Carbon Disclosure Project South Africa's Carbon Chasm - Based on Carbon Disclosure Project 2010 responses from the JSE 100 Companies
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Carbon Disclosure Project
South Africa’s Carbon Chasm
Based on Carbon Disclosure Project 2010
responses from the JSE 100 Companies
Report writing and analysis by KPMG Carbon Disclosure Project
www.cdproject.net
44 (0) 20 7970 5660
info@cdproject.net
South Africa’s Carbon Chasm – Based on Carbon Disclosure Project 2010 responses from the JSE 100 Companies
Foreword
Carbon Chasm foreword
Recent figures reported in 2011 by the International Energy Agency, show that Greenhouse gas
(GHG) emissions increased by a record amount in 2010, to the highest output in history,1 yet scientific
evidence shows that we need to see global emissions cut by up to 95% in some major economies by
20502 if we are to avert climate change and continued disruption to our weather patterns.
As some three quarters of total global emissions3 are generated by corporations globally, the role
of business in helping achieve the required emissions reductions is crucial. We are delighted to be
working with KPMG in South Africa to gain a better understanding of how South African businesses
are tackling emissions reductions, based on CDP data collected in partnership with the National
Business Initiative.
The Intergovernmental Panel on Climate Change (IPCC) recommends that there is a substantial reduction in emissions, against
business as usual, by 2050 in emerging markets. In 2009, the South African government committed to reduce the country’s
emissions by 34% from business as usual levels by 2020 and 42% by 2025. This research investigates whether South Africa’s
biggest businesses are on track to achieve these reductions, based on the emissions reduction targets reported through CDP
in 2010.
What is striking is that even though just one third of South African companies in the JSE 100 companies report setting targets,
this covers 93% of the JSE 100 direct emissions profile, due to a small number of companies, in sectors such as mining,
generating the majority of emissions. This shows how heavy emitters recognise the importance of developing and delivering
emissions reduction strategies. It is also striking that the power sector is responsible for 45% of South Africa’s emissions,
compared to just 26% globally. This high footprint from the power sector means that energy efficiency measures, which can
be applied in all businesses, need to play a major role in reducing power usage and in turn, the power sector’s high carbon
footprint.
When considered against CDP’s Carbon Chasm report series, based on the largest Global, UK and US companies, South
Africa’s JSE companies are setting strong targets compared with the government commitment to reduce emissions. However
this is counterbalanced by the enormous footprint from the power sector which has heavy dependence on fossil fuels and very
limited reduction plans. In addition, just one third of companies in the JSE 100 report targets, meaning there is scope within
two thirds of the JSE 100 to advance further emissions reductions. This can be achieved in every company, through energy
efficiency, changes in processes and improved technology, many of which generate cost savings, often with a short payback.
More and more investors and companies globally are identifying and acting on these opportunities not just because they make
good environmental sense, but also just as important, they make good business sense.
Joanna Lee
Chief Partnerships Officer, Carbon Disclosure Project
1. http://www.iea.org/index_info.asp?id=1959
2. Intergovernmental Panel for Climate Change Fourth Assessment
Report, 2007
3. http://www.pewclimate.org/facts-and-figures/international/by-
sector
2
Foreword
Foreword:
KPMG foreword
The business and regulatory risks relating to climate change and sustainability are complex and
evolving. While there are undoubtedly commercial opportunities to be capitalised on in the process,
what is clear is that there is an implied level of shared responsibility by all stakeholders – most
notably between Government and business. KPMG plays a key role in facilitating this engagement.
South Africa has made a bold commitment in international climate negotiations to reduce national
emissions to 34% below ‘business as usual’ levels by 2020 and 42% by 2025 (with a few identified
dependencies). The fact is that Government cannot achieve this on its own – and nor should they.
It’s up to every responsible citizen – corporate and individual – to play their part in achieving this.
Using the Carbon Disclosure Project (CDP) 2010 dataset to analyse how companies are currently
setting emissions reduction targets and what level of reduction these will likely deliver, it is clear that South Africa currently
faces a ‘carbon chasm’. A particular challenge for South Africa is that our coal-based electricity mix is already responsible
for a large portion of national emissions. What is exciting is that an analysis of the available data reveals that the Private
Sector holds great potential for achieving our national desired emissions reduction. Indeed, to bridge the ‘carbon chasm’
fully, energy efficient behaviour should extend to organisations in all sectors of the economy, and to private households.
Government plays a crucial role in creating an appropriate policy framework to incentivise low carbon behaviour. The
challenge in South Africa is balancing climate objectives with our very pressing socio-economic issues, and promoting low
carbon growth whilst tackling unemployment and poverty.
At KPMG, we understand the complexities about bringing together a hugely diverse and apparently disparate group of
stakeholders – especially from business and Government – through constructive, facilitated engagement to realise the vision
that ultimately benefits us all.
KPMG is proud to play a leading role in cutting through this complexity, including as the lead sponsor of the CDP in South
Africa and as shown in our support of this Carbon Chasm initiative. Through relevant, timely disclosure, the CDP allows for
the building of bridges of profound change – leading by example, demonstrating the practical application of what will go on
to challenge and inspire others. The ‘Carbon Chasm’ highlights the challenges – and opportunities – in getting this right.
Our Climate Change & Sustainability global practice is a multi-disciplinary team of outstanding professionals geared to serve
clients as the business investment in this area grows. We have a strong presence in Africa and the global leadership team
includes Yvo de Boer, former Executive Secretary for the United Nations Framework Convention on Climate Change and
now Global Advisor with KPMG (based in the UK). We look forward to continuing our engagement with you in positively
shaping this space.
