Abstract
Climate risk is material for South Africa and the government’s decarbonization goal is commendable. There are many opportunities to pursue a green recovery, but there are also deep structural constraints. As such, the climate ambition faces challenges and is further complicated by the impact of the COVID-19 pandemic. Success in moving toward a green and climate-resilient economy crucially hinges on reforms to tackle the structural rigidities in the economy to allow for dynamic product and labor markets and strong institutional credibility that would minimize the costs of the transition.
How Can Structural Reforms Support The Climate Ambition of South Africa?1
Climate risk is material for South Africa and the government’s decarbonization goal is commendable. There are many opportunities to pursue a green recovery, but there are also deep structural constraints. As such, the climate ambition faces challenges and is further complicated by the impact of the COVID-19 pandemic. Success in moving toward a green and climate-resilient economy crucially hinges on reforms to tackle the structural rigidities in the economy to allow for dynamic product and labor markets and strong institutional credibility that would minimize the costs of the transition.
A. Addressing Climate Change
1. South Africa faces significant climate challenges. Over the past decade, over 3.8 million South Africans were affected by natural disasters, such as droughts, floods, and storms (Figure 1). According to the Intergovernmental Panel on Climate Change, the increased extreme heat stress trend in the region is likely to continue accompanied by increased aridity and droughts; the intensity and frequency of heavy precipitation will likely increase; and coastal and ocean-related hazards in the region will climb with continued relative sea-level rise, contributing to increased coastal flooding in low-lying areas. Accompanied by the global warming trend, the increase in frequency and severity of these events poses challenges to the economy, including via their impact on water and food security, health, and infrastructure (DEA, 2013).
People Affected by Natural Disasters
(Number in log terms)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: EM-DAT.People Affected by Natural Disasters
(Number in log terms)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: EM-DAT.People Affected by Natural Disasters
(Number in log terms)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: EM-DAT.2. Moreover, the South African economy is extremely carbon-intensive due to its high dependence on coal. Emissions from fuel combustion account for over 70 percent of total greenhouse gas (GHG) emissions in South Africa, and the energy sector is the largest contributor (Figure 2).2 Over 90 percent of the electricity generation comes from coal-fueled plants, and coal also contributes to a significant proportion of the country’s exports. The geographic concentration of coal exposure makes the need for a green transition even more challenging. Specifically, the Mpumalanga region, which is the center of coal mining and hosts most of Eskom’s power plants, has many activities linked to the coal value chain. These include the coal-to-liquids operations at Secunda, which is the largest single-source site of CO2 emissions in the world.
C02 Emissions from Fuel Combustion
(MtC02)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IEA.C02 Emissions from Fuel Combustion
(MtC02)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IEA.C02 Emissions from Fuel Combustion
(MtC02)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IEA.3. A climate policy framework is in place to strengthen the country’s climate resilience and facilitate decarbonization of the economy. After signing the Paris Agreement on Climate Change in 2016, South Africa has developed its Low Emission Development Strategy (LEDS), which is based on three key policy documents: the National Development Plan, the National Climate Change Response Policy, and the forthcoming Climate Change Bill. The recently established Presidential Climate Commission is tasked with advising on climate policies and overseeing a just transition toward a climate-resilient and low-carbon economy. The authorities also started working on the implications of the climate policy on the financial sector, including the preparatory work on the supervision of climate-related risks and taxonomy of green finance. The climate commitment and efforts were well received by the international community as evidenced by the financial support pledged at the COP26 climate summit.
4. Nevertheless, meeting South Africa’s climate goals will be challenging. The projected GHG emissions trajectory appears high compared to the targets consistent with the Paris Agreement’s 1.5°C temperature limit (Figure 3), although the South African government recently announced a significant reduction of the 2030 emissions target in its updated Nationally Determined Contribution (NDC).3The new carbon tax, which was introduced in June 2019, came into force only in October 2020. South Africa was ranked 110 out of 115 countries by the World Economic Forum on the performance of their energy systems and readiness for the transition to a secure, sustainable, affordable, and reliable energy future (WEF, 2021). The country’s ability to adapt to the adverse effects of climate change has been lagging the G20 average with a widening gap in recent years according to the ND-GAIN index (Figure 4).4 Several barriers to the adoption of a climate change technology have been identified, including uncertainty and lack of policy and regulatory clarity, insufficient knowledge, and information deficiencies, limited private-sector investment, high costs, and social resistance. There is also a need to build capacity for monitoring and assessing climate policies and conducting integrative and systematic climate research (DEFF, 2020).
