S Africa's high-carbon economy may face trade barriers

Source : https://www.argusmedia.com/en/news/2263611-s-africas-highcarbon-economy-may-face-trade-barriers

 

South African president Cyril Ramaphosa has warned that the country could face trade barriers unless it transitions to a low-carbon economy at a faster pace.

Ramaphosa outlined some of the broad economic risks associated with much of South Africa's industry being dependent on coal-generated electricity.

"As our trading partners pursue the goal of net-zero carbon emissions, they are likely to increase restrictions on the import of goods produced using carbon-intensive energy," Ramaphosa said. So South Africa could find that the products it exports are subject to trade barriers and consumers in those countries are less willing to buy its products, he said.

Another economic risk is that investors will shy away from investing in fossil fuel-powered industries, the president said. Banks and financial institutions are already under pressure from their shareholders not to finance enterprises that depend on fossil fuels to produce their products or services, he said.

All these emerging trends mean that South Africa needs to act with urgency and ambition to reduce its greenhouse gas (GHG) emissions and transition to a low-carbon economy, Ramaphosa said.

In view of this, South Africa is developing detailed plans to enable such a transition, the president said. Its electricity sector, which contributes 41pc of GHG emissions, will be targeted first as it will be the fastest to decarbonise.

South Africa will decommission and repurpose its coal-fired power plants and invest in new low-carbon generation capacity such as renewables. As an initial step towards this, state-owned utility Eskom will undertake a pilot project at its Komati power plant, which is due to shut down its last coal-fired unit next year, to produce power through renewable energy.

South Africa will also pursue "green industrialisation" by shifting to areas such as green hydrogen and electric vehicle production, Ramaphosa said. The country has to harness its abundant resources to open up new investment frontiers, he said.

But South Africa also has to have a just transition, the president stressed. So the needs of communities and workers in industries negatively affected — such as mining, energy and manufacturing — have to be addressed. Organised labour and business have to be involved in reskilling and upskilling programmes to create employment and providing other forms of support, he said.

To signal its increased ambition, South Africa last month approved an updated Nationally Determined Contribution, which sets out its emissions targets towards net-zero by 2050. It also raised its GHG reduction target for 2030 to 350-420t of CO2 equivalent, the lower end of which is in line with the Paris agreement's 1.5°C global warming threshold.

But South Africa's success in meeting this goal will depend on the financial support it gets from more developed economies, Ramaphosa said.

"This is not about charity. It is about fairness and mutual benefit," he said. Industrialised countries carry the brunt of responsibility for climate change, so they have an obligation to support developing economies to reduce emissions and adapt to climate change.

"We are therefore engaging with our international development partners on a just transition financing facility to support our decarbonisation," Ramaphosa said. "As the world prepares for the Cop26 climate summit, there is a window of opportunity to mobilise additional climate finance."

While climate change presents South Africa with economic challenges and risks, it also offers huge economic opportunities that the country must seize, the president said.

South African ministers met with climate envoys from the UK, France, Germany, the US and the EU last month to explore options for a climate finance deal ahead of the UN climate summit in November.

 

Elaine Mills

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