The transition to a low-carbon South African economy: a comparison with a German case-study

As a function of its large mineral reserves, South Africa’s carbon-intensive economy has been driven by resource intensive mineral extraction and petroleum and chemicals processing. These industries have long been supported and incentivized by government through the provision of relatively cheap coal-fired generated electricity, taking advantage of South Africa’s extensive coal reserves (Brent et al., 2002).

 

However, since the 1990s,  the secondary (manufacturing) and tertiary (services, transport) economic sectors have surpassed these resource intensive industries in total contribution to GDP. But, despite the transition to a value-adding economy, the electricity supplied to these sectors remains largely carbon intensive. In South Africa, the goal of transitioning to a low carbon economy forms part of the South African National Development Plan – Vision 2030, the National Strategy for Sustainable Development and Action Plan (2014) and the New Growth Path (2020).  Furthermore, the Green Economy Accord was agreed to by government, labour unions, civil society and the private sector with the aim of creating 300 000 new work opportunities in the green economy by 2020 (Department of Environmental Affairs and Energy, 2013).  This green economy approach supports growth and low-carbon development, which South Africa has included in the country’s future development plans to foster an inclusive and sustainable economy.

 

The four critical economic sectors identified for investment in this South African Green Economy Model (SAGEM) are:

 

1. Natural resource management
2. Agriculture
3. Transport and
4. Energy

 

But, the important question –  is this transition to a low-carbon economy taking place before any formal investment? Figure 1 shows the relationship between CPI linked to GDP, and CO₂ emissions (Real GDP/MtCO₂) for each year since 1990.  What is clear is that the carbon intensity of the South African economy peaked around 1995 and has decreased slowly since then. It is projected to continue on a downward trend into the future, as seen in Figure 1.

 

 

From further investigation, one of the main reasons for this downward trend is the more than doubling (108% increase) of real GDP over the period of 1990 – 2012 (“Statistics South Africa”, n.d.), while CO₂ emissions only increased by 48% over the same period. Therefore, the curve in Figure 1 represents a decoupling between carbon intensity and economic growth.

 

The main contributors to the increase in CO₂ emissions can be attributed to increased energy production, industrial processes, AFOLU (Agriculture, Forestry and Other Land Use) and Waste (Letete, Guma & Marquard, 2010). One can argue that as CO₂ emissions are still increasing, the ideal transition to a less carbon-intensive economy and that true or absolute decoupling has not taken place. However, it is clear that the economy has been growing without carbon emissions increasing at the same rate, indicating a gradual de-coupling between GDP and carbon emissions. While this is positive, it does not represent a sustainable growth path.

 

To accelerate this transition to a sustainable low carbon economy, strategic objectives have been put in place based on the SAGEM modelling exercise in 2013, which followed a dynamic modeling approach (Department of Environmental Affairs and Energy, 2013). These strategic objectives are outlined below:

 

Natural Resource Management. This objective includes investment in land restoration, including virgin land rehabilitation and alien vegetation eradication, increasing water availability while not reducing the land available for agriculture. This will in turn create more jobs in this sector, especially in the restoration of water ecosystem services and biomass for energy (from alien vegetation).

 

Agriculture. Investments in conservation agriculture and the use of organic fertilizer. This has the benefit of increasing crop yield with minimal impact on ecosystems and water resources.

 

Transport. This sector requires investment in improving energy efficiency in transport systems (improved public and goods transport systems), which translates to lower energy consumption, in addition to decreasing the carbon intensity of fuel production (Sasol, 2014).

 

Energy demand and supply. The modeling exercise recommends an investment of 2% of GDP into all industrial sectors in order to increase energy efficiency, and thus reduce overall demand going forward.  The intention is to also increasingly diversify the energy mix, bringing the contribution of renewable energy sources to 33% of the total mix by 2030.

 

National development. With the increased investment in the transition to a low carbon economy in all 4 sectors, the energy and agricultural sectors will show the largest growth in job opportunities, of great importance in South Africa.  Other potential benefits of this investment are the much needed sustainable and long-term economic growth and lowering of GHG (Green House Gas) emissions.

 

Germany

Germany is a prime example of an ongoing successful transition to a low carbon economy. The focus has been on the energy sector as this contributes to more than 80% of total GHG emissions (United Nations Climate Change Secretariat, 2012).