South Africa GHG Emissions
(MtC02e)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Clim ate Action Tracker and South Africa’s LEDS 2050.Note: Colored bars indicate South Africa’s target ranges under international commitments, and the shaded area shows the projected range for the emissions trajectory from the LEDS.South Africa GHG Emissions
(MtC02e)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Clim ate Action Tracker and South Africa’s LEDS 2050.Note: Colored bars indicate South Africa’s target ranges under international commitments, and the shaded area shows the projected range for the emissions trajectory from the LEDS.South Africa GHG Emissions
(MtC02e)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Clim ate Action Tracker and South Africa’s LEDS 2050.Note: Colored bars indicate South Africa’s target ranges under international commitments, and the shaded area shows the projected range for the emissions trajectory from the LEDS.
Adaptation Readiness
(0 = low, 1 = high)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Notre Dame Global Adaptation Initiative Readiness Index.Adaptation Readiness
(0 = low, 1 = high)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Notre Dame Global Adaptation Initiative Readiness Index.Adaptation Readiness
(0 = low, 1 = high)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Notre Dame Global Adaptation Initiative Readiness Index.B. Impact of the Pandemic
5. The pandemic has had a significant impact on the carbon-intensive sectors and the coal-dependent region. The COVID-19 pandemic hit South Africa hard. Economic activity declined significantly due to its impact on health and the demand contraction that followed the stringent containment measures. The economy is recovering following a significant output contraction (6.4 percent) and employment losses (8.5 percent) in 2020, with a high degree of heterogeneity across sectors. The energy-intensive sector experienced declines in output and employment of 13.3 percent and 7.9 percent respectively.5 The mining sector, of which coal mining accounts for about 19 percent of sectoral employment (Minerals Council South Africa, 2020), shrank by 11.9 percent in output and 10.7 percent in employment. In the coal-dependent Mpumalanga province, employment dropped by 7.7 percent, of which about 1.5 percentage points reflected job losses in the mining sector. As a result of the economic slowdown, it is estimated that emissions in 2020 may have fallen by 9 to 11 percent from the 2019 level, and the pandemic may further reduce South Africa’s emissions level by 8 to 10 percent by 2030 below the Climate Action Tracker’s pre-COVID projections.
6. The pandemic has also made the climate adaptation and decarbonization transition more challenging in several ways:
Public finance constraints. Public debt was on the rise years before the pandemic and jumped to nearly 70 percent of GDP in 2020 as the government deployed a policy package to mitigate the impact (Figure 5). With these expenses and difficulties to rein in less-efficient budgetary spending (e.g., SOE transfers), the room for active government support of the climate adaptation and decarbonization transition is constrained by public debt sustainability risks. At the same time, many SOEs are highly exposed to carbon-intensive activities, such as coal-fired power plants, and rail and port infrastructure for fossil fuel transportation, which makes them vulnerable to a drop in demand from the decarbonization transition with potentially significant fiscal implications.
Labor market characteristics. In the face of a dysfunctional labor market and very high income inequality (a Gini coefficient of 63), South Africa’s unemployment rate rose steadily, reaching nearly 30 percent by end-2019.6The pandemic exacerbated the issue, as close to 1.4 million jobs were lost in net terms in 2020, of which two thirds were low-skilled jobs (Figure 6).7 More worrisome is the fact that the recovery so far has been jobless. The situation worsened with a significant drop in employment of over 4 percent during the third quarter of 2021, which partly reflects the impact of the July social unrest and looting. The cyclical rebound, albeit jobless, is proving relatively rapid, but the medium-term outlook indicates that employment could stay below pre-pandemic levels for a protracted period (Figure 7).8 Migration of typically low-skilled workers out of the coal value chain will therefore be all the more challenging. Deficiencies in the country’s education system complicate further the necessary workforce transition (RES4Africa, 2020).
