Renewable energy + industrial sustainability
Countering rising energy costs and carbon taxes South Africa’s manufacturing and industrial sectors are increasingly facing major energy challenges. With global markets demanding reduced carbon emissions and the cost of domestic carbon taxes on the rise, local manufacturers have to navigate an increasingly complex landscape. Anja Visagie, Chief Growth & Marketing Oicer at Sustainable Power Solutions outlines the current context and a route to counter rising costs.
Anja Visagie, SPS Africa.
Carbon costs at the border The European Union is targeting high-emission imports, implementing several tax measures. One of the most significant is the Carbon Border Adjustment Mechanism (CBAM). This is a carbon import tax introduced by the EU to level the playing field between local (EU) and foreign manufacturers. It raises a carbon-based fee on selected imported goods based on the CO» emissions embedded in their production. This regulation specifically targets carbon-intensive products exported to the EU, such as steel and aluminium, placing a levy on imports to the EU from countries where the energy mix is heavily dependent on coal power. CBAM aims to prevent ‘carbon leakage’, where companies relocate production to countries with weaker climate regulations to avoid carbon costs. It ensures that imported goods face the same carbon pricing as those produced in Europe. The CBAM rollout [1] has been structured into phases. From October 2023 to December 2025, a transitional phase was in place during which companies were required to report emissions for CBAM-covered goods, although no fees would be applied. From January 2026, a definitive phase began with EU importers required to start paying CBAM fees on goods based on reported emissions. Between 2030 and 2034 [2] , CBAM is expected to expand further to cover indirect electricity emissions and additional sectors such as hydrogen, chemicals, and plastics.
The CBAM rate is linked to the EU Carbon Price (EURO / tonne) and is calculated as follows: - Embedded emissions (tonnes CO» per tonne of product) × EU carbon price (€/tonne) - Less any domestic carbon tax paid (that is, in South Africa, for example). This presents a significant challenge for South African exporters in sectors like iron, steel, aluminium, cement, and fertilisers. To avoid the financial impact, manufacturers need to demonstrate their direct emissions (that is, fossil fuel combustion during production) and emissions from grid electricity use. This is where renewables can play a valuable role. Although renewables cannot reduce direct emissions, they can help by replacing diesel generators or reducing diesel usage and electrifying fossil fuel- based processes (such as furnaces). As CBAM takes eect, local exporters will need to act fast to remain competitive. South Africa’s carbon tax Locally, South African businesses are also facing increased carbon taxes being introduced by government and particularly targeting high-emissions sectors such as manufacturing, mining, transport, agriculture and waste. Proposed amendments include a gradual increase of the current carbon tax rate of R236 per tonne of CO 2 and the introduction of a mandatory carbon budget system [3] in 2026, which will require industries to meet emissions reduction targets. These changes highlight the growing focus on sustainability and the need for businesses to adapt by finding solutions to comply with new
By transitioning to renewables, manufacturers can address sustainability goals and save on energy costs.
14 Electricity + Control JUNE 2026
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