Linda Ensor
29 July 2008
Cape Town — The cabinet has adopted an ambitious policy framework on climate change which could include the introduction of carbon taxes and incentives to ensure business adopts clean technologies and achieves a significant reduction in harmful carbon emissions.
The new policy will have far-reaching implications for the structure of the economy and its development path and will add significantly to the cost of doing business in SA in the short term.
However, the cabinet believes it will ramp up the technological efficiency of industry and eventually open the way for earning extra income from carbon trading.
Announcing the policy decision taken at last week's cabinet lekgotla yesterday, Environmental Affairs and Tourism Minister Marthinus van Schalkwyk warned that it could not be business as usual in future.
The decision will mean an accelerated drive towards greater energy efficiency and conservation across all sectors.
In some cases targets will be both ambitious and mandatory.
The strategy will involve electricity demand management; more ambitious targets for renewable energy; and a faster reduction in vehicle emissions.
While business is supportive of the broad aims of the policy, it is resistant to the idea of any further taxes and has appealed for other options to be considered.
Eskom MD of corporate services Steve Lennon said yesterday business feared a carbon tax "might result in double- accounting".
Van Schalkwyk said the new policy sent a "very strong signal to business" that the government was committed to the transition to a low-carbon economy. He believed most businesses were ready to support this.
He said the treasury would study the introduction of a carbon tax starting from low levels "soon" and escalating to higher levels to 2018-20. It would also look at alternatives such as a market mechanism to increase the price on carbon emissions and report back on its findings.
Chemical and Allied Industries executive director Laurraine Lotter said the introduction of any further taxes would be counterproductive and urged that other options be examined.
She said she did not believe the introduction of cleaner technologies would not have a negative effect on growth or job creation. Studies showed that reducing energy consumption had a positive effect on the bottom line.
Lennon said Eskom believed the scenarios were "very doable" and supported by business. Innovative technologies could meet the challenges of climate change and at the same time make sound business sense.
"If we can improve energy efficiencies we are reducing emissions and reducing input costs and making the economy more efficient. Energy efficiency is a win, win, win situation all the way," he said.
Finance Minister Trevor Manuel gave notice of a carbon tax in his budget vote speech and Van Schalkwyk said this could be extended.
The policy would "set the strategic direction for climate action in SA" and culminate in the introduction of a legislative, regulatory and fiscal package to implement it.
SA has committed itself to limiting its temperature increase to 2° C above pre-industrial levels. The country is now about 0,7° C above this level.
In terms of the policy, greenhouse gas emissions will have to stop growing and flatten out for up to 10 years from 2020-25 and begin falling in absolute terms from 2030-35.
This would still allow SA to produce about 100-million tons of greenhouse gas emissions above its 2003 level to reach the ceiling of 550 megatons by 2025.
Adoption of the policy - based on a long-term mitigation scenario worked out in collaboration with business, civil society and labour - places SA at the forefront of the developing world in addressing climate change and will form the basis of its position in global climate change negotiations which take place in Copenhagen next year.
"Cabinet has mandated a clear path for the future. Milestones will include a national summit in February next year, the conclusion of international negotiations at the end of 2009 and a final domestic policy to be adopted by the end of 2010 after international negotiations have been completed," Van Schalkwyk said. The longer SA waited to take action "the more difficult and the more costly it will become".
Spending 1% of gross domestic product (GDP) on mitigation now would save having to spend 5% of GDP later on adaptation.
More concrete policies and mandatory targets for energy efficiency would be worked out by government departments. Each economic sector would be required to formulate proposals over the next few months for how this could be achieved.
SA's energy mix would be diversified away from coal and would also shift to cleaner coal, by for example introducing more stringent thermal efficiency and emissions standards for coal-fired power stations.
No coal-fired power stations would be approved unless they were ready to incorporate carbon capture and storage technology once this was developed.
Stringent fuel efficiency standards would be set and public transport and hybrid and electric vehicles would be promoted.
Van Schalkwyk said industrial policy would be biased towards sectors that used less energy.
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