Sasol's Mitigation Progress towards a Low-Carbon Economy

Sasol presentation on carbon taxto the Portfolio Committee on Trade and Industry20 August 2013

presentation overview Sasol background & mitigation progress Policy process Negative impact of tax on Sasol Conclusion

Sasol is a proudly South African based international company Our vision is to grow profitably, sustainably and inclusively, delivering value to stakeholders through technology and the talent of our people in the energy and chemical markets in Southern Africa and worldwide Sasol has exploration, development, production, marketing and sales operations in 38 countries across the world, employing more than 34 000 people.

Sasol is committed to a strategy of investment in South Africa to 2050 Current investment Employment Reducing carbon footprint • 800 jobs created during the construction phase • 52 permanent jobscreated • R1.5bn Natural Gas Power Generation Unit Growing production • R14bn Secunda Growth Project • R8.4bn FT Wax Expansion Project • R1.9bn Ethylene Purification Plant • R1.1bn Cobalt Catalyst Plant • 5,200 jobs created during construction phase • 165 permanent jobs on project completion Ensuringlong term sustainability • 5,000 jobs created during the construction phase • 4,000 permanent jobs retained • R14bn Sasol Mine Replacement Programme • Exploration in SA and region continues Sasol’s stated strategic intent may be impacted due to limited opportunities to further mitigate its carbon emissions

Sasol’s overall position- carbon tax • Sasol supports a response to climate change that is based on clear and accurate information and identifies the opportunities and reflects the constraints of a transition to a lower carbon and climate resilient South African economy. • Sasol believes that such a proactive response should recognise the following: • the structure of the South African economy is inherently energy-intensive and, as such, presents a challenge as it cannot be transformed in the short- to medium-term to a lower carbon economy due to the lack of viable alternative lower carbon energy sources; • the developmental needs of South Africa and the resultant demand in energy necessitate the prioritisation of long-term energy security for South Africa; • mitigation actions in all industries would need to be introduced over time and will require international financing, technology and skills development support; • the impact of policies to limit or tax carbon emissions on South Africa’s current international trade position and competitiveness needs to be better understood; • the socio-economic impact of the transition to a lower carbon economy is likely to be significant and, accordingly, a range of trade-offs may be required to achieve the overall national imperatives of economic growth, job creation and poverty alleviation; Sasol does not support the carbon tax in its current form, without a full understanding of its consequences on the economy in the form of aspects such as employment, competitiveness and trade measures

Sasol is committed to engaging in policy development to mitigate climate change... • reflects the constraints of a transition to a lower carbon and climate resilient South African economy. • is based on analysis that uses clear and accurate information • will effectively contribute to the reduction of GHG emissions • a thorough analysis of the potential impacts & alternative options has not been performed • does not align with South Africa’s broader mitigation policy; • does not sufficiently take account of South Africa’s mitigation and socio-economic challenges Sasol supports a transition to a low carbon economy that is: Sasol does not support the carbon tax in its current form as:

carbon tax needs to be seen in the broader policy context Objective Environmental policy National Climate Change Response White Paper Carbon tax Fiscal policy IRP 2010 & IEP Energy policy Durban Platform International negotiations

Sasol has substantially reduced its carbon footprint in SA … Made possible by accommodative regulatory environment

...which this was partially facilitated through natural gas imports from Mozambique 2004:Initial investment (R12bn) 2014:New 128km loop line in Mozambique(R2bn) 2013:New 155km Gauteng Network Pipeline(R1.6bn) 2012:Expansion of the CPF¹ in Temane to 183 mGJ(R1.8bn) 2010:New compressor station at Komatipoort(R1bn) 2013 2014 2011 2012 2009 2010 2007 2008 2005 2006 2004 Ongoing:Exploration in Southern Africa(R3bn in 2009-11) Provision of feedstock alternative to customers facilitated further 2 mt emissions reduction

one needs to start with the international negotiations Objective • agreed at COP 17 in Durban • applicable to all countries and will be agreed by 2015 • implementation in 2020 including use of new market instruments and economy wide targets International negotiations Durban Platform Environmental policy National Climate Change Response White Paper Fiscal policy Carbon tax Energy policy IRP 2010 & IEP

… and then understand national climate change policy … Objective • Governments vision for an effective climate change response • Carbon budgeting approach • implementation through a multi stakeholder technical working group reporting to the DG cluster International negotiations Durban Platform Environmental policy National Climate Change Response White Paper Fiscal policy Carbon tax Energy policy IRP 2010 & IEP

…before considering how fiscal policy is to play a role … draft policy document Draft carbon tax policy document Design policy mix (including carbon tax) White Paper Gazetted Mitigation Potential analysis Sector / company Carbon budget WHITE PAPER IMPLEMENTATION 2011 2012 2013 2014 2015 COP21 ADP finalised COP17 ADP agreed INTERNATIONAL NEGOTIATIONS this approach was confirmed by DEA’s carbon budget – carbon tax interface study

current carbon tax design will not assist Sasol & industry in meeting the climate change policy objectives • mitigation options that are technical feasible already included in carbon budget; • Sasol will be following an agreed mitigation plan; • tax reduces funds available to invest in low carbon feedstock alternatives. Open cycle gas turbines, Secunda Sasol Synfuels, Secunda

....but will impact negatively upon our business Concerns • no economic analysis done on current tax proposals • World Bank study highlighted risk of loss of low skill jobs Insufficient Analysis • Carbon tax more onerous than other jurisdictions *(R12 – R174) • lack of ability to pass cost through – due to trade exposure & regulation • multiple carbon prices – IRP, non renewable levy Competitiveness • punitive for beneficiation activities • escalating price can change investment decisions • Tax policy complex and lacking sufficient clarity Impact on investment * Depending on exemption and impact of Z factor

current policy environment pointing towards multiple costs for industry & consumers • Multiple carbon cost • higher electricity price to fund low carbon build plan ~ R116 /ton • non renewable electricity levy ~ R35 /ton • costs to meet mitigation plan • Carbon tax • Air Quality Act • clean Fuels • Waste Act • Other environmental cost

proposed way forward Progress await the outcome of DEA’s carbon budgeting process – achieve alignment end 2014 design appropriate policy instruments to support carbon budgeting process 2015 • Create appropriate regulatory & fiscal environment to: • encourage achievement of carbon budget • balance environmental & socio economic objectives • align to international agreements 2015

in conclusion • Sasol is concerned about the carbon tax policy proposed: • Economic impacts not adequately considered • analysis insufficient • impact upon competitiveness and jobs • negative impact of multiple carbon prices • Lack of alignment with overall mitigation policy • Impact upon mitigation likely to be limited

thank –youNorbert.Behrens@sasol.com

Sasol's Mitigation Progress towards a Low-Carbon Economy