Paying billions of rands in carbon tax while simultaneously investing in decarbonisation efforts is impossible, steel maker ArcelorMittal South Africa (AMSA) CEO Kobus Verster has said.

In South Africa, the carbon price is currently fixed at R308/t of carbon dioxide equivalent (CO₂e) Scope 1 emissions by 2026 and will increase to R462/t by 2030, while tax-free emissions related to performance, trade exposure and emission categorisation are afforded to all industry.

Minor changes to tax-free allowances are expected from 2023 onwards with a more radical phase-out under consideration from 2026 onwards to reach zero by 2030.

However, AMSA, which is a major emitter, has bemoaned that these interventions are not being tempered with government support, with no additional funds being made available from the public fiscus towards decarbonisation.

“Decarbonisation needs to be commercially viable and sustainable. Given that you have to also be relative equal or comparable to your international peers. Now, typically, in Europe, they've got massive grants from government to support the capital expenditure. And then there's a tax-friendly regime, in terms of to the extent that you decarbonise, you get the benefits. And then there's a border protection from countries that don't decarbonize. So, I think we are asking for roughly the same,” Verster told Engineering News on April 30.

AMSA CTO Werner Venter said most other carbon tax jurisdictions offered plenty of financial support, where the taxes were funnelled back in the form of grants to help fund the decarbonisation of industry.

However, there is no indication yet that this will be the case in South Africa.

“There's no feedback yet from the carbon tax, how it will come back to industry. That is not developed, and also the rate at which our allowances will be going out, and from when it will be going out. It’s not clear,” Venter said.

Verster insisted that decarbonisation would not be possible without government support, especially if carbon taxes had to be paid. He said those taxes needed to be directed back towards industry to fund the transition to more environment-friendly technologies.

“Our opinion is that the carbon tax needs to come back in some sort of form. We can’t go and pay billions of rands of carbon tax, while you still have to decarbonise your facilities. You can't do both. It just becomes impossible,” Venter said.

Verster said a carbon tax regime that penalised companies only if they were allowed enough time to decarbonise and failed to do so, should be developed in South Africa.

“We assume we will not have the same capital support as other countries. We need at least a form of tax protection, that we can have enough cash generation to actually fund our investments ourselves. If the rest of the world put in border tax, we need the same to protect us against other countries that don't do the same investment and decarbonisation,” Verster said.