The National Treasury yesterday released draft regulations that will allow companies to reduce their carbon tax liability by as much as 10 percent of their actual emissions.
The carbon offset scheme is part of measures South Africa is taking to reduce emissions since it voluntarily committed at the 2009 UN conference of parties on climate change in Copenhagen to reduce greenhouse gas (GHG) emissions from projected “business-as-usual scenarios” by 34 percent in 2020 and 42 percent in 2025, subject to certain conditions.
The draft regulations, which set out the procedure for the use of carbon offsets by taxpayers to reduce their carbon tax liability, follow the publication of the carbon offsets paper in 2014 and the draft Carbon Tax Bill in November last year.
“Carbon offsets can be generated through investments outside of a taxable entity’s activities that results in quantifiable and verifiable GHG emission reductions,” said the Treasury. “The carbon offset projects should generate sustainable development co-benefits and employment opportunities in South Africa by encouraging investments in energy efficiency, rural development projects, and initiatives aimed at restoring landscapes, reducing land degradation and biodiversity protection.”
The Treasury said investments in transport, agriculture, forestry and waste sectors were likely to qualify for carbon offsets.
Climate Neutral Group, which provides carbon management services, yesterday said the draft regulations were long overdue.
The company’s country director in South Africa, Franz Rentel, said: “To ensure that a credible, diverse and liquid supply of carbon offset credits is available to the entities that will have tax liabilities as of January 2017, the ground rules and infrastructure needed to support an offset program must be finalised and articulated as soon as possible so that companies can maximise their carbon tax savings.
“We hope these draft regulations will encourage companies to start securing eligible carbon offsets, as demand will far outstrip supply in phase 1 of the tax (2017 to 2020). Furthermore, companies will only have until December 31, 2017, to utilise the carbon offsets from existing offset projects (which make up the bulk of the offset supply in South Africa).”
Rentel said that including carbon offsets as an additional relief mechanism under the proposed carbon tax would allow companies to access least cost mitigation options.
This would enable companies to save up to 20 percent on carbon tax a year.
“We also agree that only South African-based project credits be eligible for use within the scheme as this will hopefully boost the development of locally based projects and contribute significantly to the country’s socioeconomic challenges. That being said, it is important that there is clarity post-2020 in order for new projects to get off the ground successfully,” Rentel said.
“We also have concerns how the future South African carbon registry would function as well as the additional administrative burden of the scheme within the Department of Energy as well as others.”
Earn valuable CPD credits
The UN Food and Agriculture Organization estimates about one-third of the food produced globally goes to waste, creating a massive amount of greenhouse gas emissions and needlessly squandering water, land, labor and energy resources. This waste is drawing the attention of global agriculture organizations and financial institutions, which have started to back initiatives aimed at scaling back food waste.
But a group of farmers in Uganda have already come up with a solution: transforming food into novel products with a longer shelf life. FSRN’s Ngala Killian Chimtom reports.
Elizabeth Nsimadala is a 36-year-old mother of two from a small village in Southern Uganda. She’s a founding member of a group of female farmers who have been making big returns by turning bananas into wine, a relatively novel product now adding diversity to Uganda’s cuisine. But it was not always so.
Before the year 2000, Nsimadala struggled to make ends meet in agriculture, frequently going hungry and repeatedly unable to pay school fees for her kids. Then an NGO came along, teaching farmers in her area about better ways of producing and managing banana yields. And while the methods did increase output, Nsimadala says it had unintended consequences.
“The project, which was supposed to be a blessing to the communities, became a problem because there was overproduction, but the prices decreased. So, instead of getting money from bananas, a bunch went as low as 500 Uganda Shillings, this is something like a quarter of a dollar,” Nsimadala explains. “So it went so low, to that level, and people were instead chopping the bananas and giving them to animals. So they became of no use.”
Her story is common across Africa, where harvested food crops are often lost because the cost of transporting them to markets is more expensive than letting them rot in place. Meanwhile, people who need food the most don’t have money to buy it.
Nana Osei-Bonsu, CEO of Private Enterprise Federation, Ghana, says this aggravates food insecurity on the continent.
“[There’s] $4 billion (USD) equivalent of food losses in a year in the continent and if you can conceptualize what four billion can do to alleviate poverty in our various countries, then you can understand the waste and the economic deprivation that food loss is causing the continent,” Osei-Bonsu points out. “Apart from food losses, there is food waste, they are two different things. The food waste is the cooked food that we don’t use. At the end of the day, they are not apportioned to people who need it, and we have about 800 million in the world going hungry every day and we have excesses of food that are going to waste.”
