Sasol tax break, subsidy support boosts pollution, group says

Subsidies are hindering efforts to move the country’s transportation sector away from reliance on coal – report.
Image: Bloomberg

Sasol got a $490 million (R8.08 billion) profit boost last year thanks to the country’s fuel subsidies and its exemption from a South African carbon tax, according to the International Institute for Sustainable Development.

In a report, the institute says that Sasol’s proprietary coal-to-fuel technology is a significant source of greenhouse gases from its Secunda plant yet it still benefits from government policy on emissions and fuel price regulation. The company’s biggest shareholder is the fund manager that oversees state worker pensions, the Public Investment Corp.

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Read: Climate risk continues to weigh on Sasol – Old Mutual

The fuel and chemicals company received a carbon tax exemption of R6.5 billion ($394 million) last year as well as R1.6 billion in direct subsidies through South Africa’s regulated fuel price, according to the report. The researchers were unable to calculate Sasol’s production cost versus fuel refined from crude oil, but note the process of using coal creates 2.5 times more emissions than the conventional method per unit produced.

Sasol is South Africa’s second-biggest producer of greenhouse gases after the state power utility, Eskom Holdings. Secunda, which supplies about a third of the motor fuel produced in South Africa, is the world’s biggest single-site emitter of the pollutants.

The company and South Africa’s energy and environment departments didn’t immediately respond to requests for comment.

Sasol plans to reduce greenhouse gas emissions by at least 10% by 2030. The company is seeking bids for two 10-megawatt solar power plants and recent asset sales, spurred by a need to cut debt, will reduce its total emissions.

Sasol share price

Still, the subsidies are hindering efforts to move the country’s transportation sector away from reliance on coal, according to the group, which is based in Canada and funded by a number of governments, United Nations’ agency and private sector donors.

“South Africa’s reliance on coal is already badly polluting local air in several cities,” Mostafa Mostafa, an IISD policy adviser, said in a statement. “Subsidising Sasol adds to the pollution burden and hurts consumers.”

The Ministry of Transport in South Africa should focus on aligning energy policy with social and environmental objectives, which “will promote a shift to cleaner energy sources and gradually reform pricing policies to stop subsidies,” the report recommended.

© 2020 Bloomberg

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I am very, very sceptical about this reporting and their calculations.

The calculations/logic is wrong. Fuel prices in SA is based on international oil prices, exchange rate, global refining costs and a lot of tax on top.
The article argues that coal is a cheaper input, and says this is a “direct subsidy” to Sasol. They imply the reason the subsidy is paid because the government pension fund is the largest shareholder, neglecting to mention the large shareholding is less than 14%, or that the PIC is often the largest shareholder in listed companies.
Sasol does polute, but the author should have given the figures to compare Eskom and Sasol emmissions, but the bold statement that Sasol is the second biggest culprit in SA carries more weight.
Emotions often cloud logic and distort the facts when environmental issues are discussed.

The fuel subsidy + taxes on imported oil + discount on carbon tax = Eskom’s viability as a going concern.

Eskom depends on favours from the government to stay in the game. They tried to escape this situation, and then they shot themselves in the foot with the Lake Charles disaster.

I’d like to see the figures and a graph showing the Sasol tax breaks and subsidies over the years relating to pollution / emissions which are juxtaposed against the annual rate of such pollution / emissions.

Effectively what I’d like to see is how much has the SA taxpayer offered up to Sasol, for how long and what has the return (if any) been.

End of comments.

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