South Africa is trying to make its economy greener. But it must work hard to stay on target and tread a fine diplomatic line, writes Anna Petherick.
When negotiators from around the world descended on Durban, the coal-powered nation that played host to the 2011 Conference of the Parties (COP) could proudly point to a new white paper as a sign that it was serious about responding to climate change. South Africa had grown in international prominence since the previous COP meeting, by nudging its way into the BRICS group of developing nations (Brazil, Russia, India, China and South Africa) as a kind of geopolitical representative1, presumably eager to endear itself to its recently crowned top trade partner, China. The Durban meeting's momentum flowed into South Africa's next budget — presented just two months afterwards — in which finance minister Pravin Gordhan stipulated the loose details of a national carbon tax. He said it would be brought in this year.
But then the pace of progress appeared to flag; Gordhan failed to mention the carbon tax in his mid-term budget statement in October. “I would say that forces hindering this policy direction have returned to their level of influence before the COP,” observes independent climate change economist, Emily Tyler. The current edition of the national electricity generation strategy — called the Integrated Resource Plan, or IRP — includes impressively mainstreamed green objectives, however an anticipated update hasn't materialized as yet. And the proportion of JSE 100 companies (the biggest hundred companies listed on the Johannesburg Stock Exchange) choosing to publicly disclose emissions information fell last year2.
As of February, however, the carbon tax has re-emerged3, although its introduction has been postponed until the first day of 2015. That is cause for relief among those who wondered whether the political opportunity had drifted away — particularly because South Africa, unlike most other economies of comparable size, lacks the plausible option of running its own cap-and-trade scheme. “The big problem that South Africa has is a technical one: unless cap-and-trade was linked internationally, we don't have the liquidity to make it work,” says Tyler. “Two companies, Eskom and Sasol, would hold around a half of the emissions credits that would be traded in a scheme.”
Normally, trust would be hard to muster in such a set-up; in these cases, it looks nigh on impossible. Sasol has a rare roster of dubious distinctions: it literally fuelled the Nazi's military expansion across Europe, powered apartheid, and to this day operates the dirtiest single-point source of carbon dioxide on the planet4. Earlier this year, Eskom was forced to institute an internal investigation into whether the activities of a private security firm that it hired to spy on environmental non-governmental organizations broke the law5.
As envisioned at present, the carbon tax will impact these companies, but not fully until 2020. The treasury proposes a levy of R120 (US$13.27) per ton of carbon dioxide, rising by 10% per year between 2015 and 2020. During this period, industry — including energy-hungry mines, petrochemical factories and smelters — will enjoy substantial protection, in the form of a 60% exemption. Companies can claim a further 10% off by investing in green projects external to their own businesses. Without these partial reprieves, Sasol, which makes petrol and diesel from coal and gas, would pay a carbon tax of about R3 billion (US$332 million) per year, or 12% of its profit between June 2011 and June 2012 (ref. 6). Eskom, a utility, would contribute even more, with around R11 billion (US$1.22 billion) in annual carbon-tax payments. Given that Eskom made R13.2 billion (US$1.46 billion) between March 2011 and March 2012, the full tax would consume the lion's share of its profits, raising questions about the company's long-term future were it not to implement significant changes.
“There is plenty to still be decided”, says Andrew Gilder, an environmental lawyer. Policy nerds will pay particular attention to how the government chooses to overcome the inherent socially regressive character of carbon taxes, whereby poor people contribute a higher percentage of their incomes than rich people. Economic inequality is an acknowledged contributor to South Africa's heinous level of violent crime, which, in turn, puts off international investors and persuades many highly qualified locals to emigrate.
Harald Winkler, an energy and environment economist at the University of Cape Town, says that the Treasury has presented results from modelling reduced personal or corporate income taxes alongside a carbon tax. These would be intended to lessen inequality. Winkler himself suggests extending the 50 kilowatt hours of free electricity that all households are entitled to in South Africa, using part of the carbon-tax revenues. But he is also sceptical of the tax level. “According to all the analysis we've done, it's set at too low a level to transform the energy economy, but I take the point of getting the system in place.”
At least the IRP takes South Africa's greenhouse-gas emissions targets more seriously than it might get away with. The country is aiming for reductions of 34% on business-as-usual projections by 2020. In absolute terms, that means emissions should peak between 2020 and 2025, plateau for a decade, and then start to decline some time between 2030 and 2035. Depending on assumptions about what business-as-usual really entails, the levelling off could be argued to occur at 600 megatons of carbon dioxide equivalent. But the IRP has stuck with the more conservative national cap of 550 megatons, allotting half to the electricity sector7.
One way to shift South Africa's energy matrix (see Fig. 1) would be to build more nuclear power plants, which is under discussion. The government is rapidly procuring renewable energy from independent suppliers. Meanwhile, the Karoo region's hundreds of endemic plant species are growing on top of what is thought to be the world's fifth biggest shale gas deposit8. But as with nuclear energy, not everybody is keen on fracking.
So there are options available for whenever the economic incentives become more pressing. As its policies develop, South Africa will have to create closer coordination between its ministries, which is currently limited by the relatively junior position of the Department of Water and Environmental Affairs, the institution charged with implementing the pre-Durban climate change white paper. It will also have to carefully balance the politics of participation in the BRICS as well as the Africa Group. The latecomer's seat at the table of rapidly developing continental heavyweights owes its existence to geography, but other African countries are often sensitive to the slightest suggestion that South Africa speaks for them. When it comes to climate, their emphasis is adaptation; South Africa's must be mitigation.