Moses Kgosana
Chief Executive, KPMG in South Africa
3
Executive Summary
South Africa has made a voluntary Emissions need to decrease by an
commitment in international climate estimated 0.2% per year to achieve “Climate change is widely
negotiations to reduce national South Africa’s 2020 commitment of recognised as one of the most
emissions to 34% below business as 34% below business as usual. serious challenges the world
usual levels by 2020 and 42% by 2025, faces, with consequences that
dependent on finance, technology • South Africa’s absolute emissions
commitment has not been formally go far beyond its impact on the
and capacity-building support from
quantified. Therefore the best environment alone. The question is
industrialised countries. This carbon
chasm report evaluates how the available approximation of the 2020 no longer if we have to move into a
emissions reductions targets of the absolute emissions commitment low-carbon future but how we will
largest 100 companies listed on the using publicly available data is get there.
Johannesburg Stock Exchange (the 34% below the ‘Growth Without South Africa’s Carbon Chasm
JSE 100) compare with the national Constraints’ scenario in the Long report illustrates that there is a
commitment. Term Mitigation Scenarios (LTMS)2. gap between business as usual
• South Africa’s total emissions level carbon emissions and South
The research utilises the Carbon
Disclosure Project (CDP) 2010 dataset from all sources in 2010 has been Africa’s commitment of 34% below
to analyse how companies are currently estimated at approximately 500 the business as usual scenario by
setting emissions reduction targets and million metric tonnes of CO2-e3. This 2020. However, many companies
what level of reduction these targets can is used as the baseline to calculate in the South African market have
deliver. Projections on emissions from the reduction rate required to 2020. stepped up to the challenge of
electricity in South Africa’s Department The projected annual increase voluntarily reducing greenhouse
of Energy’s Integrated Resource Plan in emissions from electricity gas emissions by putting forward
are also assessed against the national generation is the primary driver substantive commitments that
commitment, as South Africa’s coal in South Africa’s annual total contribute to meeting South
based electricity mix is responsible for a emissions growth up to 2020. Africa’s overall commitment.
large portion of national emissions.
Although it is encouraging to see
• As the electricity mix is unlikely to
Key Findings change substantially before 2020, the articulated voluntary GHG
South Africa expects to increase reduction emissions targets
South Africa faces a carbon chasm. in the private sector, it is only
emissions from electricity generation
• The gap between business as usual by 2% per year, as per the through a collective effort that
carbon emissions and South Africa’s Department of Energy’s projections4. climate change can be seriously
voluntary commitment of 34% below addressed.
• When this projected rate is adjusted
business as usual in 2020 is 253 South Africa will soon become
for the weighted average of the JSE
million tonnes CO2-e1. This chasm the focus of world attention
100 targets for electricity efficiency5
constitutes approximately half of in the lead up to COP17 in
the annual increase rate slows
current national emissions. Durban, with the chance to
to 1%. This demonstrates that
• When adjusted for the JSE 100 electricity efficiency is a crucial lever address some of the gaps that
targets this chasm is more than in achieving substantial emissions exist in the international climate
halved to 105 million tonnes CO2-e. reductions. framework.
This illustrates that the private sector This report contributes to the
holds great potential for achieving debate on the road to the
South Africa’s desired emissions climate negotiations in Durban
reduction. by providing an interesting
insight into the current state of
achievement of South Africans
1. CO2-e stands for carbon dioxide equivalent, which is the 2. The Long Term Mitigations Scenarios (LTMS) are a set of climate ambitions.”
accepted unit of measurement for greenhouse gases. evidence-based scenarios of future possible mitigation
actions by South Africa. They were developed by the Energy – Yvo de Boer, KPMG’s Special
Research Centre (ERC) in 2007 and provided a basis for the
South Africa’s negotiation policy at the international climate Global Advisor on Climate Change
negotiations in Copenhagen in 2009. and Sustainability and former
3. Carbon Disclosure Project 2010, South Africa JSE 100
4. The Department of Energy has gazetted the 2010 Integrated Executive Secretary to the UN
Resource Plan (IRP2010) which maps out the expansion of Framework Convention on Climate
South Africa’s electricity supply up to 2030.
5. Scope 2 emissions are Indirect GHG emissions from Change
consumption of purchased electricity, heat or steam, as
defined by the Greenhouse Gas Protocol
4Executive Summary
If achieved and maintained, targets Recommendations
from the JSE 100 companies could It is important to
result in a 0.5% annual reduction • To bridge the ‘carbon chasm’ fully, it
in the JSE 100’s overall direct6 is critical that the target setting JSE note that South
emissions. 100 companies follow through on Africa’s emissions
maintaining and achieving the targets reduction commitment
• Target setting amongst the JSE 100 they have set. Emissions reduction
has shown a strong upward trend. actions, particularly on energy is conditional on
31 of the JSE 100 reported having efficiency, must also extend to the rest international financing,
an emissions reduction target in of the JSE 100, and non-listed carbon technology and
2010, as compared to 20 companies intensive organisations.
in 2009. capacity-building
• To achieve this, strong and clear support.
