Better together … we deliver Sasol presentation on carbon tax to the Portfolio Committee on Trade...

better together … we deliver

Sasol presentation on carbon taxto the Portfolio Committee on Trade and Industry

20 August 2013

22better together…we deliver

Confidential – not for further distribution

presentation overview

Negative impact of tax on Sasol

Sasol background & mitigation progress

Conclusion

Policy process




Policy process



Conclusion



Sasol has exploration, development, production, marketing and sales operations in 38 countries across the world, employing more than 34 000 people.

Our vision is to grow profitably, sustainably and inclusively, delivering value to stakeholders through technology and the talent of our people in the energy and chemical

markets in Southern Africa and worldwide

Sasol is a proudly South African based international company



Sasol is committed to a strategy of investment in South Africa to 2050

Employment

• R14bn Sasol Mine Replacement Programme

• Exploration in SA and region continues

• R1.5bn Natural Gas Power Generation Unit

• R14bn Secunda Growth Project

• R8.4bn FT Wax Expansion Project

• R1.9bn Ethylene Purification Plant

• R1.1bn Cobalt Catalyst Plant

● 800 jobs created during the construction phase

● 52 permanent jobscreated

● 5,200 jobs created during construction phase

● 165 permanent jobs on project completion

● 5,000 jobs created during the construction phase

● 4,000 permanent jobs retained

Reducing carbon

footprint

Growing production

Ensuringlong term

sustainability

Sasol’s stated strategic intent may be impacted due to limited opportunities to further mitigate its carbon emissions

Current investment



Sasol’s overall position- carbon tax

Sasol supports a response to climate change that is based on clear and accurate information and identifies the opportunities and reflects the constraints of a transition to a lower carbon and climate resilient South African economy.

Sasol believes that such a proactive response should recognise the following:

• the structure of the South African economy is inherently energy-intensive and, as such, presents a challenge as it cannot be transformed in the short- to medium-term to a lower carbon economy due to the lack of viable alternative lower carbon energy sources;

• the developmental needs of South Africa and the resultant demand in energy necessitate the prioritisation of long-term energy security for South Africa;

• mitigation actions in all industries would need to be introduced over time and will require international financing, technology and skills development support;

• the impact of policies to limit or tax carbon emissions on South Africa’s current international trade position and competitiveness needs to be better understood;

• the socio-economic impact of the transition to a lower carbon economy is likely to be significant and, accordingly, a range of trade-offs may be required to achieve the overall national imperatives of economic growth, job creation and poverty alleviation;

Sasol does not support the carbon tax in its current form, without a full understanding of its consequences on the economy in the form of aspects such as employment, competitiveness and trade measures



•reflects the constraints of a transition to a lower carbon and climate resilient South African economy.

•is based on analysis that uses clear and accurate information

•will effectively contribute to the reduction of GHG emissions

Sasol is committed to engaging in policy development to mitigate climate change...

Sasol supports a transition to a low carbon economy that is:

•a thorough analysis of the potential impacts & alternative options has not been performed

•does not align with South Africa’s broader mitigation policy;

•does not sufficiently take account of South Africa’s mitigation and socio-economic challenges

Sasol does not support the carbon tax in its current form as:



Objective

carbon tax needs to be seen in the broader policy context

National Climate Change Response White Paper

Durban Platform

IRP 2010 & IEP

Carbon tax

International negotiations

Environmental policy

Energy policy

Fiscal policy



Sasol has substantially reduced its carbon footprint in SA …

Made possible by accommodative regulatory environment



...which this was partially facilitated through natural gas imports from Mozambique

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2004:Initial investment (R12bn)

Ongoing:Exploration in Southern Africa(R3bn in 2009-11)

2010:New compressor station at Komatipoort

(R1bn)

2012:Expansion of the CPF¹ in Temane to 183 mGJ

(R1.8bn)

2013:New 155km Gauteng Network Pipeline

(R1.6bn)

2014:New 128km loop line in Mozambique

(R2bn)

Provision of feedstock alternative to customers facilitated further 2 mt emissions reduction






Conclusion

Policy process



Objective

one needs to start with the international negotiations

National Climate Change Response

White Paper

Durban Platform

IRP 2010 & IEP

Carbon tax

• agreed at COP 17 in Durban

• applicable to all countries and will be agreed by 2015

• implementation in 2020 including use of new market instruments and economy wide targets



Energy policy

Fiscal policy



… and then understand national climate change policy …

• Governments vision for an

effective climate change

response

• Carbon budgeting

approach

• implementation through a

multi stakeholder technical

working group reporting to

the DG cluster

Objective

National Climate Change Response

White Paper

Durban Platform

IRP 2010 & IEP

Carbon tax



Energy policy

Fiscal policy



this approach was confirmed by DEA’s carbon budget – carbon tax interface study

…before considering how fiscal policy is to play a role …

2011 2012 2013 2014 2015

INTERNATIONAL NEGOTIATIONS

WHITE PAPER IMPLEMENTATION

COP17ADP agreed

COP21ADP finalised

draft policy document Design policy mix(including carbon tax)

Draft carbon tax policy document

MitigationPotential analysis

Sector / companyCarbon budget

White PaperGazetted






Conclusion

Policy process



current carbon tax design will not assist Sasol & industry in meeting the climate change policy objectives

Open cycle gas turbines, Secunda Sasol Synfuels, Secunda

• mitigation options that are technical feasible already included in carbon budget;

• Sasol will be following an agreed mitigation plan;

• tax reduces funds available to invest in low carbon feedstock alternatives.



....but will impact negatively upon our business

Concerns

• Carbon tax more onerous than other jurisdictions *(R12 – R174)

• lack of ability to pass cost through – due to trade exposure & regulation

• multiple carbon prices – IRP, non renewable levy

•punitive for beneficiation activities

•escalating price can change investment decisions

•Tax policy complex and lacking sufficient clarity

Competitiveness

Impact on investment

• no economic analysis done on current tax proposals

• World Bank study highlighted risk of loss of low skill jobs

Insufficient

Analysis

* Depending on exemption and impact of Z factor



• higher electricity price to fund low carbon build plan ~ R116 /ton

• non renewable electricity levy ~ R35 /ton

• costs to meet mitigation plan

• Carbon tax

Multiple carbon cost

• Air Quality Act

• clean Fuels

• Waste Act

Other environmental cost

current policy environment pointing towards multiple costs for industry & consumers






Conclusion

Policy process



proposed way forward

Progress

await the outcome of DEA’s carbon budgeting process – achieve alignment

design appropriate policy instruments to support carbon budgeting process

Create appropriate regulatory & fiscal environment to:• encourage achievement of carbon budget• balance environmental & socio economic objectives• align to international agreements

end

2014

2015

2015



• Economic impacts not adequately considered

o analysis insufficient

o impact upon competitiveness and jobs

o negative impact of multiple carbon prices

• Lack of alignment with overall mitigation policy

• Impact upon mitigation likely to be limited

Sasol is concerned about the carbon tax policy proposed:

in conclusion

better together … we deliver

thank –[email protected]

Date post:	20-Jan-2016
Category:	Documents
Upload:	jemimah-copeland
View:	212 times
Download:	0 times

Better together … we deliver Sasol presentation on carbon tax to the Portfolio Committee on Trade...

Documents