Theme 1: Carbon Pricing and The Policy Environment

Emily Tyler

Aligning South African energy and climate change mitigation policy.
Emily Tyler

This paper considers the alignment of energy policy in South Africa with the Cabinet’s mitigation vision of a ‘peak, plateau and decline’ greenhouse gas emissions trajectory to 2050. First, the term ‘policy’ is defined as having a number of levels and components. Following from this definition it is argued that, at the level of written and stated energy policy, the intention exists to move towards a more diverse, efficient and less carbon-intensive energy sector. A number of policy instruments are being developed which go some way towards achieving this, although targets set are too low. However, at a policy paradigm level, the dominant energy policy paradigm and the orientation and capacity of the country’s energy institutions are fundamentaly misaligned with the Cabinet’s mitigation vision. In particular, vested interests within these institutions constrain policy co-ordination and hence alignment. The paper then explores how greater alignment could be secured. The establishment of a single, overarching, co-ordinating energy policy institution through intervention
at the highest political level appears to be a prerequisite. This institution could then govern appropriately oriented institutional capacity, either by creating new institutions, or mandating existing institutions to deliver on low-carbon initiatives. It is suggested that, whilst new capacity may be optimal, it could be unrealistic to attain this level of sector transformation within the timeframes required by mitigation policy, given the strongly entrenched energy sector interests in maintaining the status quo.

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Brent Cloete

Carbon pricing and industrial policy in South Africa
Brent Cloete and Genna Robb

Economic instruments to mitigate climate change alter the relative cost structures of sectors within economies and between economies internationally. This will lead to structural changes within economies benefitting less carbon-intensive goods and services. One area of government policy that is particularly important in this context is industrial policy, which aims to facilitate structural changes in economies towards higher productivity activities.

Genna Robb

To ensure that industrial policy places South Africa on a low-carbon growth path, it needs to start favouring less carbon-intensive industries. Industrial policy must align with the use of economic instruments to mitigate climate change in South Africa to ensure that industrial strategies are implemented that will be sustainable in a carbon-constrained world. This interplay between carbon pricing and industrial policies in South African is investigated by considering, on the positive side, the opportunities created by climate change and, on the negative side, the potential impact of carbon pricing on industrial competitiveness. The paper concludes by recommending ways in which climate change considerations can be incorporated into industrial policy in order to move South Africa towards a sustainable low-carbon growth path. This will ensure that the economic costs of carbon pricing are minimised while potential long-term competitiveness advantages are maximised.

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