• The most carbon intensive sectors policy signals are required from
are leaders in target setting. Target government, indicating how it
setting companies account for 93% intends to achieve the overall
of the JSE 100 direct emissions, commitment, what actions it expects
and 19% of South Africa’s national in each sector and what policies
emissions. and incentives will be put in place to
ensure the transition to a low carbon
• In line with South Africa’s status as
economy.
a developing country, the JSE 100
average reduction target of 0.5% is • It is important to note that South
lower than the Global 100 average Africa’s emissions reduction
target reduction rate of 1.9%7 and commitment is conditional on
the FTSE 100 target reduction rate international financing, technology
of 2.5%8. and capacity-building support. As
the 17th Conference of the Parties
(COP17) is due to be hosted in
South Africa at the end of 2011, the
government and private sector have
an opportunity to influence these
aspects of the international climate
negotiation outcomes.
A key challenge in performing the
carbon chasm analysis South Africa’s
commitment to reduce emissions to
34% below business as usual in 2020
is that the absolute commitment has
not been quantified. The commitment
should be quantified and disclosed
as a matter of urgency, for emitters
in South Africa to be able to develop
strategies and set appropriate targets
for emissions reductions and to be able
to participate in carbon markets.
6. Scope 1 emissions, as defined by the Greenhouse Gas
Protocol
7. Global 100 Carbon Chasm Report, CDP
8. FTSE 100 Carbon Chasm Report, CDP
5Background
International Climate South African Climate Policy The Long Term Mitigation
Negotiations and South South Africa has committed to reducing
Scenarios (LTMS)
Africa’s role its greenhouse gas emissions by 34% The Long Term Mitigation Scenarios
Achieving a global deal on climate against a ‘business as usual’ baseline by (LTMS)9 process was mandated by
change remains one of the greatest 2020 and 42% by 2025. government to build evidence based
multilateral policy challenges of the scenarios of future possible mitigation
This voluntary commitment was
21st century. The first commitment actions by South Africa. The process
submitted under the Copenhagen
period of the Kyoto Protocol, governing was established with three key goals
Accord at the COP15 held in
greenhouse gas emissions in in mind: to engage South African
Copenhagen in 2009. South Africa’s
industrialised countries, expires in 2012. stakeholders in building scenarios, to
commitment is conditional on finance,
Countries are now working towards inform the South African delegation to
technology and capacity-building
a successor to this treaty in the form COP15’s negotiating position, and to lay
support from Annex 1, or industrialised
of a second commitment phase of the basis for long term climate policy in
countries.
the Protocol and/or a new governing South Africa. South Africa’s voluntary
framework. This international commitment is one commitment under the Copenhagen
of the important factors influencing Accord is based on the ‘Peak, Plateau
South Africa, as the host of the next domestic policies related to climate and Decline’ trajectory of the LTMS.
Conference of the Parties (COP17) is change, which also need to be aligned
a particularly important stakeholder in In the absence of an official
with local socio-economic development
the current process of negotiations. The quantification of South Africa’s
priorities. Context is provided by the
event, to be held in Durban in November commitment, the ‘Growth without
National Climate Change Response
and December 2011 is a watershed Constraints’ scenario in the LTMS
Green Paper published in 2010. This
moment in international climate policy. It provides a proxy for ‘business as usual’,
sets out the guidance and framework
represents a critical chance for countries which forms the baseline of South
for climate change policy in South
to agree on a deal. However, a number Africa’s commitment. This scenario
Africa relating to both mitigation and
of issues remain unresolved. models the trajectory of greenhouse gas
adaptation.
emissions if the economy and society
The overarching challenge to Concurrently, a carbon tax discussion do not change their behavioural patterns
international negotiations is in paper has been developed. This and economic growth is as expected.
reconciling the interests of developed outlines the government’s intention to Under this scenario, emissions are
and developing countries. Developing implement an economy-wide carbon projected to increase almost 50% by
countries are calling for a second tax in South Africa. The proposal, 2020 from 2010 levels and more than
commitment period of the Kyoto currently under revision based on triple by 2050.
Protocol with binding emission limits on stakeholder consultation, is expected to
developed nations. However, a number Based on the ‘Growth Without
be finalised in the latter half of 2011 and
of the industrialised countries do not see Constraints’ scenario, the commitment
implemented in 2012.
a second commitment period without it of 34% below business as usual
including targets for the major emitting Finally, a number of policy initiatives translates to emissions of 491 million
countries, including the United States. have an indirect influence on climate tonnes of CO2-e per annum by 2020,
In addition to securing this overarching change mitigation in South Africa. These slightly lower than South Africa’s
agreement, a number of key technical include the push for renewable energy in estimated 2010 annual emissions of
issues are outstanding, including the the latest Integrated Resource Plan for 50010 million tonnes CO2-e. This would
details of operation of the financial and electricity (IRP2010), a CO2 emissions require a yearly decrease in emissions of
technology mechanisms as well as tax on new vehicles, and a levy on the 0.2% to meet this estimation of South
the arrangements for measurement, price of electricity on account of carbon Africa’s commitment. It must be noted
reporting and verification of emissions. emissions. Additionally, there are a range that the LTMS were performed in 2007,
of fiscal incentives to promote energy and the business as usual projection is
efficiency and the adoption of low in the process of being updated.
carbon technologies.