The causes of food loss and food waste in Africa are closely linked to lack of infrastructure, affordable transportation, and even harvesting techniques, says Nana Osei Bonsu: “Let me give you an example: tomatoes. People harvest them when they are red. When they are red and you pick them, they don’t even last 36 hours! But if you pick them green, they give you seven days or more. So, there are a lot of factors that contribute to this magnitude of losses.”
The inefficiency of moving food stocks to hungry mouths can be an even bigger problem in 50 years, when Africa’s population is expected to double.
“If the world’s population doubles, what should we double then?” asks Moussa Seck, chairman of the Pan African Agribusiness and Agro Industry Consortium. “It’s not cars. It’s not highways. It’s mostly food. But the problem is, mankind has made ten thousand years in order to count today seven billion tons of food. Ten thousand years of constant progress. And when the world population doubles in 50 years, we have to double these seven billion tons.”
African countries, through the Comprehensive Africa Agriculture Development Program, say they are committed to eliminating hunger and cutting extreme poverty in half by 2025. How this will be achieved, according to Seck, is not only through production, but more importantly, by avoiding the loss and waste of food already produced.
Elizabeth Nsimadala and other farming women in Uganda could offer significant lessons in this regard. The bananas that used to be thrown away are now fetching them significant returns on their investment, thanks to value addition. In other words, processing the crop into another, more novel product with a longer shelf life.
“We were trained in banana wine production. We started on a small scale, but for any new innovation that comes, it takes some time for people to embrace it. But later on, our mindset kept on changing,” Nsimadala says. “When I do a comparison between the prices, it’s actually more than a hundred percent. A bunch that can go for $10, once processed, you can be able to make a net profit of $200 (USD), which is unbelievable to many. To me it’s a reality because I am doing it. We are doing it and we are getting the results.”
Nsimadala’s success has been hailed as a best practice by the African Union, but continues to be an exception to the rule. In the short term however, Bonsu recommends that African governments set up agencies to buy and store food in peak season, for eventual redistribution during lean periods.
Singapore has declared its plans to be a sustainable city. In the Sustainable Singapore Blueprint 2015, a policy document which maps out the country’s sustainable development strategies, the city-state has set out a collective vision that includes being a “car-lite”, zero waste nation by 2030.
It has also set reduction targets for its greenhouse gas emissions by 2030. Under Singapore’s pledge to the United Nations Framework Convention on Climate Change, it will cut its emissions intensity—that is, the greenhouse gases needed to produce every dollar of national income—by 36 per cent compared to 2005 levels.
Experts say that one largely untapped strategy for Singapore with huge potential is the sharing economy, where people use websites and mobile applications, or apps, to rent, lend, and swap goods and services with one another rather than buying them from shops or commercial companies.
April Rinne, a United States-based sharing economy consultant and World Economic Forum Young Global Leader, says that by encouraging people to pool existing resources instead of buying new goods, “there is no question that the sharing economy can help a society be more sustainable”.
With its high population density, technology-savvy society, compact urban layout, and a strong government commitment to efficiency, Singapore is perfectly poised to become a sharing nation, adds Rinne, who was in Singapore last month to speak on the sharing economy.
An evolving economy
People have swapped, loaned, and rented items informally for centuries, but the sharing economy—also known as collaborative consumption, peer economy, and access economy, among other names—has gained formal recognition only in recent years.
The term has come to include everything from services that help neighbours lend each other household items and websites that allow a tourist to stay at a stranger’s home while on vacation, to apps that summon a driver at the tap of a button.
United Kingdom-based business consultancy PwC notes in a 2015 study that peer-to-peer lending and crowdfunding, peer-to-peer accommodation, and car-sharing are among the fastest growing sharing economy sectors globally.
PwC predicts that these sectors—along with online staffing, and music and video streaming—by 2025 will present a global revenue opportunity of US$335 billion, up from US$15 billion in 2013.
These new operating models certainly promise bigger business opportunities and profits, but they are also a chance to change how society uses resources, note experts.
Eugene Tay, founder and former president of the Sharing Economy Association of Singapore (SEAS)—an organisation set up in 2014 to promote the industry’s growth—notes that “car sharing or carpooling reduces the need to own a car, while the sharing of accommodation or co-working spaces reduces the resources to build more spaces”.
Members of SEAS include local start-ups such as item-lending services Rent Tycoons and Leendy, accommodation sharing site PandaBed and car-sharing firms CarPal and iCarsclub. International home-sharing giant Airbnb is also a member.
Other local enterprises include Carousell, an app for selling second-hand goods, and carpooling services like the Tripda app and ShareTransport.sg, an online community.
Fenni Wang, co-founder, Rent Tycoons, says that “renting helps to reduce the wastage caused by avoidable purchases—for example, if an item is only needed for a one-off or short-term use”.
