The mining industry is concerned about the impact of the EU's mechanism to introduce CO2 emissions tariffs on imported goods, including platinum group metals and copper.
South Africa’s largest investor and trading partner — accounting for almost half of the country’s foreign direct investment — will collect CO2 charges at its borders through the cross-border adjustment mechanism (CBAM) from 2026, a move that has irked the developing world.
Speaking at the 2024 Coal & Energy Transition Day hosted by Resources for Africa in Johannesburg, Nikisi Lesufi, senior executive for environment, health and legacies at Minerals Council South Africa, said the mechanism envisages manufacturers or exporters paying a penalty based on the carbon intensity of their products.
While other sectors, such as agriculture, might be able to absorb the tariff by passing it on to the end consumer, the mining industry can't do the same, he said.
“If our agricultural products like oranges, and naartjies need to be exported and there is a carbon tax attached to them, the price of those naartjies will simply go up and the consumer will pay. For minerals, the mining sector does not set the prices of commodities, and they will need to absorb that tax. If that tax is unaffordable, it makes mining unsustainable.”
The Minerals Council has engaged the EU and the UK government on the impact of CBAM on mining.
“We want this issue to be discussed in climate change discussions because it does not take into account a common but differentiated approach, and that principle dictates that those who contributed more to climate change have to do more and assist those who are feeling the impact of climate change but have not contributed significantly to [it]).
“The cross-border adjustment mechanism does not take this into account. It puts the whole burden on developing nations to put in measures to ensure that carbon mitigation has taken place at the area of origin, which we think is unfair,” said Lesufi.
Tseliso Maqhubela, deputy director-general in the department of mineral and petroleum resources said the EU mechanism was contrary to the objectives of the just transition.
“If you look at South Africa and the rest of the developed world, we believe we need to be treated fairly and equitably as a country. I think our partners globally perhaps are opting not to get the message,” he said.
We don’t believe it is just and equitable because the contribution of our country and the rest of the continent to global warming and carbon emissions is negligible
— Tseliso Maqhubela, deputy DG in the department of mineral & petroleum resources
He warned mining companies to take the carbon border adjustment mechanism seriously because it was real despite being “unfair”.
“Whether it is just and equitable is another matter, we don’t believe it is just and equitable because the contribution of our country and the rest of the continent to global warming and carbon emissions is negligible, to be honest.”
The renewable energy independent power producer programme (REIPPP) was proof that South Africa was serious about the just transition, he said.
The REIPPP is a government initiative to bring additional power to the grid through private sector investment in wind, solar, biomass, and hydro. It has attracted R234bn in investments in bid windows 1 to 5, including R43.1bn in foreign investment.
In addition to the REIPPP, the private sector — including mining companies such as Gold Fields, Anglo American and Seriti Resources — has installed renewable power plants to mitigate the impact of Eskom power cuts on their balance sheets and reduce their carbon footprint.
According to a presidential climate commission paper published last year, the introduction of the EUs mitigation measures could have a knock-on effect on South African producers. Between 2017 and 2021 the EU imported, on average, $1.4bn (R25.5bn) a year of products from South Africa that could attract penalties under the proposals, including in sectors that account for significant employment.
The paper noted that, for example, 28,000 people work in the steel industry in South Africa, with the EU importing more than $2bn worth of iron and steel products from the country each year before the Covid pandemic.
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