9. Long Term Mitigation Scenarios, prepared by the Energy
Research Centre, October 2007
10. Carbon Disclosure Project 2010, South Africa JSE 100
6Background
However, it is still the best publicly towards achieving the global reduction strategic options that frame different
available approximation of business as target of between -60% to -80% from scenarios to close this gap, with varying
usual. This initial declining trajectory 1990 levels. This reduction is deemed effectiveness.
contradicts the general understanding necessary to limit climate change to two
that South Africa intends to follow the degrees Celsius above pre-industrial The ‘Current Development Plans’
‘Peak, Plateau and Decline’ trajectory, levels by 2050, considered to be scenario shows how the growth without
which entails increasing emissions up to dangerous climate change. However, it constraints would change if current plans
a peak in 2020. This highlights the need is assumed that South Africa bears less for energy efficiency and introducing
for urgent quantification and disclosure than its proportional share of the global renewable sources into the energy
of South Africa’s commitment, and the burden of reduction due to its status mix are implemented. ‘Start Now’
trajectory required to achieve it. as a developing country. Therefore the accounts for mitigation actions that are
desired reduction band is between -30% implemented through sectoral plans and
South Africa’s voluntary commitment to -40% from 2003 levels by 2050. cooperative governance. The ‘Scale Up’
to reduce emissions 34% below scenario enhances the effectiveness of
business as usual in 2020 does fall The gap between the 2050 target this plan, by scaling up actions taken in
within a target band defined by the required by science and the business as the early years of ‘Start Now’. Together
‘Required by Science’ scenario. This usual scenario is in the region of 1300 the two strategies can be thought of as
scenario is based on the recognition Mt CO2-e per year of required mitigation ‘Energy Efficiency Plus’.
that South Africa must contribute effort. The LTMS then goes on to outline
Figure 1: Long Term Mitigation scenarios
Strategic options to get from Growth Without Constraints to Required By Science
1800
1600
1400
Growth without Constraints
1200
Mt CO2 -equivalent
Current Development Plans
1000 Interim national
commitment date
Start Now
800
Scale Up
600
Use the Market
400
Required by Science
200
0
2020
2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048
Source: DEAT 2007 Long Term Mitigation Scenarios: Strategic Options for South Africa, pg7
7South Africa’s Carbon Chasm – Based on Carbon Disclosure Project 2010 responses from the JSE 100 Companies
‘Use the Market’ drives further Climate change remains high on the
emissions reductions by using a carbon agenda for many large South African
pricing mechanism to create incentives companies. Each year the CDP
for mitigation. In this scenario, a CO2 questionnaire is sent to the top 100
tax is a key cost driver, making the companies listed on the JSE, and South
use of fossil fuels less attractive and Africa’s fourth CDP in 2010 generated
encouraging investment in low-carbon a response rate of 74%. This ranks
technologies. Over 75% of the target the South African CDP response rate
reduction is achieved through using the as the joint fourth highest response
market. rate internationally.11 Of the responding
companies, 94% disclosed their
The LTMS analysis identifies several greenhouse gas (GHG) emissions. There
areas to be explored further to close this has also been an increase in the number
gap: investment in new technologies of companies with GHG emissions
in the future, identifying lower-carbon reduction targets, with 31 companies
resources, incentives for behavioural having specific targets (a 55% increase
change and redefining competitive from 2009) and 22 making the
advantage in the transition to a low- commitment to develop targets. The
carbon economy. The key to success is increasing trend in target setting via CDP
leadership in government, business and provides a clearer indication as to how
civil society, together with international companies are adapting to competitors’
alignment and active support. This and national emissions reduction targets
report examines the alignment between in response to climate change.12
government intentions and strategies
formulated by the business community.
CDP in South Africa
The Carbon Disclosure Project (CDP)
was established in 2000 with the aim to
accelerate solutions to climate change
by putting relevant information at the
heart of business, policy and investment
decisions. This has challenged the
world’s largest companies to measure
and disclose their carbon emissions.
In addition to disclosing emissions
performance; which includes emissions
reduction targets and energy use,
the CDP questionnaire also assesses
companies’ wider performance by
requiring disclosure on the management
of climate change; as well as the risks
and opportunities surrounding climate
change. It takes companies on the
path of measuring, managing and
subsequently reducing their emissions.
11. Carbon Disclosure Project 2010: South Africa JSE 100, p10
12. KPMG, 2010 in ‘Carbon Disclosure Project 2010: South
Africa JSE 100, p8
8Methodology
Scope understanding that South Africa • Average annual real GDP growth rate
intends to follow the ‘Peak, Plateau forecasts (KPMG macroeconomic
The scope includes: and Decline’ trajectory, which entails forecasts for South Africa) between
increasing emissions up to a peak 2010 and 2020 are used to adjust
• All the JSE 100 companies that have
in 2020. It must be noted that the intensity targets for growth.
made disclosures through the CDP
2007 LTMS are out of date, and
in 2010. The JSE 100 companies’ • The JSE 100 companies without
the business as usual trend line is
reported Scope 113 emissions a target are assumed to be
in the process of being updated.
account for 21% of South Africa’s following a business as usual
It is, however, still the best publicly
national emissions in 2010. emissions trajectory and are
available projection.
assigned the average annual
• Emissions from electricity generation,
• To give the most accurate growth rate in the ‘Growth Without
currently almost entirely generated
approximation of the JSE 100 Constraints’ scenario in the LTMS.
by Eskom, South Africa’s state
targets, company targets are This assumption should not
owned power utility. Emissions
weighted according to company materially affect the overall weighted
from electricity generation account
contribution to total the JSE 100 average emissions reduction per
for 45% of South Africa’s national
emissions, to give an overall annum, as non-target setting
emissions in 2010.
weighted average emissions companies only accounted for 7%
• The remaining 34% of national reduction per annum. of total JSE 100 reported Scope 1
emissions will only be assessed to emissions.
