIAL CLASSIFICATION The Standard Industrial Classification (SIC) is an international activity based system used worldwide for importing, operating and tariff negotiations and policy formulations. The Department of Energy, as well as Statistics SA, divides the SA economy according to the Standard Industrial Classification Codes (SIC). The classification is done according to 10 main activities. Table 4: Standard Industrial Classification into ten main industrial sectors Sectoral scope 1 2 3 4 5 6 7 8 9 10 Description Agriculture, hunting, forestry and fishing Mining and quarrying Manufacturing Electricity, gas and water supply Construction Wholesale and retail trade, hotels and restaurants Transport, storage and communication Financial services Community. Social and personal services Private households as employers. 8 In 2006 a total of 2 480 589 TJ of energy was consumed. Industry, residential and transport sectors are the three major energy consuming sectors. The values for residential is boosted by the inclusion of estimated biomass consumption figures. The category ‘non-energy use’ is for energy carriers such as petroleum product solvents, lubricants and bitumen which is not utilised for their energy properties. Figure 4: Sectoral consumption of energy in South Africa in 2006. The Department of Energy published Regulation 142 to the National Energy Act (Act 34 of 2008) on 24 February 2012. This Regulation states that: Section 4(1): For purposes of these Regulations, data providers are classified according to the following categories: (f)(i) an entity which carries out economic activities as classified according to the SIC; Section 5(2): Where relevant, the data provider contemplated in regulation 4(1) must also make available to the Department or a representative of the Department, data and information describing the quantity and nature of - (a) greenhouse gases and related gaseous particles emitted as a result of the data provider's economic activities and processes; This regulation has not been implemented yet. When implemented it will duplicate the requirements of disclosure that has been allocated to DEA in terms of the National Climate Change Response White Paper. Although the SIC classification is ideal to monitor and track mitigation activities, however it cannot easily be collated to reflect the inventory and identification of gaps or quality control concerns is difficult to detect. 9 3.3 NATIONAL TREASURY The publication of the 2006 discussion paper, A Framework for Considering Market-Based Instruments to Support Environmental Fiscal Reform in South Africa, saw the economy divided into a new sectoral classification.. This classification seemed to focus on the sectors with high emissions, therefore eligible to pay carbon tax. Table 5: Sectoral classification by National treasury according to the 2006 discussion paper Sector Transport fuels Vehicle taxation Aviation taxes Product taxes Water supply Waste water The budget speech of the Minister of Finance saw a wider classification with each of the sectors being allocated certain tax obligations as well as provisions to reduce the tax burden. The classification is listed below: Table 6: Sectoral Classification of the Economy According to the 2012 Budget Carbon Tax Proposal Sector Electricity Petroleum (coal to liquid) Petroleum (oil refinery) Iron and steel Aluminium Cement Glass and ceramics Chemicals Pulp & paper Sugar Agriculture, forestry and land use Waste Fugitive emission: coal Other Eligible for carbon tax Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes The division of the economy is significant as the tax liability of individual entities will depend on how they are classified in terms of the above. Note that transport and construction are not listed as sectors in this classification. The carbon tax is still very much under development and we will probably only see clarity on this issue when the next round of discussion or policy papers are published by National Treasury. 10 3.4 PRIVATE SECTOR REPORTING INITIATIVES The Johannesburg Securities Exchange (JSE) require of companies to disclose their emissions on a voluntary basis through the international investor driven initiative the Carbon Disclosure Project (CDP). The JSE classifies companies in line with international trading requirements such as capital raising and compilation of indices. Table 7: Sectoral Classification of the JSE Industry Oil & Gas Supersector Oil & Gas Basic Materials Chemicals Basic Resources Industrials Construction & Materials Industrial Goods & Services Consumer Goods Automobiles & Parts Food & Beverage Personal & Household Goods Health Care Health Care Consumer Services Retail Telecommunications Media Travel & Leisure Telecommunications Utilities Utilities Financials Banks Insurance Real Estate Financial Services Technology Technology Sector Oil & Gas Producers Oil Equipment, Services & Distribution Alternative Energy Chemicals Forestry & Paper Industrial Metals & Mining Mining Construction & Materials Aerospace & Defence General Industrials Electronic & Electrical Equipment Industrial Engineering Industrial Transportation Support Services Automobiles & Parts Beverages Food Producers Household Goods & Home Construction Leisure Goods Personal Goods Tobacco Health Care Equipment & Services Pharmaceuticals & Biotechnology Food & Drug Retailers General Retailers Media Travel & Leisure Fixed Line Telecommunications Mobile Telecommunications Electricity Gas, Water & Multi-utilities Banks Nonlife Insurance Life Insurance Real Estate Investment & Services Real Estate Investment Trusts 8770 Financial Services Equity Investment Instruments Non-equity Investment Instruments Software & Computer Services Technology Hardware & Equipment This classification is useful in managing risks within an investment portfolio, but for integrated supply chains the inventories and mitigation activity reporting are difficult to benchmark. In addition CDP reports are linked to the listed entity and inventories contain information from activities across the globe. 