A risk management strategy to identify and prioritise factors affecting industry’s carbon tax liability

Abstract

The proposed South African carbon tax system forms part of an extensive structure of strategies aimed at addressing the main challenges of climate change. The system is, however, complex, with various concerns and uncertainties. Industries therefore need to adapt positively in order to ensure their sustainability and competitiveness. This paper presents a risk management strategy for industries to identify and prioritise potential factors affecting the cost of carbon tax. The risk management strategy consists of five phases: 1) establishing the concept, 2) identifying the associated risks, 3) analysing the risks, 4) evaluating the risks, and 5) managing the risks according to relevant international or national standards. The risks are effectively prioritised by evaluating the individual severity, likelihood, and correctability of each risk. The strategy is applied to case studies in the iron and steel, ferrochrome, and cement industries. The combined carbon tax exposure for these case studies is about R453 million. A discussion of the results reveals that the risk management strategy can be used effectively to identify and prioritise carbon tax-associated risks, and further mitigate the potential tax liabilitiesDie voorgestelde Suid-Afrikaanse koolstofbelastingraamwerk vorm deel van ʼn uitgebreide struktuur van strategieë wat bedoel is om die hoof uitdagings van klimaatsverandering aan te spreek. Dié raamwerk is egter kompleks, met verskeie bekommernisse en onsekerhede. Industrieë moet dus positief aanpas om hul volhoubaarheid en mededingendheid te verseker. Hierdie artikel bied ʼn riskobestuur-strategie aan vir industrieë wat hul potensiële faktore, wat die koolstofbelasting kan beïnvloed, wil identifiseer. Hierdie strategie bestaan uit vyf stappe: 1) vestiging van die konsep, 2) identifisering die gepaardgaande risiko’s, 3) analisering van hierdie risiko’s, 4) evaluering van die risiko’s en 5) bestuur van die risiko’s volgens relevante internasionale en nasionale standaarde. Die risiko’s is effektief geprioritiseer deur die individuele erns, waarskynlikheid, en korrigeerbaarheid van elk te evalueer. Die strategie is toegepas tot gevallestudies in die yster-en-staal-, ferrochroom-, en sementindustrieë. Die gekombineerde koolstofbelasting blootstelling vir hierdie gevallestudies is ongeveer R453 miljoen. ʼn Bespreking van die resultate toon dat dié risikobestuur-strategie gebruik kan word om hierdie risiko’s te

identifiseer en te prioritiseer om sodoende verdere belasting- implikasies te verminder.