• This analysis uses the targets
approximate South Africa’s carbon
reported to CDP in 2010 by these • The average annual percentage
chasm. The assumption is made that
companies to calculate their increase in national emissions from
this portion of emissions will follow a
expected annual reduction rate. For electricity generation is calculated
‘business as usual’ trajectory.
this purpose, a total of 68 absolute using a weighted average of the
and intensity CO2-e emissions JSE 100’s scope 214 emissions
Calculations targets have been analysed. 31 JSE reduction targets, with the rest of
100 companies supplied sufficient national emissions from electricity
The JSE 100 average target reduction data for this calculation as some being assigned the CO2-e emissions
rate of emissions and projected companies set more than one target. growth rate as per the projection
emissions from electricity generation in the Department of Energy’s
have been evaluated against the • Targets that do not cover Integrated Resource plan.
reduction rate required to achieve South the full period up to 2020 are
Africa’s 2020 voluntary commitment. extrapolated up to 2020 based
on the assumption that companies
• Considering South Africa’s will continue to set targets at least
commitment against a business as at the same level. This assumption
usual trendline, KPMG has calculated may be conservative (in the sense
that South Africa’s commitment that it underestimates the carbon
to reduce emissions 34% below chasm) as many short term targets
business as usual by 2020 translates may have been set under low
into an average annual reduction economic growth expectations. As
rate of at least 0.2% per annum. the economic outlook improves, or
This figure is arrived at by calculating companies adjust their targets based
the compound annual growth rate on their performance against them,
between South Africa’s estimated targets may become less aggressive.
national emissions in 2010, and Equally, if the government moves
66% of the 2020 value in the forward with national climate change
LTMS ‘Growth without Constraints’ policy, companies may tighten their
scenario. This initial declining targets to respond to policy change.
trajectory contradicts the general
13. Scope 1 emissions are all direct emissions, as defined by 14. Scope 2 emissions reductions are Indirect GHG emissions
the Greenhouse Gas Protocol from consumption of purchased electricity, heat or steam,
as defined by the Greenhouse Gas Protocol
9Analysis of the JSE 100’s Reported Targets
An increasing number of As illustrated in figure 3, in 2010, 31 CO2 equivalent targets lead
companies report having of the JSE 100 companies reported the way
having some form of emissions
targets reduction target in place. Forty-seven There are a total of 68 targets reported
According to the JSE 100 responses to did not respond or had no current by these 31 companies, indicating that
CDP in 2010, 31 of these companies targets in place. Twenty-two JSE 100 it is common for a company to set
are setting targets to reduce their companies reported that they were in more than one target. As illustrated in
emissions or energy consumption. As the process of setting targets. figure 4, targets are most frequently
shown in figure 2, the trend is toward defined in terms of carbon dioxide
more companies setting targets, with equivalent emissions, (CO2-e), which
20 companies reporting targets in 2009 Figure 3: Target setting by JSE 100 is the accepted unit of measurement
and only 12 reporting targets in 2008. Companies in 2010 for greenhouse gases. Recent ‘Carbon
It is expected that this increasing trend Chasm’ reports by CDP found that this
will continue in 2011, as 22 additional trend is also reflected globally amongst
companies were in the process of Global 100 companies and FTSE 100
16 Companies . Energy consumption is an
setting targets in 2010.
28 alternative target and the benchmark is
used by the JSE 100 companies as it is
Figure 2: Trends in target setting by directly related to emissions but easier
JSE 100 Companies to measure and track over time.
22
60
Currently setting targets
Targets in place 3 Figure 4: Types of targets
50
22 31
40 4%
30
No target
11
20 Currently setting targets
8 31
10 20 Previously had a target
12
Those that had targets in place
0
2008 2009 2010 No response
96%
CO2-e
Energy consumption
10Analysis of the JSE 100’s reported targets
Absolute targets are most Figure 5: Absolute vs Intensity
frequent targets*
A major differentiator between targets
is whether they are absolute or intensity 7%
based. Absolute emissions reduction
targets are defined by the GHG Protocol
as goals to “reduce absolute emissions
over time” and are the most popular
target type.
37%
Intensity emissions reduction targets are 57%
defined as goals to “reduce the ratio of
emissions relative to a business metric
over time”. Intensity targets are popular
for the reason that they allow companies
to account for growth.
As illustrated in figure 5, 37% of target Absolute
setting companies set intensity targets Intensity
only, 57% set absolute targets only, Both
while 7% adopt both absolute and
intensity targets.
Although setting intensity commitments
can be valuable for a company,
the ultimate result of a company’s
emissions reduction targets should be
an absolute reduction in emissions.
Such absolute reductions are required
if the private sector is to deliver in
line with South African government
commitments and are not guaranteed
by a reduction in emissions intensity. In
fact, if a company’s activity grows at a
faster rate than the emissions intensity
reduction rate, absolute emissions will
actually increase. By setting absolute
targets, 64% of target setting JSE 100
companies have committed to avoiding
emissions growth.
