Evaluating the effect of the suggested carbon budgeting system on the hard-to-abate industry

Abstract

Background: Carbon pricing mechanisms are considered powerful instruments to reduce greenhouse gas (GHG) emissions in a global effort to respond to climate change. In South Africa, a carbon tax has been implemented, and a proposed carbon tax rate of R640 per tonne of CO2eq will be charged as a penalty for emissions exceeding the carbon budget allocation. Hard-to-abate industries, including iron and steel, cement and chemical manufacturing, contribute significantly to the GHG emissions in the country but are hard-to-abate because they lack available low-carbon technologies at industrial scale and will require significant investment to decarbonise fully. There is a need to explore the effectiveness and feasibility of both carbon pricing mechanisms on the hard-to-abate industries while the industry cannot make the transition to ensure a sustainable, feasible transition to a low-carbon economy. Objective: The study aims to determine the effect of the suggested R640 per tonne of CO2eq carbon tax penalty as part of the carbon budget system over and above the carbon tax on the hard-to-abate industry in South Africa. It will explore potential opportunities, challenges, and implications for the industry and civil society. Method: This study followed an interpretivism paradigm associated with an inductive research approach, originating from an empirical investigation applying qualitative data collection and constructing theory throughout the research process. A pragmatic philosophy was followed as well as a non-probability interview strategy. A crosssectional time horizon, data collection based on information from interviews applied in a single period and to a restricted number of participants. Correlation with theory, legislation, and other information already in the public domain regarding carbon pricing mechanisms implemented in South Africa was also considered. Results: The study determined that the suggested R640 per tonne of CO2eq carbon tax penalty as part of the carbon budget system over and above the carbon tax would significantly affect the hard-to-abate industry in South Africa. The study identified the challenges experienced by the hard-to-abate sector to fully decarbonise, opportunities, and negative implications. The study presents recommendations to possibly support the hard-to-abate industry in transitioning to a just and equitable low-carbon economy.