While there are no statistics on how these local companies have helped drive Singapore’s sustainability goals, global firms like Airbnb and on-demand ride service Uber have calculated their environmental impact.
Airbnb, for example, in a 2014 study, found that home sharing helps reduce water and energy use, greenhouse gases and waste generated compared to traditional hotel stays.
In North America, Airbnb properties used 63 per cent less energy than hotels per guest night, enough to power 19,000 homes for a year. They also consumed 12 per cent less water than hotels, which resulted in savings of 270 Olympic-sized swimming pools in 2013.
Staying in other people’s homes—most of which already have recycling facilities in place, and tend not to offer guests single-use toiletries like hotels do—also reduced waste, found Airbnb.
Car sharing or carpooling reduces the need to own a car, while the sharing of accommodation or co-working spaces reduces the resources to build more spaces.
Eugene Tay, founder and former president, Sharing Economy Association of Singapore.
Uber, meanwhile, says its vision is to have “many fewer cars on the road”. In addition to its basic service, called UberX, where people can use the app to call a driver in a few minutes, the company is also rolling out UberPool, which integrates carpooling into Uber’s standard business model.
First announced in August 2014 and launched in New York City in December that year. UberPool groups users travelling on similar routes and allows them to share a single ride—and the fare.
Not only does this allow passengers to save money, it can also reduce the number of cars on the road, says the San Francisco-headquartered company, which was founded in 2009 and now operates in almost 400 cities worldwide.
According to the company, for every fully utilised UberPool car, eight cars could be rendered unnecessary. This means that in a city like New York, UberPool could eventually result in 1 million fewer cars on the road.
Chan Park, Southeast Asia general manager, Uber, tells Climate Challenge that UberPool is likely to be launched in Singapore sometime this year.
Today, over 30 per cent of all Uber trips in Singapore start and end within 100 metres of a train station, Park shares. This likely means that “people are using UberX to complement their public transport use and bridge the first and last mile of their journey,” he says.
The first and last mile of a journey refers to the distance between a person’s home or office and the nearest public transport node, such as a train station. If commuters find it too inconvenient to bridge this distance—for example, if the walk is too long, or connecting bus services are too infrequent—they may find it more convenient to stick to using a car.
The government is already stepping up efforts to bridge this last-mile gap through measures such as improving bus services in residential neighbourhoods and providing ample bicycle parking at train stations for commuters.
To make it easier and more convenient for people to use bicycles to cover the distance between their homes and train stations, the Land Transport Authority (LTA) in July 2014 announced a study into how a public bicycle-sharing scheme could be introduced in the city-state.
Famous examples of bike-share programmes, where the public can simply rent a bicycle from one location and drop it off at another, include London’s Santander Cycles and YouBike, a public scheme in Taiwan’s capital city, Taipei.
The government is also exploring how shared autonomous vehicles—that is, self-driving cars—can overcome the last-mile challenge in another study, announced by LTA last June. These new vehicles could provide residents with a convenient last-mile solution, and encourage people to shift away from private car ownership, notes LTA.
Uncovering new opportunities
These reductions in new purchases, waste, and emissions are just the tip of the iceberg when it comes to how the sharing economy can help shape a more sustainable Singapore, say Tay and Rinne. But there are even more ways for the city-state to become a truly sharing nation.
Tay, for example, notes that most sharing businesses today operate on a peer-to-peer model, or in the business-to-consumer space.
“Businesses with underutilised equipment, vehicles, spaces and assets can share with other companies,” he says. If the government does the same, Singapore’s civil service could be “the first sharing government in the world”, he adds.
One government which has received much praise for its sharing economy initiatives is South Korea’s capital city, Seoul, says Rinne. In 2012, it launched the Sharing City Seoul initiative to promote collaborative consumption and resource sharing.
To use valuable assets like land more efficiently, the city’s leadership has opened up almost 800 government buildings for the public to hold meetings and events when they are idle.
Guided by a vision to make private car ownership obsolete by 2030, Seoul has also invested heavily in public bicycle sharing services and aims to have 1,200 car-sharing hubs in the city by 2030, up from 292 in 2013.
Similar public sector leadership could make a big difference in Singapore, says Rinne.
On its part, the Singapore government has already taken several steps recently to facilitate the growth of the sharing economy while at the same time addressing some common concerns regarding the industry such as safety, privacy, and proper taxation.
For example, given the popularity of home-sharing companies like Airbnb, the Urban Redevelopment Authority (URA) is re-assessing a law which states that it is illegal for a person to rent out their home on a short-term basis.