* Percentages do not add up to 100 due to rounding up of numbers
11South Africa’s ‘Carbon Chasm’
If South Africa continues on its Figure 6 illustrates projected emissions • Reductions in direct emissions,
estimated business as usual emissions trajectories of South Africa’s national based on Scope 115 reduction
trajectory, it will face a carbon chasm of emissions, and compares projected targets set by the JSE 100
253 million tonnes CO2-e in 2020. This national emissions to South Africa’s companies
gap between the national commitment reduction commitment.
and national emissions would constitute • Reductions in emissions from
approximately half of current estimated This graph represents South Africa’s electricity generation both due the
emissions. However, this chasm is more estimated carbon chasm, the gap changes in electricity mix projected
than halved to 105 million tonnes CO2-e between projected emissions and South in the Department of Energy’s
when South Africa’s business as usual Africa’s estimated commitment for 2020. Integrated Resource Plan, and
emissions trajectory is adjusted for the The chasm is represented under a Scope 2 reduction targets set by the
potential effects of the JSE 100 targets business as usual scenario, and shows JSE 100 companies
and electricity resource plans. the decrease in the carbon chasm when
adjusted for:
Figure 6: South Africa’s Carbon Chasm (million tonnes CO2-e)
Millions
800
Business as usual
Projected SA 2020 emissions, adjusted for JSE Scope 1&2 targets and IRP2010
SA estimated reduction commitment
700
IRP2010 and JSE 100
targets reduced carbon chasm
to 105 million tonnes 253
600
105
500
South Africa’s
Carbon Chasm
400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: DEAT 2007 Long Term Mitigation Scenarios: Strategic Options for South Africa, KPMG analysis
15. Direct emissions, as defined by the Greenhouse Gas Protocol
12South Africa’s ‘Carbon Chasm’
JSE 100 direct emissions are proactively managing their carbon
reduction targets contribute strategy. However, in absolute numbers, Target setting
not enough of South Africa’s largest
to closing the carbon chasm companies are setting targets. It is companies’ Scope 1
Based on current reported targets, the important that the trend of increasing emissions account for
JSE 100 companies aim to achieve numbers of companies setting targets 93% of reported Scope
a weighted average yearly Scope 1 continue. 1 JSE 100 emissions,
emissions reduction of 0.5%, also
accounting for those companies that did
Responses indicate that companies and 21% of estimated
in the carbon intensive sectors are national emissions.
not set targets. setting slightly less aggressive targets
To comply with South Africa’s 2020 than their peers in less carbon intensive
interim voluntary commitment, an sectors. However, due to their greater
annual reduction rate of at least 0.2% weight in terms of overall emissions,
is needed. With a weighted average these targets contribute substantially
target reduction rate of 0.5%, the JSE to achieving an overall target reduction
100 companies, on average, are setting rate that exceeds the required rate to
targets exceeding the reduction rate achieve the national emissions reduction
required by the national commitment. commitment.
Actual reduction rates are of course However, most targets set are for the
dependent on whether targets are short term, making it less certain that
achieved, and whether target levels can the required rate will be maintained up
be maintained for the full period up to to 2020 and beyond. Based on targets
2020. where sufficient detail was provided
This average reduction rate is (31 responses): 24% of targets had
substantially lower than the Global already reached their end date at time of
100 average reduction rate of 1.9% publishing the 2010 CDP (2009 or 2010
and lower than the FTSE 100 rate of target years), a further 27% of targets
2.5%16. This can be justified by the span less than 3 years into the future.
fact that South Africa’s desired band Only 26% of targets cover the full period
for reductions is much lower than to the 2020 interim commitment date.
that of industrialised countries, due to
South Africa’s status as a developing
country. However, as South Africa’s top Figure 7: Longest target year per company
performing companies, the JSE 100
should strive to achieve international
2020 26
benchmarks.
Although 69 of the JSE 100 companies 10
2015
have not yet reported emissions
reductions targets, target setting
companies’ Scope 1 emissions account 2014 16
for 93% of reported Scope 1 JSE
100 emissions, and 21% of estimated
2013 6
national emissions. This means that on
balance, companies with more carbon
intensive operations are leading the 2012 13
way in terms of target setting. This is
promising as a large portion of private 6
2011
sector emissions are accounted for, and
companies that will be most affected by
a potential carbon pricing mechanism 2010 15
16. CDP Global 100 Carbon Chasm Report, CDP FTSE 100 2009 6
Carbon Chasm Report, CDP
0% 5% 10% 15% 20% 25% 30%
13South Africa’s Carbon Chasm – Based on Carbon Disclosure Project 2010 responses from the JSE 100 Companies
While this report focuses on targets however more of the JSE 100 should The Department of Energy has recently
set by the JSE 100 companies, as be setting targets and targets should gazetted the 2010 Integrated Resource
opposed to actual emissions reductions be set further into the future. While Plan (IRP2010), which maps out the
performance, a concern is that of the direct private sector emissions are expansion of South Africa’s electricity
targets that have already expired, it is a substantial component of South supply up to 2030. This is a national
unclear whether these targets have been Africa’s national emissions, no analysis electricity plan, which forms a subset
met. Therefore, although companies that of South Africa’s carbon chasm would of the national energy plan. The goal
have a history of target setting are more be complete without an analysis of of integrated resource planning is to
likely to continue setting targets, these emissions from electricity generation. ensure sustainable development of
targets may be adjusted downwards the electricity mix, while meeting the
to make them more achievable. To add Emissions from electricity forecasted national electricity demand
to this, many targets may have been are a primary driver in South and taking into account technical,
set based on low economic growth Africa’s emissions growth up economic and social constraints and
expectations due to the prevailing to 2020 externalities. From a carbon perspective,
economic environment, and therefore South Africa’s electricity mix is currently
may be adjusted as the economic The projected emissions level 90%18 dependent on coal and a key
outlook improves. from electricity generation in 2020 objective is to diversify into renewable
as compared to 2010 translates energy alternatives.
