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State capture and the transition to a green economy
Posted: 02-Jul-2018
Brent CloeteState-owned corporations (SOCs), which have been particularly prone to state capture, have an important role in supporting the transition to a greener economy in South Africa. State capture can negatively impact this role, and the broader transition to a greener economy in South Africa, in several ways: State capture creates incentives for rent-seeking and corruption rather than innovation and entrepreneurship, limiting investment in the skills and capabilities required to drive transitions; it compounds existing structural rigidities and makes it more difficult for resources to migrate to where they are most useful during the transition to a low carbon economy; it reduces the capacity within public institutions to implement policies and initiatives that could support the transition. It also drains resources that could be used to support the transition; and it reduces the likelihood that the move to a green economy can reduce inequality. Read Article
Day Zero: What have we learnt?
Posted: 25-Jun-2018
Samantha MunroIn lieu of ‘day zero,’ the city of Cape Town implemented a number of water resource management measures in order to avoid a situation whereby the city would need to cut off their main water supply. While Cape Town may be the first major city in the world to potentially run out of water, water scarcity and water insecurity are issues experienced across South Africa and globally. Through this water crisis, Cape Town has managed to reduce their water demand by more than half. This article explores some of the most effective methods that were used to create more sustainable water usage and highlights some of the precautionary measures that other cities could potentially adopt and employ before a water crisis point is reached. Read Article
Measuring Green Growth in South Africa
Posted: 21-Feb-2018
Samantha MunroDespite South Africa’s efforts in transitioning to a green economy, measuring the success of the transition is hampered by lack of available indicators. While measuring the progress of green growth is not only an issue faced by South Africa, but globally, it is a critically important to enable an assessment of the impact of green policies. The transition towards a green economy is likely to provide growth opportunities, however, there may be trade-offs in terms of realising socio-economic priorities. Clear definitions, robust performance metrics, and adequate data to enable performance measurement are crucial for providing evidence of whether policies have been successful. This is particularly important for South Africa which continues to try and combat unemployment, poverty and equality while simultaneously trying to strive towards environmental sustainability. Read Article
Electricity efficiency in South Africa and the dangers of nominal data
Posted: 29-May-2017
Brent CloeteAs a follow-up to an earlier blog that considered the energy efficiency performance of the South African economy from 2000 to 2012, this blog looks at the electricity intensity of the economy from 1995 to 2015. The data not only tells an interesting story, but also highlights the dangers when using nominal data to consider the relationship between variables. Read Article
Bringing life to old mines through clean energy
Posted: 08-Nov-2016
Nolwazi SokhuluMine closures can be associated with a number of environmental and socio-economic impacts: pollution, adverse effect on human health and loss of jobs. Often mining rehabilitation is viewed as a burden by mining companies. The growing evidence of the development of renewable energy on old mining sites highlights an opportunity to re-use such spaces for positive impact. Deploying renewable energy on old sites can generate revenues, produce clean energy and create greener jobs for local communities. There are a number of international examples of successful projects developed at old mines, and South African has an abundance of old mines that could thus potentially be put to good use once again.Read Article
Discounting Climate Change: When Discount Rates Fail Public Policy
Posted: 18-Oct-2016
Alex ChildOne of the central difficulties in
attempting to avoid climate change is the long-term and multi-generational
nature of the problem. The current
generation is required to incur large investment costs today which will most
likely only yield benefits for future generations. There is thus a tension
between current and future interests. This presents a problem to decision
makers as Cost-Benefit Analyses (CBA), used to make investment decisions
between potential alternative mitigation projects, require the stream of future
benefits and costs to be compared at their discounted present values. This necessitates
the use of a discount rate, the choice of which has a significant impact on the
kinds of projects that will seem justifiable to the current generation and thus
what kind of world future generations inherit.
Behavioural Economics and the South African Carbon Tax
Posted: 18-May-2016
Alex ChildThe Draft Carbon Tax Bill released towards the end of last year outlined the design of a carbon tax to be implemented in 2017. Rather than a low and escalating carbon tax, as is often recommended in carbon tax literature, the Treasury proposed a complicated carbon tax structure with a headline carbon tax rate of R120/tCO2e and a number of discounts that significantly reduce the effective tax rate. Insights from the field of behavioural economics, however, suggest that there may be method to the Treasury’s seeming administrative madness.