11 3.5 EMISSION OFFSETS AND CARBON CREDITS For projects to obtain carbon credits, both Certified Emission Reductions (CERs) and Voluntary/Verified Emission Reductions (VERs) the classification is done in accordance with the fifteen Scopes stipulated by Annex A of the Kyoto Protocol. Scopes 1 to 9 are linked to industrial sectors and 10 to 13 based on sources of GHG emissions. These are the categories in which existing GHG auditor competency is defined. See Table 8 below for the list of all scopes. Table 8: Sectoral classification under the Kyoto Protocol (CDM) Sectoral scope 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Description Energy industries (renewable - / non-renewable sources) Energy distribution Energy demand Manufacturing industries Chemical industries Construction Transport Mining/mineral production Metal production Fugitive emissions from fuels (solid, oil and gas) Fugitive emissions from halocarbons and sulphur hexafluoride Solvent use Waste handling and disposal Afforestation and reforestation Agriculture (Source: UNFCCC, 2011) Emission reduction projects in the voluntary market are not in the public domain and they can participate under a range of standards. The South African projects developed under Verified Carbon Standard (VCS) include energy efficiency and agricultural project and can be classified under the scopes of the Kyoto Protocol. The various CDM projects developed in South Africa currently does not cover all the CDM project scopes. Competency for GHG verification could therefore be limited to those in the diagram below. To date, 20 South African emission reduction projects registered under the Clean Development Mechanism, are linked to more than one sectoral scope, see diagram below: 12 Figure 5: Registered South African emission reduction projects per CDM sectoral scope classification 4. AUDITING REQUIREMENTS The South African Accreditation Services (SANAS), an entity under the Department of Trade and Industry (DTI), has commenced with accreditation of GHG verifications as a new project. This program has been prioritised and is on a fast track for completion in 2013. The standard ISO14065 has been accepted as a South African Standard, creating consistency with international practices in relation to GHG calculations or verifications. The expectation is that from February 2013 SANAS will accept applications for accreditations for ISO 14065. The drivers for this programme are: • • • • • • Carbon tax calculations Increased export requirements for carbon footprint declarations Carbon trading on the voluntary market Mandatory GHG emission reporting Potential bilateral agreements Calculations or verifications for the Carbon Disclosure Project (CDP) Sectoral classification is of importance for this program as it impacts directly on the competency requirements of auditors. 13 5. MAPPING OF SECTORAL CLASSIFICATIONS The great divergence in the different classification schemes can only be understood if the schemes are mapped against each other Table 9: Classification schemes Role players Carbon Disclosure Project Classification system Based on Global Industrial Classification Codes (GSIC) Department of Environmental Affairs Intergovernmental Panel on Climate Change (IPCC) guidelines for national GHG inventories Standard Industrial Classification Codes (SIC) Kyoto Protocol Annex A According to budget speech Department of Energy Carbon credits Treasury Carbon tax 6. Categories JSE top 100 categorised in accordance with Industry Classification benchmark Sectors Main Activities Sectoral scopes Categories CONCLUSION The report concludes that a number of different sectoral classification systems are currently in place. These systems are deeply embedded and will be impossible to replace. The only workable option is to map these systems to each other, with respect to both greenhouse gas accounting (carbon foot printing) and mitigation, in order to harmonise the different actions needed for the transition to a low carbon economy. Table 10 schematically shows the relationship between the different systems of classification. 14 Table 10: Mapping of different Sectoral Classification Schemes Department of Environmental Affairs 1. Energy Department of Energy Treasury Carbon tax JSE Carbon credits 4. Electricity, gas and water supply Electricity Energy 1. Energy industries 2. Energy distribution 1. Energy industries 7. Transport, storage and communications 8. Financial services 2. Industrial Processes and product Use (IPPU) 6. Wholesale and retail trade, hotels and restaurants 10. Private households and employers 3. Manufacturing Petroleum (coal to liquid) Petroleum (oil refinery) Glass and ceramics Cement Iron and steel Aluminium Chemicals 5. Construction 2. Mining and quarrying Fugitive emission: coal 7. Transport; Financials IT and Telecommunications Health Care services Consumer staples Consumer discretionary Consumer staples Consumer discretionary Materials Industrials: subsectors construction subsectors mining, Precious metals & minerals, Gold, Steel Industrials 3. Agriculture, Forestry and land use (AFOLU) 1. Agriculture, hunting, forestry and fishing 4. Waste 9. Community, social and personal services Sugar Pulp & paper Agriculture, forestry and land use Waste 3. Energy demand 4. Manufacturing industries: subcategory for cement, iron and steel, aluminium and refineries 5. Chemical industry; 9. Metal production; 6. Construction; 10. Fugitive emissions from fuels (solid, oil and gas); 8. Mining/Mineral production; 11. Fugitive emissions from production and consumption of halocarbons and sulphur hexafluoride; 12. Solvents use; 14. Afforestation and reforestation; 15. Agriculture. 13. Waste handling and disposal; 15 A dedicated carbon and climate change advisory firm 0861 CARBON 0861 227 266 www.promethium.co.za memberships with: Contact Numbers: Office Address: • The Carbon Protocol of SA 0861 CARBON (0861 227 266) Ballyoaks Office Park Tel : +27 11 706 8185 Lacey Oak House Fax: +27 86 589 3466 2nd Floor Director Details: Harmke Immink • South African CDM Industry Association • Carbon Disclosure Project Bryanston 083 228 1781 (Mobile) GPS coordinates: [email protected] S26° 04′ 26.2″ E028° 01′ 51.3″ Robbie Louw Postal Address: 082 557 8646 (Mobile) P O Box 131253, [email protected] Bryanston, 2021 HJ Swanepoel Gautrain Route 082 460 8840 (Mobile) • Gautrain Station: Sandton [email protected] • Bus route S5 Sandton – Fourways • Project Developer Forum partner of: 35 Ballyclare Drive • Bus stop number 9 Proudly Carbon Neutral since 2007