Business and climate change: It's complicated

Is business burying its proverbial head in the sand and ignoring the signs of climate all around, while hoping for the best?

The short answer is no. And the long one is, it’s complicated; as everything occurs within a specific context, and there is none more unique than a state such as South Africa, which straddles many developmental frameworks.

Building blocks

Admission and acknowledgment are often the first crucial building blocks necessary to make any sort of change. Business, the government, and the climate lobby agree that climate change, apparent in the warming of the globe and extreme weather patterns, exists.

So, the occurrence of climate change is here and irrefutable, the human contribution therein is clear, and its physical manifestations are already unfolding all around us. It is within this context that business supports the important role and responsibility of non-state actors in addressing climate change.

This stance is in line and compatible with the historic Paris Agreement (PA) signed by 196 parties in 2015, which specifically encourages parties to work together to implement their commitments. The South African government ratified the PA in November 2016 and it is introducing several instruments to give effect to the agreement.

SA's commitment

As a signatory to the PA, South Africa made a commitment to address climate change. The PA factors the country’s current circumstances, its status as a developmental state and its socio-economic aspirations when charting its nationally determined contributions (NDCs), which are the essence of the PA agreement.

The NDCs encompass the principle of "common but differentiated responsibilities and respective capabilities" in the quest to address this worldwide challenge and are used to measure a country’s contribution to global emissions. 

As such, there is merit in introducing carbon pricing as part of a suite of policy instruments, as envisaged in the National Climate Change Response White Paper.

However, the status quo in South Africa does not include a carbon pricing mechanism. South African business has voluntarily subscribed to several international programmes on climate change, including the Carbon Disclosure Project and projects such as, among others, We Mean Business and EP100.

In addition, for years, South African businesses voluntarily submitted greenhouse gas emissions data to the Department of Environmental Affairs. These efforts were undertaken long before the introduction of a mandatory mechanism on reporting greenhouse gas emissions, which is relatively new in the country.

·         READ: Fears that carbon tax could limit SA economy

Furthermore, South African business committed itself to the Energy Efficiency accord before the introduction of the 12L energy efficiency incentive mechanism.

Business has not only adopted voluntary carbon budgets, but is also actively participating in the development of the integrated mitigation system for South Africa. Business recognises that more can be done by state and non-state actors alike.

However, it is an incorrect assumption that business is unsupportive of efforts to address climate change. Business supports climate change policy that is suitably designed and efficiently implemented, not only to incentivise mitigation but also to transition South Africa to a lower-carbon, more climate-resilient economy.   

We all agree – business, the green lobby groups, and the government – on what the problem is, but diverge on what constitutes a suitable remedy. Business supports a carbon price as part of an integrated mitigation system, but does not support an approach where South Africa becomes the only country in the world in which companies face a cap on their emissions through a mandatory carbon budget, while also forking out a carbon tax on all emissions.


South Africa’s emissions are in line with the NDCs and are unlikely to exceed the commitment level before 2025. The current level of emissions, therefore, gives the government time to develop and implement an aligned and integrated mitigation system to address greenhouse emissions, to avoid over-burdening both public and private sector resources. 

The mandatory carbon budget regime is to be implemented from 2021; however, the exact obligations and requirements of this instrument are still in development. The design of the carbon tax, the rate of the tax and, critically, the alignment of all climate change mitigation instruments remain a mystery beyond 2022.

The failure to address the prospect of double penalties, when several studies have been undertaken, and a range of options to achieve alignment has been proposed and publicly consulted on, presents a significant challenge to prospective investors.

Furthermore, the recent publication of the Climate Change Bill for comment increases the lack of policy certainty in this space, which undermines the government’s repeated assurances to address this impediment to investor confidence.

It is easy to dismiss the concerns raised by business on the carbon tax with the usual rhetoric that business does not want to address climate change.

However, such dismissal would ignore the considerable efforts business has made to address climate change. Business remains committed to the transition to a lower-carbon economy, but in a manner and set timeframes that are cognisant of South Africa’s challenges and developmental goals.

Jarredine Morris is environment and energy policy manager for Business Unity South Africa.

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