Trade-offs of the recovery plan. The country’s Economic Recovery and Reconstruction Plan considers greening the economy as one of the eight priorities in the post-pandemic recovery. The plan includes fast-tracking private-sector infrastructure investment projects and energy projects to mitigate the supply shortages from Eskom, which could turn the COVID-19 crisis into an opportunity for a green recovery. Nevertheless, the announced measures are often incompatible with a low-carbon economic rebound. For example, under the Risk Mitigation Independent Power Procurement Program (RMIPPP), the published list of preferred bidders shows that most of the 2 gigawatts of energy procured use carbon-intensive gas technology. The 20-year power procurement agreements could therefore imply high-carbon generation for a long period. Separately, the draft Mining and Energy Recovery Plan also focused on investing in the high-carbon sector, such as gas, without due concern for low-carbon technologies (e.g., any requirements for low-carbon technologies in new infrastructure investment).9
South Africa Government Debt
(In percent of GDP)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:WEO.Note: The Jan. 2020 WEO projection is adjusted for the historical GDP revision.South Africa Government Debt
(In percent of GDP)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:WEO.Note: The Jan. 2020 WEO projection is adjusted for the historical GDP revision.South Africa Government Debt
(In percent of GDP)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:WEO.Note: The Jan. 2020 WEO projection is adjusted for the historical GDP revision.
Employment Growth by Education
(Year-on-year, in percent)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver.Employment Growth by Education
(Year-on-year, in percent)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver.Employment Growth by Education
(Year-on-year, in percent)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver.
South Africa Employment Outlook
(In thousands)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver and IMF staff calculations.Note: Shaded area indicates the projection period.South Africa Employment Outlook
(In thousands)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver and IMF staff calculations.Note: Shaded area indicates the projection period.South Africa Employment Outlook
(In thousands)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Haver and IMF staff calculations.Note: Shaded area indicates the projection period.C. Advancing Structural Reforms in Support of the Climate Objectives
7. Advancing structural reforms is crucial to overcome the challenges and obstacles to South Africa’s climate goals. Success in achieving South Africa’s ambitious climate objectives hinges on the decarbonization of the power sector. Policy actions such as the introduction of a carbon tax and the Renewable Energy Independent Power Producer Program (REIPPP) are key elements of the transition. Reform efforts to reduce rigidities in the economy will help accelerate the process and ensure a just transition.
A Competitive Market for a Swift Renewable Energy Rollout.
8. The REIPPP added renewable energy sources to the system. Under the REIPPP, a total of about 9,500 MW of capacity was procured in several bidding rounds starting in 2011, including 2,583 MWfrom the latest bidding window announced in August 2021. Reflecting technological advances, the average tariff in each bidding round declined significantly overtime, reaching a point where the price of renewable energy became competitive with that of energy from fossil fuel sources (Figure 8). It is worth noting that, due to grid capacity limitations, several very competitively priced projects were not selected in the latest biding window and would otherwise have driven the average costs of the procurement even lower.
Projects under the REIPPP
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Ireland and Burton, 2018, Eskom, authorities, and staff calculations.Projects under the REIPPP
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Ireland and Burton, 2018, Eskom, authorities, and staff calculations.Projects under the REIPPP
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Ireland and Burton, 2018, Eskom, authorities, and staff calculations.9. Despite the REIPPP’s clear benefits, the rollout of renewable energy has been constrained by several factors. These include a lack of competition in the energy sector, a high regulatory burden, policy uncertainty, and infrastructure limitations. It took almost 6 years for the latest bidding window of the REIPPP to open. The aforementioned impediments also pose the risk of derailing the country’s 2019 Integrated Resource Plan, in which renewable energy sources are expected to account for about 36 percent of total installed capacity by 2030 (Figure 9). Achieving South Africa’s climate goals will be all the more challenging considering that an even higher share of renewable energy is needed to be aligned with the updated NDC. It is therefore encouraging that there are two REIPPP bidding rounds planned for 2022.
Electricity Capacity Projection
(In megawatts)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IRP 2019.Note: 1/ Storage systems for electricity include battery, flywheel, com pressed air, and hydrogen fuel cells, etc.Electricity Capacity Projection
(In megawatts)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IRP 2019.Note: 1/ Storage systems for electricity include battery, flywheel, com pressed air, and hydrogen fuel cells, etc.Electricity Capacity Projection
(In megawatts)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IRP 2019.Note: 1/ Storage systems for electricity include battery, flywheel, com pressed air, and hydrogen fuel cells, etc.10. Efforts to enhance competition in the power sector and streamline the regulatory burden will help unlock private investment in renewable energy. The power sector is highly concentrated and dominated by the state-owned electricity company Eskom. Entry barriers are high, with stringent licensing requirements and restrictions on third-party transactions. There have also been delays in connecting procured renewable projects to the grid (Renaud and others, 2020). Policy uncertainty, which is reflected in delays in the publication of the country’s Integrated Resource Plan and the stop-start procurement of renewable energy, deters private investment in the sector. Following the continued electricity shortages experienced by the country (Figure 10), some opening of the sector has finally taken place as amendments to the Electricity Regulation Act that lowered the licensing requirements and eased the electricity supply restrictions were introduced. Nevertheless, these amendments would greatly benefit from more clarity in some areas, such as regulations governing electricity sales and the registration process. Steadfast actions to tackle the remaining regulatory constraints and anticompetitive behaviors in the sector not only hold the key to ignite growth (e.g., Thakoor, 2020), but are also imperative for a renewable-energy-based green post-pandemic recovery.