Companies in the carbon intensive to a 2.04% average increase in
sectors are setting longer targets than emissions per annum between 2010 After two rounds of consultation, the
their JSE 100 peers in other sectors, with and 202017, which falls significantly Department of Energy has promulgated
29% having a target up to 2020. short of the emissions reduction the ‘Policy- Adjusted IRP’ scenario. See
rate of 0.2% required to meet the Figure 7 below:
The JSE 100 target setting companies
are setting targets at the right levels, national commitment.
Figure 7: Process to reach Policy-Adjusted Integrated Resource Plan
Before second round
Second round of After consultation
of consultation process
consultation process process (February 2011)
(IRP as of October 2010)
Scenarios tested Scenarios tested
• “Emission Limit” • Base case “Adjusted Emission”
• “Carbon Tax” (based on Emission Limit 2.0)
Quantitative • “Regional Development” • “High Efficiency”
optimisation • “Enhanced Demand Side • “Low Growth”
(least cost) Management” • “Risk Averse”
• “Peak Oil”
¢Emission Limit 2.0 to be Main changes • “Earlier Coal”
pursued further • Increased nuclear costs by 40%
• Included learning rates
Multi-criteria (mainly affects Photo Voltaic,
decision making Concentrating Solar Power, wind) Policy choices
Disaggregated solar technologies
Quantitative Revised Balanced
balancing Scenario (RBS) Policy-Adjusted IRP
Source: IRP2010
17. As carbon emissions projections are not provided for the 18. IRP2010
Policy Adjusted IRP, carbon emissions for the Revised
Balanced Scenario are used as the closest available
projection. However, the allocation for coal is the same in
both scenarios, therefore the deviation will not be substantial
14South Africa’s ‘Carbon Chasm’
The ‘Policy-Adjusted IRP’ is an iteration Renewable Energy Feed-in Tariff (REFIT) Although the target setting JSE
on the ‘Revised Balanced Scenario’ scheme, in favour of a competitive 100 companies represent a large
(RBS), allowing for increased nuclear bidding scheme with a price ceiling. portion of emissions from electricity,
costs, learning rates and disaggregation all sectors of the economy, including
of solar technologies. The RBS was the As emissions from electricity generation private households should be seeking
preferred scenario following from the first accounted for an estimated 45% of efficiencies in energy consumption. Aside
round of the IRP Consultation process South Africa country emissions in 2010, from reducing carbon emissions this
as it balanced least cost scenarios the low likelihood of changing the will this ease South Africa’s electricity
with objectives including climate electricity mix substantially before 2020 supply pressures in the short term
change mitigation, diversity of supply, is a primary factor driving South Africa’s and create savings for the consumer.
localisation and regional development. carbon chasm. Additional financial incentives to invest
In the absence of a less carbon intensive in energy efficiency measures such as
Despite efforts in the Integrated Eskom’s Energy Efficiency Demand Side
Resource Plan to hasten the electricity mix in the short term, an
important lever in reducing carbon Management programme have proven
introduction of renewable energy in effective from the outset and should be
South Africa’s grid expansion plans, emissions from electricity is to seek
efficiencies in electricity consumption. escalated to improve the efficiency of all
various factors hamper a substantial electricity consumers’ usage.
change in energy mix in the short term. The JSE 100 target setting companies
Construction of two new build coal-fired are setting a good example through their
power station projects is well underway Scope 2 emissions reduction targets.
and policy uncertainty is creating When adjusting national emissions “As emissions from
challenges in introducing Independent growth from electricity for the JSE electricity generation
100 Scope 2 emissions targets, it
Power Producers (IPPs) to the grid.
slows to only a 1% average increase accounted for an
This has recently been evidenced by
the dropping of the much anticipated per annum, partially bridging the estimated 45% of South
carbon chasm. Africa’s emissions
in 2010, the low
Figure 8: IRP2010 Scenarios likelihood of changing
Scenario Constraints
the electricity mix
substantially before
Base Case 0.0 Limited regional development options
No externalities (incl.carbon tax) or climate change targets 2020 is a primary factor
Emission Limit 1.0 (EM1) Annual limit imposed on CO2 emission from electricity industry of
driving South Africa’s
275 MT CO2-eq carbon chasm. This
Emission Limit 2.0 (EM2) Annual limit imposed on CO2 emission from electricity industry of shows the importance
275 MT CO2-eq, imposed only from 2025 of electricity efficiency
Emission Limit 3.0 (EM3) Annual limit imposed on CO2 emission from electricity industry of initiatives to reduce
220 MT CO2-eq, imposed from 2020
carbon emissions in the
Carbon Tax 0.0 (CT) Imposing carbon tax as per Long Term Mitigation Strategy (LTMS)
values (escalated to 2010 ZAR)
short term.”
– Neil Morris,
Regional Development 0.0 (RD) Inclusion of additional regional projects as options
Director,
Enhanced DSM 0.0 (EDSM) Additional DSM committed to extent of 6 TWh energy equivalent in
2015
KPMG Climate Change and
Sustainability
Balanced Scenario Emission constraints as with EM 2.0, Coal costs at R200/ton; LNG
cost at R80/GJ, Import Coal with FGD, forced in Wind earlier with a
ramp-up (200 MW in 2014; 400 MW in 2015; 800 MW from 2016 to
2023; 1600 MW annual limit on options throughout)
Revised Balanced Scenario As with Balanced Scenario, with the additional requirement of a
solar programme of 100 MW in each year from 2016 to 2019 (and a
delay in the REFIT solar capacity to 100 MW in each of the 2014 and
2015). CCGT forced in from 2019 to 2021 to provide backup options.