 

In order to achieve this low carbon growth path, a transformation of the energy sector to have renewables as the primary energy source by 2050 was key.  This concept was put together in 2010 (Energy Concept), together with specific targets, a monitoring process and a financing plan called the ‘Energiewende’ (transition of the energy system) (“German Missions in the United States – Climate and Energy Policy”, n.d.).  The main actions and objectives of this initiative are:

 

• Renewable energies as a cornerstone of future energy supply:
• Energy efficiency as the key factor
• An efficient grid infrastructure for electricity and integration of renewables
• Energy upgrades for existing buildings and energy-efficient new buildings
• Energy for transport system transformation
• Energy research towards innovation and new technologies
• Energy supply in the European and international context
• Acceptance and transparency

Since the start of the ‘Energiewende’ initiative, a 40 year project, the share of renewables in electricity supply reached 25 percent in 2012, and is still growing. In only the last 10 years, renewable energy in the electricity sector has quadrupled and after one year from the start of the ‘Energiewende’ initiative, the grid system and overall power capacity has coped well with the system shift and the shut-down of 8 nuclear power plants. Future plans include the development of new and smart grids and storage systems.

 

In Figure 3, the relationship between GDP and CO2 emissions for both South Africa and Germany also indicates a downward trend for Germany, which should accelerate further under the ‘Energiewende’ initiative.

 

 

But the big question remains, in the aftermath of the green economy modelling exercise for South Africa, whether there has been any monitoring of progress and has any progress been made? The OECD Economic Survey report for South Africa in 2013 found that the policy framework for addressing climate change and water scarcity is sound, but the implementation and eventual monitoring of these policies has been slow due to inadequate administrative capacity (OECD, 2013). Compared with global pricing, the prices for energy and water do not cover total costs or reflect environmental externalities. As part of the National Development Plan (NDP), South Africa will need to start monitoring the environmental outcomes, especially water usage and national GHG emissions, to build a database for benchmarks and to inform further policy decisions. This is  the process followed by the ‘Energiewinde’ initiative for the energy sector in Germany.  A further recommendation is that SA can start monitoring a limited set of headline indicators as set out in the OECD’s Green Growth Indicators (OECD, n.d.).

 

The main recommendations to accelerate the decoupling between economic growth and GHG emissions, put forward by the OECD Economic Survey Report 2013, are as follows:

• Reduce implicit and explicit subsidies for energy and coal consumption, and use other instruments, such as cash transfers or supply vouchers for protecting the poor;
• In designing climate change mitigation policies, favour broad and easy-to-implement instruments with limited demands on administrative capacity, such as a simple carbon tax;
• Apply the carbon tax as broadly as possible, including the electricity sector;
• Regularly revisit and revise the Integrated Resource Plan (IRP) to take into account new information about technologies, costs and demand.
• Increase the emphasis on energy efficiency in construction and industry and;
• Give responsibility for monitoring progress on the various objectives relating to climate change to a single institution, making that institution accountable to parliament via regular reporting.

Once the monitoring body has been put in place, the implementation of these policies with feedback mechanisms can build the foundation to a faster decoupling between economic growth and carbon emissions in South Africa. Until then, no progress will be evident.

 

 

References  

Brent, A.C., Rohwer, M.B., Friedrich, E. & Blottnitz, H. Von. 2002. Status of life cycle assessment and engineering research in South Africa. The International Journal of Life Cycle Assessment. 7(3):167–172. DOI: 10.1007/BF02994051.

 

Department of Environmental Affairs and Energy. 2013. South African Green Economy Modelling Report (SAGEM). DOI: 10.1038/320390c0.

 

German Missions in the United States – Climate and Energy Policy. n.d. Available: http://www.germany.info/Vertretung/usa/en/06__Foreign__Policy__State/02__Foreign__Policy/05__KeyPoints/ClimateEnergy__Key.html [2015, July 06].

 

IEA – Report. n.d. Available: http://www.iea.org/statistics/statisticssearch/report/?&country=SOUTHAFRIC&year=2012&product=Indicators [2015, May 12].

 

Letete, T., Guma, M. & Marquard, A. 2010. Information on climate change in South Africa : greenhouse gas emissions and mitigation options.

 

OECD. 2013. OECD Economic Surveys – South Africa. DOI: 10.1787/eco_surveys-jpn-2009-en.

 

OECD. n.d. Towards Green Growth: Monitoring Progress – OECD Indicators. DOI: 10.1787/9789264111318-en.

 

Sasol. 2014. Climate Change and Energy Insecurity. DOI: 10.1680/ensu.2011.164.2.161.

 

Statistics South Africa. n.d. Available: http://www.statssa.gov.za/.

 

United Nations Climate Change Secretariat. 2012. Summary of GHG Emissions for Germany. Available: http://unfccc.int/files/ghg_emissions_data/application/pdf/deu_ghg_profile.pdf.