The agency last January embarked on a public feedback exercise to decide whether private residential properties in Singapore should be allowed to be used for stays shorter than six months. At the end of the feedback exercise, URA said that it is reviewing the matter and will announce details when ready.
Meanwhile, LTA has also taken steps to encourage people to carpool, a practice which results in more efficient car use and fewer vehicles on the road.
Until recently, drivers could not accept any compensation for offering others a ride, which discouraged them from going out of their way to offer strangers a ride.
But this changed last May when LTA passed laws allowing drivers to receive payment from passengers as long as it did not exceed trip expenses such as fuel and road tolls.
Virtually every city in the world is tackling the same uncertainties and regulatory challenges that Singapore is working on, says Rinne. When these issues have been addressed and sharing is the ‘new normal’, it could transform daily life for Singaporeans, she adds.
In an ideal scenario, every resident will tap on sharing services to make life more convenient and save money, and the government will use these platforms to better deliver public services, streamline its own operations, and fulfil the nation’s sustainability goals.
“This is not an unachievable utopia,” she says. “It is a bold ambition which is 100 per cent doable, and I am more confident that Singapore will get it right than other places”
Renewable energy makes up a very small part of South Africa’s energy mix. This needs to be improved as the country’s reliance on coal is still very high. An increase in renewable usage will result in lower carbon emissions and set the country on a more sustainable path. But adding more renewables to the energy mix research and development is essential.
The Conversation Africa’s energy and environment editor Ozayr Patel asked Velaphi Msimang, the head of Knowledge Economy and Scientific Advancement at the Mapungubwe Institute for Strategic Reflection, about what South Africa must do to improve its renewable energy output.
What is the problem with South Africa’s current renewable strategy?
Renewable energy solutions are being deployed but the country has not invested much in related research and development. It must do this if it is to take maximum advantage of global markets for energy services.
But investments should not be limited to renewables, which are a supply-side solution that require machinery which converts one form of energy to another. There should also be investment in energy efficiency, which is no-build and passive solution. An example of an energy efficient solution is the integration of good insulation in the design of dwellings as this reduces the need to use heaters or air conditioners.
Taking an approach that is less dependent on machinery-based solutions would match the make-up of South Africa’s skills’ profile. This would be the right approach as the country must ensure people have the capability to work on the technologies being invested in. This is for at least two reasons:
The procurement of big lumps of large energy infrastructure characterised by large capital costs and long construction times often lead to the crowding out of lower cost alternatives. The fact that these large projects can’t be reversed or stopped means that better alternatives may not be viable as large supply capacity ends up idling, and often mothballed.
This was identified in the revision of the country’s Integrated Resource Plan and borne out by experience in its last energy infrastructure expansion programme. Expensive idle capacity would be created for which future generations would still have to pay.
For South Africa to compete in markets for manufactured goods, input costs need to be minimised. This means that cost-competitive energy solutions are a requirement for success.
This is the only way that the country’s long-term National Development Plan can be realised. Its central aims are to reduce poverty, unemployment and inequality.
Are there examples South African can follow?
South Africa’s carbon footprint is high and continued dependence on coal will only make this worse. It is a small country that needs to prioritise its limited resources – both human and financial – towards cost-competitive solutions for which global markets are guaranteed and growing.
Denmark offers a good example of what is possible, even for a small country. It has reduced its carbon footprint significantly. At the same time it has established itself as a leading exporter of clean technologies.
To summarise Thomas Friedman and Monica Prasad, Denmark responded counter-intuitively to the 1970’s oil crisis. The country had to deal with oil prices hikes in two separate years. But it responded excellently.
It imposed a set of gasoline taxes, CO2 taxes and building and appliance efficiency standards. This allowed it to grow its economy — while barely growing its energy consumption — and gave birth to a Danish clean power industry. Today it is one of the most competitive in the world.
The linchpin of Denmark’s ability to achieve these outcomes was that it skillfully directed revenues from carbon tax to research and development. As a result it reached a 15% reduction in greenhouse gas emissions from 1990 levels.
Countries like Norway, Sweden and Finland are interesting examples. They also imposed carbon taxes. But revenues raised in this way were nationalised. This has failed to help them reduce carbon emissions in the way they had planned. In fact, Norway’s increased by 43% per capita between 1980 and 1996.
What can South Africa do?
South Africa needs to put in place two sets of well coordinated policy measures. These would catalyse both the transformation of its energy system as well as the development of globally competitive related industries.
On the supply side the country must implement a carbon tax and invest the revenues in the development and deployment of more sustainable low carbon technologies.
On the demand side, South Africa must create markets for cost-competitive low carbon solutions. These can accelerate the transformation and diversification of the energy system away from coal and towards a decentralised, resilient and intelligent one.