/ 25 February 2011

Favouring the soft option

Favouring The Soft Option

As South Africa gears up for COP17, the United Nations climate change summit in Durban, it is clear business and government are not entirely on the same page about how to achieve a low-carbon future.

The government’s commitment at the 2009 Copenhagen talks to reduce greenhouse gas emissions by 34% by 2020 and by 42% by 2025 was a point of no return. The burden of meeting these targets has to be shared. The largest share will have to come from changes in investment patterns by both government and business.

Business played a role in developing the long-term mitigation scenarios that define the different actions South Africa can take to stabilise and reduce its carbon emissions. Key parties to the discussions included Sasol, Eskom and other energy-intensive companies.

The process identified three main avenues for mitigation: changing the nature of investment in the energy sector from carbon-intensive technologies to low-carbon technologies, managing energy-efficiency programmes and introducing carbon taxes. Translating these scenarios into action will put the parties involved to the test. It’s clear that voluntary measures are not the answer.

In his State of the Nation address in early February President Jacob Zuma identified the green economy as one of the six focus areas for job creation. The new growth path and other policy documents also encourage investment in green industries.

Those businesses that have responded so far, however, have tended to favour “soft” options such as calculating their carbon footprints, buying carbon credits, or volunteering on the carbon disclosure programme. Government plans to introduce carbon taxes have aroused the biggest consternation among businesses.

Carbon taxes were initiated several years ago by the national treasury to induce behavioural change among consumers and business. The first was a 2c per kilowatt hour levy on electricity. This was followed by a flat emissions tax for cars that takes into account the efficiency of a car’s engine and its fuel consumption.

With the rise in petrol prices, this is already forcing car companies to respond to consumer demands for more efficient and economical vehicles. Proposed new carbon taxes on fossil fuels, including a suggested R75/tonne tax, rising to R200/tonne, have produced the predictable outcries.

Energy-intensive companies have established an industry task team to prepare a formal response by February 28. Companies have warned of adverse business consequences, as well as potentially negative effects on job creation and growth.

This tends to be a knee-jerk reaction and reflects a lack of imagination. To argue blindly about economic costs is to be oblivious to new opportunities to revitalise the South African economy through new areas of investment.

In the end, whether we are pleased or not with the government’s efforts, it has been setting the agenda on climate change issues and looking at ways to intervene that can slowly move the economy to a lowcarbon future. The shift is already happening globally, despite the success or failure of climate negotiations.

The key drivers are energy security, technology innovation, new clean-tech industrialisation and competitiveness as other countries apply carbon constraints on imported goods through both public and private measures. A lot more can be done on the side of the government.

Conflicts between policy and infrastructure investment decisions abound. South Africa continues to build coalfired power stations and to produce liquid fuels from coal. A gigantic new refinery is on the cards, there are proposals to extract unsustainable shale gas in the Karoo and there is insufficient commitment to renewables.

While the policy blocks and changes to the tax regime are being put in place, the government should use its power and influence in procurement policy to engineer the tight alignment that is required. And as far as business goes, it has to replace the mind-set of short-term goals with the long-term plans that are more inclusive of the wellbeing of all in the country.

Saliem Fakir is head of the Living Planet unit at WWF-SA