GHG - Emissions Intensity Benchmarks for the South African Carbon Tax

South Africa has committed to reducing its greenhouse gas (GHG) emissions by 34% by 2020 and 42% by 2025 below business as usual. To achieve these GHG emission reductions, South Africa is looking at adopting a mix of policy instruments. One of these instruments is a Carbon Tax policy as outlined in May 2013 by South Africa’s National Treasury. The Carbon Tax Policy Paper provides details of the carbon tax design and revenue recycling options. One of the key features of the carbon tax design is the use of GHG benchmarking of selected industries to determine the applicable tax-free threshold under the carbon tax. Companies that perform better as compared to a carbon emissions intensity sector benchmark qualify for a higher than default tax-free threshold. This study aims:  To study the carbon tax policy objectives and the role of benchmarking therein; and to translate these into clear guidance for benchmarking in the South African context that meets the policy objectives.  To assess the applicability of existing international and South African benchmark studies for use in the South African context.  To design one or more generic fall-back approaches for activities not covered by a specific (sub-sector) product benchmarks.  To provide recommendations for each sector on the benchmark approach to be used and outlining next steps to finalise benchmark values using the approach suggested. This study focuses on the following energy-intensive industries which account for a large share of industrial emissions in South Africa: iron and steel, ferroalloys, cement, crude oil production, coal to liquid (CTL), gas to liquid (GTL), chemicals, pulp and paper and sugar. Based on international experiences, this study concludes that where possible, product benchmarks (defined as emissions per unit of sector output) should be developed. Developing such benchmarks allows all emission reduction options for companies to be taken into account when determining the benchmark approach. Ideally, the majority of emissions of sectors are covered by such product benchmarks so that the sector is treated in a uniform way.