Sasol & CDM: The Developed World Pays Sasol to Increase its Carbon Emissions

09 December 2009

South African based multinational, Sasol, is nominated for the Angry Mermaid Award for its national and international lobbying campaign to promote Carbon Capture and Storage (CCS) as a clean solution to the dirty business of producing liquid fuels from coal and gas. Tristen Taylor of Earthlife Africa Johannesburg tells the story of its many attempts to benefit from carbon trading.

If you wish to highlight the absurdity of the entire Clean Development Mechanism (CDM) process and the failure of current climate change mitigation measures, point no further than the fact that the South African petrochemical giant Sasol already receives CDM funding for nitrous oxide abatement project at its Secunda and Sasolburg plants in South Africa. While this project will reduce Sasol's emissions by one million tonnes of CO2e annually, Sasol's new coal-to-liquids (CTL) plant in South Africa will add approximately 30 times that per annum into the atmosphere.

In effect, Sasol is being paid to pollute. If the fate of the entire planet wasn't in the balance, the absurdity of this distortion of the Kyoto Protocol would make fine comedy.

Buoyed by this windfall from nitrous oxide, Sasol made a second attempt at the CDM kitty in December 2008. This project application dealt with a 645 km natural gas pipeline running from Mozambique to its Secunda CTL plant in South Africa, along with the requisite gas conversion and processing technology and the development of natural gas fields in Mozambique.

Sasol claimed that it needed to find a new source of fuel because the coal mine that previously fed its Secunda plant has reached the end of its lifespan. It had the option of either opening a new coal mine, or building a natural gas pipeline from Mozambique. The company chose the natural gas option.  Using natural gas instead of coal will reduce greenhouse gas emissions, hence Sasol’s argument for registering as a CDM project worth US$1.57bn in credits.

Earthlife Africa Johannesburg successfully opposed Sasol's application, on the ground that Sasol was planning this conversion even before CDM was written into the books. Not only did Sasol state in its 1999 Annual Report that it found high quality natural gas in Mozambique (a process that would have begun well before 1999), that it had a use for such gas in its Sasolburg and Secunda plants, that the gas from Mozambique was a “viable alternative” to locally mined coal, and that it had an external market for the gas, but also that it was planning to build the pipeline. In fact, Sasol had already costed the operation and did not find it prohibitive. 

In other words, Sasol’s plans to build the natural gas pipeline and use that gas in its CTL plants predates the adoption of the amendments to the Kyoto Protocol in Bonn in 2001, and misses the cut-off date of 1st January 2000.

In August 2009, South African civil society learned that Sasol was making another attempt at CDM funding, this time for an electricity co-generation project at its Secunda plant. The plant is increasing its own electricity generation capacity through the installation of gas turbines. Sasol's basic argument is that it will be purchasing less coal-fired electricity from the coal-fired grid and this will reduce carbon dioxide emissions. This application is still in the beginning stages, and is on the way to the National Designated Authority.

Once again, it seems that Sasol has violated the additionality component with this new application and is gambling on a favourable outcome. In a newsletter to Sasol investors in January 2009, Sasol CFO, Christine Ramon, stated, “The reason for the scope change is that some of the additional natural gas supply will be re-routed to increase electricity production through the installation of new gas-based co-generation technology. This will improve energy-efficiency and reduce Secunda’s reliance on external energy supply from Eskom”.

Sasol's own documentation clearly states that increasing co-generation has not only been part of its pre-existing business plans for some time, but that it is an economically attractive proposition when compared to purchasing from the state owned utility, Eskom.

So, what's going on here? A highly carbon intensive petrochemical giant, with a CTL plant that is world's highest single point emitter of carbon dioxide, not only receives funding under CDM but is aiming to use the CDM mechanism to generate cash to be reinvested in more CTL plants.

Rotten to the core.

Tristen Taylor is from Earthlife Africa Johannesburg.

The article appears in the Climate Chronicle newspaper published at the Copenhagen climate talks.