University of Pretoria: Greening South Africa’s economy is a growth path out of unemployment and poverty — and is the right thing to do

Climate change is a serious challenge across the globe, and with it comes detrimental economic effects. As one of the biggest polluters in the world, South Africa is not absolved from this unfortunate reality, given its ailing economic growth in recent years. This calls for a new “green impetus” in South Africa to steer economic growth.

The challenge of pursuing economic recovery and reconstruction in the face of the ongoing COVID-19 pandemic offers South Africa a rare opportunity to change course, tackle the climate crisis and ensure long-term, environmentally sustainable prosperity.

Findings from in-depth modelling exercises – undertaken in collaboration with global partners, including Cambridge Econometrics, the United Nations Environment Programme (Unep) and the International Labour Organisation’s Partnership for Action on Green Economy – reveal that by focusing on green economic recovery measures, South Africa can reconstruct its economy in an improved and more inclusive way.

The country can also achieve higher economic activity and increase employment while allowing for significant cuts in carbon dioxide (CO2) emissions. Without strong green economic policies, South Africa will see an increase in already high CO2 emissions, thus reducing economic activity and employment opportunities.

Putting in place green economic recovery measures is not only the right thing to do, but the best thing to do in the face of the stark reality of climate change. There is no shortage of evidence of this. The latest Intergovernmental Panel on Climate Change (IPPC) report has emphasised the adverse effects of rising temperatures. It is indisputable that human behaviour has contributed to climate change and global heating. We have reached a tipping point — the world must limit global heating to below 2°C and ideally 1.5°C by 2050.

South Africa is a significant polluter and is among the top 15 countries in terms of greenhouse-gas emissions worldwide. Electricity generation is the biggest contributor to greenhouse gases in the country (more than 40%), followed by industry, transport and agriculture. Carbon dioxide makes up 85% of the gases that we emit. These statistics show that it is imperative that the country takes considerable action to green its economy.

In going green in South Africa, two things have to be taken into account: biodiversity conservation must be a key factor in all policies, as we depend on this for our survival; and the green economic recovery plan must be inclusive. It must advance gender equity and consider the fact that women have been hit hardest in terms of job losses as a result of the pandemic.

A green economic recovery plan that seeks to reduce CO2 emissions can also yield economic benefits. Numerous studies show the benefits of carbon taxation on reducing emissions, and that a well-designed carbon tax and revenue recycling scheme is likely to achieve a triple dividend of reducing emissions, increasing economic growth and lowering poverty in the long run.

South Africa has no shortage of green economic policies and ambitions, two of which are the Integrated Resource Plan and the Nationally Determined Contributions Report. The latter was submitted to the UN Framework Convention on Climate Change ahead of COP21. The report contains information about South Africa’s targets, policies and measures for reducing national emissions and adapting to climate change impacts.

In September 2021, South Africa updated its Nationally Determined Contributions, which are more ambitious than its projections in 2016, when the country produced its first report. In the latest report, the projection is that by 2025, South Africa’s peak CO2 emissions will have reduced to 510 metric tons, accounting for a 17% reduction in emissions in relation to its 2016 ambition. By 2030, the country would have a peak of 420 metric tons – a 32% reduction from what was projected in the 2016 report.

Ambitious as this may be, South Africa still has a long way to go. Worryingly, the evidence on the ground is not encouraging. There is still a lot of work to be done in tackling climate change. Renewables have increased very slowly, while coal still dominates. This is a major concern. The World Economic Forum’s latest Energy Transition Index shows that South Africa does not appear to be serious about reducing its emissions. The country is ranked 110 out of 115 countries in the world in the index. Hopefully, this picture will improve substantially.

There is some increase in momentum towards finding a different path. In October 2020, President Cyril Ramaphosa launched his stimulus package, the Economic Reconstruction and Recovery Plan (ERRP), in which there are signs that it is time to move away from business as usual and towards a more sustainable growth path that is pro-poor and pro-environment.

To assess the viability of this plan, the University of Pretoria worked with a team at Cambridge Econometrics to analyse the green versus the non-green economic recovery potential for South Africa, using the Cambridge Econometrics global E3ME energy-economy-environment model. We modelled the impact of the country’s ERRP and analysed the long-term plans to determine environmentally sustainable ways that would offer South Africa prosperity without reducing production.

On green elements, we homed in on electricity, as it is the most significant polluter in South Africa, focusing on investments in renewables, and analysing their contribution to growth, employment and the environment. We also modelled an additional “green push” scenario to offer policymakers evidence of the implications of a more ambitious green economic recovery. Additionally, we focused on renewables, pushing further subsidies on renewables, grid investments and improving energy efficiency.

The results showed that the stimulus package would enable South Africa to recover faster than without it. Both growth and employment would increase due to non-green investments as well as the green components of the ERRP. Furthermore, the green push would allow for increased growth and employment. However, non-green elements would quickly lead the economy back to pre-pandemic emission levels. Green elements, on the other hand, would lead to reduced emissions, with the green push moving South Africa rapidly toward meeting its 2030 emissions projections.

The team concluded that green growth policies would substantially contribute to economic growth and subsequently create more employment while protecting the environment. What was also clear was that some sectors, such as the extractive industries, would suffer job losses due to reduced coal mining. It is thus imperative to put in place just transition policies and measures if such a growth path is to be followed. No one should be left behind.

However, for this to happen, we need funding for a green push. The stimulus package is one source, and there is the $8.5 billion (about R133 billion) available to South Africa for greening from the US and Europe, but it is not enough to drive economic growth in the country. We need developed countries to significantly increase their investments in South Africa.

There is a real opportunity to contribute towards South Africa’s economic growth and save the planet. Our research and results are available and can be used for policy and to contribute to a green economic recovery, a green employment path, environmental sustainability and move South Africa towards net-zero emissions.