South Africa gears up for carbon tax

SOUTH Africa’s coal sector is bracing for a major overhaul in the country’s energy markets, with carbon tax legislation to be finalised this year and Eskom to lose its monopoly over the nation’s power generation sector as the merits of nuclear and renewables are hotly debated.

Anthony Barich

South Africa expects to introduce the carbon tax early next year, with the debate this year to focus on the issue of carbon budgets and the alignment of this mechanism with the carbon tax which is linked to the Intended Nationally Determined Contributions that will be submitted to the UNFCCC prior to the COP21 (Conference of Parties) forum in Paris in December.

Anglo American coal stewardship manager Nikki Fisher, who sits on the International Energy Agency Clean Coal Centre’s executive committee, said recently that the South African government’s Department of Environmental Affairs will be consulting stakeholders in the first quarter of 2015.

Anglo American owns and operates nine mines and has a 50% interest in the Mafube colliery and Phola washing plant. Six of the mines are in the Witbank coalfield and supply some 23 million tonnes per annum of thermal coal to the export and local markets.

World Coal Association policy manager Aleks Tomczak said that, as in other jurisdictions which have already introduced a price on carbon, “this new policy can be expected to shape the business environment in which investments in coal-fired power generation are made”

Changes are also expected in the rules governing the power generation sector.

So far all coal plants in South Africa have been run exclusively by the public utility Eskom, but 2015 might see the first investments in independently constructed coal-fired power plants.

South Africa will also see a continuation of the debate about investment in nuclear energy and more investment in renewables.

Eskom’s flagship coal projects, Medupi and Kusile – each to supply 4800 megawatts of coal-fired generation – once again suffered delays in their construction program last year.

The first unit of Medupi did not meet its planned synchronisation date of 24 December 2014 and is now only expected to be in commercial operation in the second half of 2015, according to Tomczak.

Kusile’s commissioning program will follow at least one year after Medupi’s.

As a result of these delays and maintenance issues at Eskom’s existing coal fleet, South Africa experienced electricity blackouts in December 2014 for the first time in several years.

The Mineral and Petroleum Resources Development Act, meanwhile, was ratified by South Africa’s parliament last year and now awaits presidential signature in order to come into effect.

“While a number of the more onerous provisions of the original Bill have been amended, uncertainties persist regarding the modalities of implementation and its impact on coal investment – especially in relation to the Minister having powers to designate coal as a ‘strategic mineral’ and a ‘designated mineral’,” Tomczak said.

“The latter would result in a portion of existing production having to be sold domestically.”

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