Additional import hydro as per the Regional Development scenario
Note: All scenarios (except Balanced and Revised Balanced) were tested with a case of Kusile not committed.
Source: IRP2010
15Conclusions
South Africa’s announcement of To create the right incentives for It is important to take into account that
a voluntary emissions reduction emissions reductions, South Africa’s South Africa’s emissions reduction
commitment has signalled a clear government urgently needs to move commitment is conditional on
intention by government to regulate forward on creating a policy environment international financing, technology and
carbon emissions. However, a key geared towards low carbon economic capacity-building support. As the 17th
challenge in performing the ‘carbon growth, which provides incentives Conference of the Parties (COP17) is
chasm’ analysis for South Africa is that for mitigation, as well as reasonable due to be hosted in South Africa at the
the commitment to reduce national penalties for lack of mitigation without end of 2011, South Africa’s business
emissions to 34% below business as hampering economic growth. Position community, together with government,
usual in 2020 has not been quantified. papers released by the government have an opportunity to influence these
The commitment should be quantified indicate that it is likely that a carbon tax aspects of the international climate
and disclosed as a matter of urgency, will be introduced in the near future. negotiation outcomes. A strong, fair
for emitters in South Africa to be able to However, there is still uncertainty as global climate change policy is the key in
develop strategies and set appropriate to exactly what shape a mechanism creating the right incentives for all players
targets for emissions reductions. to price carbon in South Africa will to limit dangerous climate change.
take and at what level it will be priced,
Despite this information constraint, the what other policies and incentives will
JSE 100 carbon intensive companies be put in place, and what actions the
are setting targets to reduce both government expects in each sector. The focus for the JSE
their direct carbon emissions and their 100 target setting
emissions from electricity consumption. Furthermore, it is essential that
The carbon chasm analysis has shown government continues to engage companies should
that target setting behaviour holds its private sector and civil society be on achieving and
great potential for bridging South stakeholders, particularly in the lead maintaining their targets.
Africa’s chasm. The focus for the JSE up to COP17. This will help to ensure
100 target setting companies should that national mitigation actions are
In addition, this target
be on achieving and maintaining their both appropriate and achievable in setting behaviour should
targets. In addition, this target setting light of South Africa’s socio-economic extend to the rest of the
behaviour should extend to the rest of objectives, particularly the protection JSE 100, and all other
the JSE 100, and all other organisations of the poor and the need to tackle
particularly in carbon intensive sectors. unemployment. organisations particularly
Private households and individuals in carbon intensive
should be seeking efficiencies in their sectors.
energy consumption.
16Acronyms
CDP Carbon Disclosure Project
CO2-e Carbon dioxide (CO2) equivalent
COP Conference of the Parties
DSM Demand-side management
FTSE Financial Times Stock Exchange
GHG Greenhouse gas
IRP Integrated Resource Plan
JSE Johannesburg Stock Exchange
LTMS Long Term Mitigation Scenarios
Mt Megatonne
MW Megawatt
MWh Megawatt Hour
NBI National Business Initiative
REFIT Renewable Energy Feed-in Tariff
SA South Africa(n)
UNFCCC United Nations Framework
Convention on Climate Change
17South Africa’s Carbon Chasm – Based on Carbon Disclosure Project 2010 responses from the JSE 100 Companies Notes 18
Acknowledgements
Our sincere thanks are extended to the following:
CDP Country Lead Partner
Design and production
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NBI Intellectual Property and/or NBI affiliated companies. This document is For more information on KPMG
not an offer, commitment, representation or warranty of any type by NBI. visit www.kpmg.co.za
19Contacts CDP Eva Murray Global Partnership Manager Email: eva.murray@cdproject.net Carbon Disclosure Project www.cdproject.net info@cdproject.net 40 Bowling Green Lane London EC1R 0NE Great Britain Tel: +44 (0) 20 7970 5660/5667 Fax: +44 (0) 207691 7316 KPMG Neil Morris Director Climate Change and Sustainability Tel: +27 (0) 11 647 5252 Email: neil.morris@kpmg.co.za Marijke Vermaak Manager Financial Risk Management Tel: +27 (0) 11 647 7551 Email: marijke.vermaak@kpmg.co.za KPMG Services (Proprietary) Limited Private Bag 9 Parkview South Africa 2122 www.kpmg.co.za Important Notice The contents of this report may be used by anyone providing acknowledgement is given to Carbon Disclosure Project. KPMG and CDP prepared the data and analysis in this report based on responses to the CDP 2010 information request. KPMG, NBI and CDP do not guarantee the accuracy or completeness of this information. KPMG, NBI and CDP make no representation or warranty, express or implied, concerning the fairness, accuracy or completeness of the information and opinions contained herein. All opinions expressed herein are based on KPMG’s and CDP’s judgment at the time of this report and are subject to change without notice due to economic, political, industry and firm-specific factors. Guest commentaries where included in this report reflect the views of their respective authors. KPMG and CDP and their affiliated member firms or companies, or their respective shareholders, directors, officers and/or employees, may have a position in the securities discussed herein. The securities mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates. © 2011 Carbon Disclosure Project. ‘Carbon Disclosure Project’ and ‘CDP’ refers to Carbon Disclosure Project, a United Kingdom company limited by guarantee, registered as a United Kingdom charity number 1122330.
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