Electricity Shortages in South Africa
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Calitz and Wright (2021).Electricity Shortages in South Africa
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Calitz and Wright (2021).Electricity Shortages in South Africa
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: Calitz and Wright (2021).11. Fundamental changes to Eskom are essential amid the climate change effort. The debt-ridden state-owned monopoly has become an impediment to growth, including through rising electricity tariffs and frequent power outages. The company has been relying on government support to continue with its outdated business model, which favors large-scale projects in coal and nuclear, and supports the mining value chain. As Eskom’s sales fell, the company resisted new entrants into the sector, delaying the expansion of independent power producer programs. In 2017, Eskom publicly resisted providing transmission facilities to renewable projects (Makgetla, 2017). The government intervened on the regulatory front to help protect demand for Eskom’s electricity10The financial difficulties of the company also resulted in underinvestment in the transmission grid (Figure 11), and the performance of the transmission network deteriorated (National Treasury, 2019; Department of Public Enterprise, 2019). Efforts to improve Eskom’s efficiency will help guard investment in the grid infrastructure, which is needed to integrate renewable energy sources, especially considering the limited grid capacity in the resource-rich areas of the country (Eskom, 2020). As discussed earlier, this already became a constraint to further lowering the cost of renewable energy procurement in the latest bidding window under the REIPPP. A broader strategic alignment of renewable energy procurement processes with transmission infrastructure planning would also be beneficial.
Eskom Expenditure Composition
(In percent of total expenditure)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:Authorities.Eskom Expenditure Composition
(In percent of total expenditure)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:Authorities.Eskom Expenditure Composition
(In percent of total expenditure)
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source:Authorities.12. The greatest obstacle to the transformation of the energy sector has been insufficient reform efforts rather than lack of financing. Eskom recently announced a Just Energy Transition Pian, seeking concessional financing for decommissioning and repurposing its coal plants, increasing the share of renewables in the energy mix, and strengthening the grid network. Access to green finance is available to South Africa as long as the country can demonstrate a commitment to private sector-led renewable energy production and a full operational overhaul of Eskom—both focused on transforming the country’s energy sector. Otherwise, meeting the financing demands of Eskom could be perceived as providing it with resources to maintain its current unsustainable and inefficient operations, and could in fact reduce incentives for green investment and financing by the private sector. An enabling regulatory environment with clear rules of the game that fosters competition and attracts private-sector participation will be key in a successful transition, with concessional financing and a reduced footprint of Eskom in the sector.
13. A competitive energy market will greatly complement other policy measures, such as carbon taxes, in decarbonizing the economy. The IMF Carbon Pricing Assessment Tool (CPAT) is used to analyze how a competitive energy market contributes to the impact of a carbon tax on the energy mix in South Africa’s power sector. The CPAT is based on a reduced-form model of energy consumption that incorporates growth forecasts, price and income elasticities, exogenous and endogenous rates of technical progress, and price changes.11 While a carbon tax was introduced in June 2019, implementation did not start until late-2020 with exemptions and significant tax-free emissions allowances to ease the transition.12 The model simulation considers a C02 tax progressively increasing to $75 a ton by 2030, which is estimated to be compatible with a 2°C rise in global temperatures compared to preindustrial levels (IMF, 2019).
14. The model simulation results suggest a significantly lower level of renewable energy share in a more rigid power sector. The estimated impact on emission reduction and energy mix in the power sector are presented under two scenarios, which are differentiated in the degree of rigidities in the power sector (proxied by the generation cost elasticities). In the baseline scenario, the model uses the default parameterization of the CPAT, which approximates projections and underlying behavioral responses for fuel use and emissions generated from more disaggregated structural models. The high-rigidity scenario assumes lower own-price elasticities for generation fuels, reflecting the fact that the lack of competition and continued dominance of Eskom in the highly regulated power sector would dampen the price-responsiveness of coal use despite the rapid decline in the costs of renewable energy13 The implication on the renewables shares and the emissions of the power sector as a result of the carbon taxes could be substantial as the estimates show that the share of renewable energy by 2030 under the high-rigidity scenario is less than Vi of that in the baseline scenario (Figure 12).
