Carbon budgets raise urgency of company plans to reduce emissions

South Africa has taken an important step towards meeting its carbon reduction commitments under the Paris Agreement, with carbon budget regulations that will demand tangible action from the country’s large emitters.

Published for comment in early August 2025, the draft National Greenhouse Gas Carbon Budget and Mitigation Plan Regulations set the stage for companies to plan exactly how they will cut their carbon emissions – against real targets they will be legally obliged to meet. Philippa Burmeister, partner and principal environmental scientist at SRK Consulting South Africa, explains that the regulations are aimed at companies that emit over 300,000 tonnes a year of carbon dioxide equivalents.

“These identified companies will need to provide their greenhouse gas (GHG) emission inventories as a baseline, which will need to be rigorously verified,” said Burmeister. “From this basis, they will be required to draft time-bound plans for reducing their emissions – plans which the Department of Forestry, Fisheries and the Environment will review and approve.”

Significant risk

In its assessment of these plans and targets, the department is not bound to accept the proposals and can set its own benchmarks for each applicant. She notes that this could pose a significant risk to companies, who may be required to meet even more demanding targets for carbon reduction.

The regulations are aligned with South Africa’s commitments to reduce emissions, which it outlined in its Nationally Determined Contributions (NDCs) under the Paris Agreement. In its updated NDCs submitted in 2021, South Africa aims to have achieved annual GHG emissions of 398-510 Mt of carbon dioxide equivalents in 2025, and 350-420 Mt in 2030.

“When compared to the GHG emissions generated by South Africa between 2000 and 2022, these commitments equate to a 0-22% reduction by 2025 and a 18-32% reduction by 2030,” she said. “It is worth noting, though, that sector-specific reduction targets have not yet been issued and could require reductions above the country average for high emitters.”

Report on actions

While the carbon tax system was already in place and requires emitters to report GHG emissions for tax purposes, the latest regulations go beyond just affecting companies’ financials. Those that do not achieve the legally required reductions will face fines, jail time or both.

“After a company is issued with a final carbon budget, it will have six months to report on the action that it plans to take to meet these targets,” said Burmeister. “The regulations will work on five-year cycles during which a company must monitor and demonstrate its progress toward the targets.”

SRK Consulting SA chairman Vis Reddy highlighted that the regulations help to give life to the Climate Change Act of 2024, by further driving the country in realistic ways towards reducing carbon emissions.

Feedback essential

“The country’s citizens – corporate and individual – need to appreciate that the regulatory process is advancing and that we take our global commitments seriously,” said Reddy. “It is also vital that stakeholders engage with the draft regulations constructively and give the necessary feedback to flag any aspects that might undermine effective implementation.”

He notes that public comment is essential to create final regulations that can be reasonably applied and enforced. Good regulations will enhance certainty and clarity of purpose, allowing companies to plan ahead – as many will have to make considerable financial commitments to upgrade systems or improve infrastructure related to emissions.

“The regulations’ five-year horizon of initial expectations is not very long, given the investments and technological advancements that will need to be made by companies to improve their environmental performance,” he said. “Understanding what your carbon budget will be is a key benchmark in this process, but companies really need to have built up some momentum on this issue by now – and should be ready to act decisively on their plans sooner rather than later.”

Awareness varies

Burmeister noted that the majority of those affected by the regulations would be aware of how to report emissions. However, there may still be some that are still coming to grips with quantifying their emissions and may have significant challenges in identifying reduction opportunities.

“It is not clear yet how the budget determinations will be calculated and applied, and whether these will be on a case-by-case basis for each company – or whether certain minimum reduction requirements will be applied on each industry or sector,” she noted.

Like the Minimum Emission Standards under the National Environmental Management: Air Quality Act, these regulations therefore require proactive involvement at the commenting phase – alongside effective planning and action to avoid risks to business.