SA is blowing its carbon budget
South Africa has a climate change problem. Per person, South Africans emit more than anyone outside of the West. It is the world’s 14th largest emitter of carbon dioxide.
Three-quarters of these emissions come from Eskom’s coal-fired power plants and Sasol’s coal-to-liquid fuel plant at Secunda, the largest in the world.
Tackling emissions effectively would mean taking tough decisions about these. But the country’s plans are nowhere near ambitious enough. If they were, Eskom would either have to close down its Medupi and Kusile power plants (which are just coming into operation) or Sasol would have to close down its lucrative Secunda plant.
Both entities have indicated that this is not going to happen. Sasol has said it won’t build another plant like Secunda, partly because of its carbon footprint.
South Africa’s national plan for lowering carbon emissions was drawn up in 2007 before the global financial crash and before renewable energy could create energy more cheaply than coal-powered plants. Each year, the country emits nearly 500-million tonnes of carbon dioxide. The goal sees this continuing to 2025, before plateauing out, and then decreasing from 2036.
Climate Action Tracker, a European group that digs into country climate plans to see their cumulative global effect, rates the South African plan as “highly insufficient”. If every country in the world adopted a similar approach, the world would warm by 4°C this century, double what is considered safe by the United Nation’s Intergovernmental Panel on Climate Change.
And even the numbers in the already relaxed plan from 2007 will be hard to achieve. The country as a whole can emit 14-gigatons of carbon dioxide until 2050, which is its carbon budget. The idea is for the government to split it up and decide how much each part of the economy can emit. But, as South Africa is operating now, it will have used up its whole budget before 2040.
Eskom’s Medupi and Kusile power plants will take 7.4-gigatons of this budget, according to data from the Energy Research Centre at the University of Cape Town. Their numbers show that the only way the target can be met is if Sasol reduces production at Secunda, starting in 2025, before shutting it down in 2040. Otherwise, Eskom will have to shut down both its megaplants by 2045, two decades ahead of schedule.
The law governing the carbon budget, the National Climate Change Bill, was gazetted for comment in June. It gives the environment minister the power to set a budget for each part of the economy. Companies will then have to submit plans explaining how they will reach this target, which will be made more ambitious every five years. Failure to do so will carry a R5-million fine.
But the effectiveness of this will depend on the department having the capacity, and the will, to enforce it. State-owned entities, such as Eskom, are not currently included and private companies have already stymied this process by refusing to disclose their carbon emissions to the government.
The treasury has its own plan to curb carbon emissions with a tax that will come into force mid-2019. Companies will have to pay up to R120 for each tonne of carbon they emit. Sasol says this will cost it between R700-million and R2-billion a year. In theory, the proceeds from the tax will go towards helping companies to lower their carbon emissions.
But most governments have little power to make fundamental changes to how energy companies invest in different sources of power. This is something that some investors have now taken up. Around the world, shareholders have started tabling “two-degree scenario resolutions”. These ask companies to look at what they need to do to reduce their carbon emissions to keep global warming to 2°C.
For entities such as Sasol, this can mean that profitable assets, its coal-to-liquid plants, will have to be shut down before they pay, themselves.
This movement is being driven by pension funds, which are worried that their money is going into companies that cannot continue to operate if they are warming the world. Central banks and stock exchanges are also increasingly calling for emissions disclosures. The Bank of England now requires companies to disclose their plans for climate change. The JSE has similar initiatives, except these are voluntary.
Things are changing, but not fast enough. The current rate of global warming will mean the worst possible outcome, when the ecosystems that the economy and life rely on collapse.