Projected Renewables Share and Emissions Reduction in the Power Sector
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IMF staff estimates.Note: Lines show the renewable energy shares (left axis), and bars showing emission reduction (right axis).Projected Renewables Share and Emissions Reduction in the Power Sector
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IMF staff estimates.Note: Lines show the renewable energy shares (left axis), and bars showing emission reduction (right axis).Projected Renewables Share and Emissions Reduction in the Power Sector
Citation: IMF Staff Country Reports 2022, 038; 10.5089/9798400201318.002.A003
Source: IMF staff estimates.Note: Lines show the renewable energy shares (left axis), and bars showing emission reduction (right axis).A Dynamic Labor Market to Absorb Displaced Workers from the Transition.
15. A profound green transition could put many jobs at risk. According to a recent study, there are 452,000 jobs in the country’s coal value chain that could be affected by the transition and another 427,000 jobs in the automobile sector that could be lost due to the global shift toward electric vehicles (PwC, 2021). While more jobs are expected to be created by the renewable energy rollout, there could be significant mismatches both in terms of job location, quality, and qualification needs (Burton and others, 2019).
16. Efforts to promote labor market flexibility and build human capital will support workers displaced by the decarbonization transition and prepare the young for the future. Bold reforms of labor market institutions in the areas of collective bargaining, employment protection legislation, and minimum wage-setting would give firms greater workforce management ability and boost employment opportunities for the inexperienced and the young. Measures to improve the quality of education, apprenticeships, and vocational training schemes would not only help tackle high structural unemployment (Duval and others, 2021, Mlachila 2019), but also support displaced workers via reskilling and upskilling. Improvements in the design of active labor market policies, particularly geographical mobility subsidies, could be effective in bridging the spatial divide between displaced workers’ living areas and places where new jobs are created. These efforts become especially important considering the impact from the pandemic, particularly on the young and low-skilled as discussed earlier.
Tackling Governance Vulnerabilities to Ensure a Fair and Just Transition.
17. Accelerating governance reforms will foster trust among stakeholders, including those from affected regions, helping overcome potential social resistance against the transition. Concerns about corruption, poor governance, and insufficient accountability and transparency can weaken institutional credibility and undermine the ability to plan, manage, and implement the climate resilience transition (National Planning Commission, 2019). Considering the profound decarbonization transformation, significant resources will be needed to support affected regions and communities so that they also benefit from being actively involved in the transition. Improved governance and institutional arrangements will foster cooperation among different ministries and levels of government, which will not only help reduce policy uncertainty but will also contribute to an efficient utilization of the resources needed for a fair and just transition.
References
Burton, Jesse, Andrew Marquard, and Bryce McCall. 2019. “Socio-Economic Considerations for a Paris Agreement-compatible coal transition in South Africa”, Policy Paper, Climate Transparency.
Calitz, Joanne R, and Jarrad G Wright. 2021. “Statistics of utility-scale power generation in South Africa in 2020.” Presentation by the CSIR Energy Centre on the statistics of utility-scale power qenerationin South Africa in 2020: http://hdl.handle.net/10204/11865
Department of Environmental Affairs (DEA). 2013. “Long-Term Adaptation Scenarios”, Phase One, Technical Report, Pretoria: Department of Environmental Affairs.
Department of Environment, Forestry and Fisheries (DEFF). 2020. “South Africa’s draft 4th Biennial Update Report to the United Nations Framework Convention on Climate Change”, Department of Environment, Forestry and Fisheries, South Africa.
Department of Public Enterprises, 2019. “Roadmap for Eskom in a Reformed Electricity Supply Industry”, South Africa.
Duval, Romain, Ippei Shibata, and Yi Ji. 2021, “Labor Market Reform Options to Boost Employment in South Africa”, IMF Working Paper.
Eskom. 2020. “Transmission Development Plan 2021–2030”, South Africa.
International Monetary Fund. 2019. “How to Mitigate Climate Change”, Fiscal Monitor, Washington, DC, October.
