EY Cova supports members with GHG reporting and carbon tax compliance

On 3 April 2017, the Department of Environment, Forestry and Fisheries (DFFE) published regulations requiring companies to report on their Greenhouse Gas (GHG) emissions. Companies that are undertaking a listed activity equal to or above the prescribed thresholds (normally 10MW installed capacity), are required to report their emissions to the DFFE by 31 March. These activities include direct GHG emitting activities, and these must be reported online on the South African GHG Emission Reporting System (SAGERS).

Following the promulgation of these regulations, a Carbon Tax was implemented in South Africa on 1 June 2019. In addition to reporting on GHG emissions, companies that are required to report emissions are also required to pay carbon tax on these emissions.

The Carbon Tax or Environment Levy Returns must be filed and paid by 28 July each year to the South African Revenue Services (SARS). A company’s carbon tax liability is determined based on the GHG emissions reported to the DFFE which is the tax base. As a result, ensuring the accuracy and verifiability of the underlying GHG activity data is of utmost importance. Ensuring this data is credible and accurate requires an independent assessment of whether the underlying data can be confirmed to a verifiable audit trail.

In addition to these compliance requirements, companies must also be licenced for Carbon Tax with SARS. Licences expire annually at the end of December and application for renewal must be submitted to SARS by end of November.

The most important aspect of the National GHG Reporting Regulations is to assess whether the regulations are applicable to your business i.e. are you above the 10MW installed capacity threshold?

Should the outcome be that the Reporting Regulations are applicable to your company, several requirements must be met:

• Firstly, your company is required to register with the Department of Environment, Forestry and Fisheries (DFFE)
• Should you have not submitted the required information to the Department of Environment, Forestry and Fisheries (DFFE), you would be committing an offence in terms of regulation 16 of the Reporting Regulations and could therefore face a potential R5 million penalty. We expect these penalties to be more strongly enforced from 2023 onwards.
• Secondly, relevant activity data must be collated for the reporting period (1 January up and until 31 December) to enable quantification of greenhouse gas emissions in accordance with the “Technical Guidelines for Monitoring, Reporting, Verification and Validation of Greenhouse Gas Emissions by Industry”. The calculated quantities and activity data for all relevant facilities must be submitted to the DFFE before 31 March each year.

If the Reporting Regulations are applicable to your company, then you will also be required to pay carbon tax on your direct emissions.

• Again, you must ensure that you are licenced and registered with SARS for carbon tax.
• The submission deadline for your carbon tax return and payment is scheduled to take place on 28 July 2022 at a carbon tax rate of R134 per ton CO₂e. Returns are filed and paid through the SARS e-filing platform.
• There are also several allowances and rebates that companies can qualify for.

The key questions to ask yourself: –

1. Do you make use of any fossil fuels such as coal, natural gas, paraffin, or diesel in stationary combustion devices on your site?
2. Are you unsure whether you may be liable for carbon tax; or concerned that you may have missed important deadlines?

If you answer “yes” to either of the two questions above, you may be liable for GHG reporting and carbon tax – please contact EY Cova to assist you.

A summary of the important deadlines is shown below.

Contact Details:

Pieter de Villiers [email protected] 082 614 0642	Zelda Burchell [email protected] 082 4100 750