Legal implications of the Climate Change Act

South Africa has reached a historic milestone with the formal signing of the Climate Change Act No. 22 of 2024. The Climate Change Bill was signed into law by President Cyril Ramaphosa on 18 July 2024 and published as the Climate Change Act, 2022 (Act) on 23 July 2024. However, in terms of section 38 of the Act, it will only come into operation on a date fixed by the President by proclamation in the Government Gazette. This landmark legislation marks the country’s first comprehensive legal framework for addressing climate change and sets the stage for a significant transition toward a greener and more resilient economy. The Act aims to align with global efforts to reduce greenhouse gas (GHG) emissions and adapt to climate impacts, serving as a crucial roadmap for South Africa’s shift to a low-carbon, climate-resilient economy.

With the Act now in effect, several key provisions and objectives are set to transform South Africa’s approach to climate change:

• The Act establishes a structured framework to synchronize policies across national, provincial, and municipal levels, creating forums to ensure robust institutional coordination.
• It introduces measures for the gradual reduction of synthetic GHGs and for specific reduction targets for different sectors, aiming for a more focused and effective approach to emissions control.
• The Act includes stringent provisions for transparency, with penalties for false or incomplete data reporting related to climate change, enhancing overall accountability.
• A strategic plan to fund climate response efforts is required, ensuring that adequate financial resources are allocated to support the Act’s implementation and objectives.

The Climate Change Act addresses the complex nature of the climate crisis, which impacts various sectors and industries across South Africa. The Act reflects the country’s vulnerability to climate issues, such as food and water security, underscoring the importance of effective climate action.

Successful implementation will depend on collaboration across sectors and a shift in public and corporate attitudes towards sustainability. Balancing economic growth with environmental consciousness will be essential for a just transition. While the Act represents a significant step forward, its effectiveness will rely on proactive engagement and adaptive strategies.

Under the Climate Change Act, businesses, particularly those in high-emission sectors, will face new compliance requirements. These include adhering to carbon budgets, mandatory emissions reporting, and implementing measures to reduce their carbon footprints. The Act also emphasises the need for businesses to support the country’s transition to a green economy by adopting sustainable practices and technologies.

The alignment of policies under the Act means businesses must ensure their operations are consistent with national climate objectives. This may require substantial changes, such as investing in cleaner energy sources, upgrading infrastructure, and enhancing energy efficiency. Although these adjustments may involve costs, they are vital for businesses to remain compliant and competitive in a rapidly evolving regulatory landscape.

Directors and company executives must now consider climate-related risks as part of their fiduciary duties, ensuring that these risks are managed in line with the Act’s requirements. This includes integrating climate considerations into business strategies and ensuring that environmental impacts are disclosed transparently. The Presidential Climate Commission, established under the Act, will play a crucial role in advising on the country’s climate response. Businesses should be prepared for increased scrutiny from this body, as well as from other stakeholders and since the Act is not yet in operation, companies have time to prepare.

The Act’s provisions may also necessitate reviewing existing contracts to include climate-related clauses. For instance, businesses may need to incorporate sustainability requirements into supplier agreements or address climate risks in long-term contracts. The potential for climate-related disruptions could lead to a re-evaluation of force majeure clauses, with companies seeking to mitigate potential liabilities related to climate events.

As climate change effects become more pronounced, the risk of climate-related litigation is likely to increase. Companies that fail to comply with the Act or adequately manage their climate risks may face legal challenges from regulators, shareholders, or environmental groups. To mitigate these risks, businesses must be proactive in implementing the necessary changes to their operations and ensuring that they are aligned with the Act’s requirements.

The Path Forward

The Climate Change Act No. 22 of 2024 is a landmark achievement for South Africa and the continent, demonstrating a strong commitment to sustainability and aligning with global environmental, social, and governance (ESG) goals. As the Act begins to shape South Africa’s climate strategy, it holds the potential to set a precedent for other nations and drive significant environmental change.

The focus on green economy initiatives presents opportunities for innovation, particularly in sectors such as renewable energy, sustainable agriculture, and green infrastructure. Companies leading in these areas may benefit from incentives and support for sustainable projects, positioning themselves as frontrunners in the transition to a low-carbon economy.

Moreover, the Act’s focus on risk assessment and opportunities in the green economy could drive the creation of new markets and industries. Businesses that invest in training and development for green jobs will not only stimulate economic growth but also strengthen their workforce’s resilience and adaptability to climate change.

The implementation of the Act will be closely observed, with hopes that it paves the way for meaningful environmental progress and aligns with international climate commitments. This pivotal legislation marks the beginning of a new era in South Africa’s climate response, aiming for a more sustainable and resilient future.

By Ginen Moodley (Director of Moodley Attorneys)