Ireland, G. and Burton, J. 2018. “An assessment of new coal plants in South Africa’s electricity future: the cost, emissions, and supply security implications of the coal IPP programme”, Cape Town: Energy Research Centre, University of Cape Town.
Makgetla, Neva. 2017. “The Crisis at Eskom and Industrialization”, Working Paper, November. Pretoria: Trade and Industrial Policy Strategies.
Minerals Council South Africa. 2020. “COAL KEY FACTS AND FIGURES”, https://www.mineralscouncil.orq.za/sa-mininq/coal.
Mlachila, Montfortand Tlhalefang Moeletsi. 2019. “Struggling to Make the Grade: A Review of the Causes and Consequences of the Weak Outcomes of South Africa’s Education System”, IMF Working Paper.
National Planning Commission. 2019. “Social Partner Dialogue for a Just Transition”, Department of Planning, Monitoring & Evaluation, National Planning Commission, South Africa.
National Treasury. 2019. “Economic Transformation, Inclusive Growth and Competitiveness: A Contribution Towards a Growth Agenda for the South African Economy”, Economic Policy Division, National Treasury, South Africa.
Parry, Ian, Victor Mylonas, and Nate Vernon. 2018. “Mitigation Policies for the Paris Agreement: An Assessment for G20 Countries”, IMF Working Paper.
PricewaterhouseCoopers. 2021. “What a Just Transition means forjobs in South Africa”, Strategy&, PwC South Africa.
Renaud, Celeste, Emily Tyler, Adam Roff, and Dr Grove Steyn. 2020. “Accelerating renewable energy industrialisation in South Africa: What’s stopping us?”
Renewable Energy Solutions for Africa Foundation (RES4Africa). 2020. “A Just Energy Transition in South Africa: Socio-economic needs and the positive impacts of a future low-carbon economy”, Rome.
Thakoor, Vimal. 2020. “Market Power, Growth and Inclusion: The South African Experience.” IMF Working Paper No. 20/206. International Monetary Fund, Washington, DC.
World Bank. 2020. “State and Trends of Carbon Pricing 2020”, Washington, DC: World Bank. World Bank, https://openknowledge.worldbank.org/handle/10986/33809 License: CC BY 3.0 IGO.
World Economic Forum (WEF). 2021. “Fostering Effective Energy Transition 2021 insight report”, Geneva, April.
Prepared by Haonan Qu (AFR).
Other GHG emissions include fugitive emissions, methane, and nitrous oxide from sectors such as agriculture, waste, and industrial processes, etc. The energy sector consists of electricity and heat production (about 80 percent) and other energy-producing industries, such as oil refineries and extraction of fossil fuels (20 percent).
In preparation for the United Nations climate conference in November, the South African government announced its updated NDC for submission to the United Nations Framework Convention on Climate Change in which the 2030 mitigation target range is revised from 398–614 Mt C02e to a range of 350–420 Mt C02e.
The readiness component of the Index created by the Notre Dame Global Adaptation Initiative (ND-GAIN) encompasses social economic and governance indicators to assess a country’s readiness to deploy private and public investments in aid of adaptation. The index ranges from 0 (low readiness) to 1 (high readiness).
The energy-intensive sector is loosely defined as the electricity, water, gas, transport, storage, and communications sectors.
The latest Gini index available is for 2014 from the World Bank’s World Development Indicators.
Low-skilled workers are defined as workers with an education level lower than secondary.
The projection is based on estimates of the Okun’s law relationship between real output growth and employment growth using quarterly data for the period between 2000Q1 and 2021Q2.
See more detailed assessment from the Climate Action Tracker.
For instance, in 2017 the government issued a letter to businesses delaying permits for own generation to protect demand for Eskom’s power (Makgetla, 2017). In 2021, the government proposed lifting the licensing threshold for small-scale power generation projects to 10 MW from 1MW, an arguably small step that falls short of industry expectations. The threshold was subsequently raised to 100MW amid the country’s significant electricity shortages.
See Parry and others, 2018 for more details on the model.
According to World Bank, 2020, the effective tax rate ranges between $0.3-$1.2/tCO2e after considering tax-free allowances.
The elasticity discussed refers to own-price elasticity of generation from an energy source with respect to the generation cost. It reflects the percent reduction in the use of an energy source due to switching it to other energy sources, per one-percent increase in its generation cost. The baseline scenario uses an elasticity of 0.7 while the high-rigidity scenario has an elasticity of 0.2.
