Sasol Climate Change Report 2023 - Book - Page 25
INTRODUCTION
TRANSFORMING FOR RESILIENCE
GOVERNANCE
CLIMATE ADVOCACY AND POLICY
DATA AND ASSURANCE
Overall attractiveness for investment
>3
2–3
1,5 – 2
~1,5
Focus for investment and development
Maintain with investment to transition
Explore alternative options
SASOL CLIMATE CHANGE REPORT 2023
24
46
2
2030
4
2029
5
42
In the Net Zero and Cooperative worlds, global relationships provide the support mechanisms to progress Sasol ecoFT’s sustainable fuels
and chemicals product ambition. In the Current Pathway, focused engagement will be required to pursue partnership opportunities. The
disjointed nature of global relationships in the Fragmented World implies that Sasol will need to more actively pursue partnerships. The
announced 50/50 joint venture (JV) with Topsoe will increase the competitiveness of the ecoFT offering in all pathways.
APPROXIMATE
TEMPERATURE
TARGET (°C)
38
9
SASOL
ecoFT
Treasury announced South African carbon
tax rate (ZAR/tCO2e) before allowances
applied in nominal terms
2028
Sasol’s differentiated technology provides a strategic advantage and delivers value in FT technology licensing through establishing
partnerships internationally. The Sasol ecoFT Business is structured to take advantage of international business opportunities,
supportive partnerships and funding while remaining robust in different scenarios. It will take time to develop established markets as
production costs for sustainable fuels and chemicals decrease. Sasol ecoFT relies on legislated blending mandates and grant funding
from governments; however country-specific GHG commitments and regulatory frameworks are driving demand for both green fuels
and chemicals at premium prices. There may be some execution risks, which are normal for new business ventures.
A CARBON PRICE TRAJECTORY IS DEVELOPED AND
USED IN TESTING INDIVIDUAL PROJECT ROBUSTNESS
THROUGH OUR GROUP ECONOMIC MODEL.
7
In the Net Zero and Cooperative worlds, the need for alternative chemical feedstocks is even higher as fossil-derived feedstock volumes
need to be substantially reduced. More work is required in this area to better understand the impacts and expand Sasol’s ability to pivot
internationally. Especially in the developed world, the existing preparedness and greater local industry support to reduce emissions
mean that the physical risks of climate change are lower than those in South Africa.
34
(INTERNATIONAL)
2027
SASOL
CHEMICALS
8
Driven by a growing population and middle class, chemical product demand continues to grow in all scenarios. In the Net Zero and
Cooperative worlds, there is a greater need for recycling, re-use, material efficiency, circular economy and greener feedstocks. The
differentiated and specialty chemical aspects of Sasol's portfolio, which includes products that improve efficiency, reduce waste,
conserve resources and support new technologies, help to facilitate the energy transition. Other products assist in reducing
consumption through lightweighting and energy efficiency, especially in food packaging, personal care and hygiene. There is on-going
pressure and action across the value chain to improve climate change impacts.
For the period 2030 to 2050, no regulated carbon price
rate has been set. With global and local circumstances
changing, the requirements for a carbon tax could
change. Similarly, allowances should also be assumed
to change.
30
SASOL ENERGY:
SOUTH AFRICAN
VALUE CHAIN
Although the carbon tax rate is set to 2030, external
circumstances change and it cannot be assumed that
the rate will remain unchanged.
2026
Sasol’s proprietary Fischer-Tropsch (FT) technology and integrated value chains are well placed to convert a variety of feedstocks into
diverse product pools that can be leveraged under a wide range of emergent directives such as the European Union renewable energy
directive (RED). These value chains lead to more positive sentiment, with international partners available to invest. In the Fragmented
World, additional effort will, however, be required to find supportive partnerships for new value chains to overcome the disjointed
nature of global relationships. Overall, these new value chains may take longer to demonstrate real returns in the short to medium term
but show promise post-2030. Supportive policy and regulation is required in a number of areas, especially to help shape markets in the
short to medium term. The Cooperative and Net Zero worlds may experience greater competition for skills and hardware. Sasol
continues to explore alternative markets.
Carbon budget penalty rates will apply only for
emissions that exceed the mandatory carbon
budget from ~2025/2026 at a rate of R640/tCO2e,
at which point the carbon budget allowance will fall
away, when the Climate Change Bill is promulgated.
6
Carbon border taxes are likely to affect South Africa’s chemical exports to certain markets. This could result in the need to re-route
certain exports, possibly impacting competitiveness and reducing margins. Implementing the just energy transition will be challenging
in all scenarios for South Africa due to the country’s social and economic challenges. South Africa may, however, experience additional
issues in the greener scenarios as a result of not having sufficient time to build up local supply chains. The physical risks of climate
change are increasing across all scenarios (although to a lesser extent in Net Zero), which would result in higher operating costs.
23
(SOUTH AFRICA)
95% of available carbon tax allowances apply as per
National Treasury’s October 2022 announcement
indicating there is no ‘sunset clause’ for the
allowances in the period to 2030.
2025
SASOL ENERGY:
FUELS AND
CHEMICALS
Carbon tax rates are as per National Treasury’s
October 2022 announcement (see below).
0
In the Current Pathway, Fragmented World and Cooperative World, there are some growth opportunities in gas as a transition fuel, with
the emphasis on balancing renewables flexibility in power generation. In the Net Zero World, the cost of renewable energy with energy
storage out-competes other forms of power generation, reducing support for gas and other sources of generation capacity. The
demand for gasoline and diesel remains robust in South Africa in the Fragmented World, Current Pathway and Cooperative World.
Demand is, however, reduced due to higher penetration rates of electric vehicles, other forms of transport and changes in consumer
behaviour in the Net Zero World.
Sasol’s high GHG emissions profile in South Africa
attracts a high carbon tax liability as compared to our
other international operations. As such, the following
carbon pricing assumptions apply:
19
Coal and gas are not favoured in the Net Zero World and both are speedily phased out. Coal is not a growth area in the Current Pathway
and the Cooperative World, with limited to no new investments. Due to the divided nature of global geopolitics in the Fragmented
World, coal experiences a slower rate of decline, which allows more mining jobs to be retained for longer.
2024
Qualitative robustness testing to 2030 (with mitigation)
Using carbon pricing in business
and project analysis
15
// 2030
2023
Fragmented
World
Cooperative
World
Current
Pathway
Net Zero
RESILIENCE OF OUR PORTFOLIO CONTINUED