Sasol Climate Change Report 2022 - Book - Page 20
RISKS AND OPPORTUNITIES
INTRODUCTION
OUR FUTURE SASOL STRATEGY
GOVERNANCE
DATA AND ASSURANCE
RESILIENCE OF OUR PORTFOLIO (CONTINUED)
Fragmented
World
Current
Pathway
Cooperative
World
Net
Zero
Robustness testing against our scenarios to 2030 (continued)
Coal is not a growth area in any of our scenarios. Further investments in new coal reserves do not take place,
with a commensurate reduction in the volume of mined coal. Gas and coal remain challenged in the Net Zero
scenario and their continued use within the value chain garners negative sentiments. In the Current Pathway,
Fragmented World and Cooperative World, gas is expected to create some growth opportunities. Here, gas is
used to balance the flexibility of renewables in power generation. In the Cooperative World, the new sustainable
value chains lead to more positive sentiment toward Sasol. Sasol’s proprietary FT technology and integrated
value chains are positioned to convert a variety of feedstocks into diverse product pools that can be leveraged
under a wide range of emergent directives such as the EU Renewable Energy Directive (RED). Sasol continues
to monitor developments and remains flexible to changing market spaces. In the Net Zero scenario, the costs
of renewable energy with energy storage out-compete other forms of power generation. In South Africa, the
gasoline and diesel market demand for Sasol’s products remain robust in the Fragmented World, Current
Pathway and the Cooperative World. However in the Net Zero scenario, demand for these products is reduced
because of high levels of substitution by electric vehicles and other forms of transport. Physical risks of
climate change are increasing across all scenarios, which will result in higher operating costs. Carbon border
tax adjustments are likely to affect South Africa’s chemical exports to certain markets, limiting their
competitiveness and impacting margins.
SASOL ENERGY:
FUELS AND
CHEMICALS
(SOUTH AFRICA)
Demand for chemical products grows in all scenarios, with greater emphasis on recycling, re-use and
material efficiency. The differentiated and specialty aspects of our portfolio, particularly products that
increase efficiency, reduce waste and conserve resources are complementary to these considerations.
Products within our portfolio also facilitate lightweighting and are used in food packaging and care
chemicals, in which a focus on personal hygiene is expected to drive consumption. In the Net Zero scenario
alternate feedstocks are required due to reduced oil and liquids supply. Demand for chemical products
grows in all scenarios. Existing preparedness and greater local support means that the physical risks of
climate change are lower internationally than in South Africa. Sasol constantly monitors the regulatory
environment and assesses the impacts of any new potential developments on our products.
SASOL CHEMICALS
(INTERNATIONAL)
Sasol has a strategic advantage in this area through our differentiated technology and delivering value in FT
technology licensing through forging strong partnerships. SAF is an essential lever for the decarbonisation of
the aviation sector and extensive work is being globally undertaken to provide an enabling policy environment.
The EU is setting standards, which specifies blending mandates and taxation benefits that could serve as global
best practice. Sasol participates in EU policy consultation processes, advocating for a level playing field to allow
participation of developing economies in the global SAF market. Transitionary approaches are being followed in
Australia and the United States, which could assist in early market entry. However, production costs for
sustainable fuels and chemicals will remain higher than alternatives until renewable energy and green hydrogen
production cost curves show further downward trends. Financing therefore remains a challenge and fuel
producers will only be able to meet future demand with the help of public funding and smart partnership
strategies. Sasol ecoFT relies on legislated blending mandates and grant funding from governments, however
country-specific CO2 commitments and regulatory frameworks are driving demand for both green fuels and
chemicals at premium prices. There could be some execution risks, which are normal for new business ventures.
In the Fragmented world, global relationships and partnerships provide the support mechanisms to progress
Sasol ecoFT’s sustainable fuels and chemicals product ambition.
Overall attractiveness for investment
>3,2
2,5 – 3,2
1,5 – 2
~1,5
SASOL ecoFT
APPROXIMATE
TEMPERATURE
TARGET (°C)
2030
QUALITATIVE ROBUSTNESS TESTING RELATIVE TO 2021 (WITH MITIGATION)
Focus for investment and development
Maintain with investment to transition
Explore alternative options
SASOL CLIMATE CHANGE REPORT 2022 19
Carbon pricing at Sasol
Sasol believes that carbon pricing is a critical part of the
policy interventions for decarbonisation. For a just transition,
an effectively designed, nationally determined and efficiently
implemented carbon pricing signal is needed as part of a
suite of policies and measures. Even though a global carbon
price has been mooted, our analysis indicates that regional
or country carbon pricing are more likely to persist, which
takes into account local energy requirements, alternative
energy availability and affordability, socio-economic
challenges, skills and capability transition commitments.
Carbon pricing also needs to take into account sectorspecific issues that dictate different pricing signals needed
to transition different sectors. We constantly review our
decarbonisation journey, taking into consideration technology
developments, emerging processes and applications to
increase the pace of the transition. Despite this, Sasol has
a high sensitivity to carbon taxes, particularly due to our
high GHG emissions profile, limited availability of mitigation
technology to reduce emissions in this timeframe and the
pace of implementation.
In South Africa, the recently proposed US$20 carbon tax
rate by 2026 and the US$30 by 2030, with an aggressive
removal of allowances, if implemented, will have an adverse
financial impact on Sasol. National Treasury has indicated
that the proposal is still subject to public input. In a
conservative scenario, assuming all allowances fall away
and the increase in price is applied, we would need to
consider trade-offs to balance the people, planet and profit
agenda. At this stage, there is still uncertainty on what rate,
trajectory and allowance phase-out will be applied. We are
awaiting further clarity from the ongoing government
consultation process.
For the South African segment of our assessment, we
factored in the lack of pricing certainty. We used a price of
R144/tCO2e in 2022, increasing to ~US$30/tCO2e by 2030 in
real terms before allowances. We assumed that the allowances
as per the prevailing Carbon Tax Act, reducing marginally
over time, still applies. Detailed analysis will only be
undertaken once more clarity on the allowance phase-down,
rates and trajectory is provided by government.
In addition, carbon price forecasts are used in our DecisionMaking Framework to inform project evaluation and strategic
choices, as well as investment decisions and asset valuations.