Read ArticleProposed SA Carbon Tax: International Context
Posted: 16-Nov-2015
Brent CloeteOn 2 November 2015 the National Treasury released the Draft Carbon Tax Bill for public comment. Comment is due by 15 December. This is the first in a series of blogs to be published by DNA Economics related to the proposed carbon tax, and focuses on the level of the carbon tax in relation to existing carbon pricing schemes internationally.
Read ArticleWarning to Eskom’s residential consumers: your electricity bill may need closer scrutiny
Posted: 27-Nov-2015
Nolwazi SokhuluThe blog aims to highlight inconsistencies in Eskom’s newly introduced bill estimation policy observed from the writer’s household bill. It highlights the non-transparent manner in which this policy was introduced and raises questions about Eskom’s underlying motives for doing so. Eskom’s residential customers are urged to carefully assess their energy usage and if necessary direct any questions to the utility. Read Article
Energy efficiency offers more than just energy savings and lower carbon emissions
Posted: 16-Nov-2015
Nolwazi SokhuluEnergy efficiency has traditionally been associated with energy interventions and policy. The multiple benefits approach seeks to broaden our understanding of energy efficiency by highlighting the wider social and economic gains that can be achieved by government and business through energy interventions. Given the current energy crisis in South Africa, and the country’s sluggish growth performance, it is important that we look beyond conventional supply measures, and also consider the immediate and wider benefits from energy efficiency that might be derived from demand-side management tools.
Read ArticleTime for a renewed focus on the EGS sector in Southern Africa
Posted: 28-May-2015
Yash Ramkolowan and Brent CloeteAfter a long lull in developments in Environmental Goods and Services (EGS) trade policy, there is increased impetus globally to liberalise the EGS sector. South Africa’s relatively advanced position in the EGS market within Southern Africa makes it well placed to drive the reduction of barriers to EGS trade in the region. However, this requires a deeper understanding of the regional EGS market and the barriers constraining its growth.Read Article
Fracking the Karoo: many uncertainties remain
Posted: 11-Nov-2014
Brent Cloete and Nolwazi SokhuluThe discourse surrounding the possible exploitation of shale
gas from the Karoo Basin has focused on emphasising its likely benefits
(trumpeted by government and energy sector insiders) and costs (the focus of
environmental groups and concerned citizens). A rigorous assessment of these
expected costs and benefits, however, is currently lacking. On the benefits
side, two factors in particular, namely the size of the shale gas resource and
the impact of the possible greater integration of the South African market for
natural gas with international and regional markets, do not seem to have
received sufficient attention.
A cost-benefit analysis is only as good as the assumptions
that underlie it. If a rigorous assessment of the relative merits of exploiting
Karoo Basin shale gas is to be undertaken, it is important that these two
factors (amongst other critical assumptions – on both the cost and benefit side
of the analysis) are considered in detail.Read Article
South Africa’s energy efficiency performance since 2000
Posted: 05-Nov-2014
Brent CloeteThe National Energy Efficiency Strategy (NEES) released in 2005 set a national target for energy efficiency improvement of 12% by 2015 compared to a 2000 baseline. This monitoring system envisaged to accompany the roll-out of the NEES, however, is still under development and there has been no monitoring of the NEES to date. This makes it difficult to rigorously assess progress towards meeting this target. Consequently this blog provides a non-rigorous glance at what the available data can tell us about South Africa’s energy efficiency performance between 2000 and 2012.Over this period, energy intensity decreased by 13.2 percent and electricity intensity by a whopping 25.4 percent.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.Read Article
Public awareness of carbon taxes - the blindside remains
Posted: April 22, 2013
Brent CloeteSomewhat against expectations, the National Treasury
announced the implementation date for the proposed South African carbon tax in
the recent budget. In my last blog post (Nov 2012),
I
mentioned that public awareness of carbon taxes (crudely approximated
by the
frequency of Google searches) has been declining steadily since the
run-up to
the implementation of the CO2 vehicle emissions tax in September 2010.
This blog explores whether anything has changed since November last
year, especially in reaction to this new announcement.
Read Article
Public awareness of carbon taxes - beware the blind side
Posted: November 28, 2012
Brent CloeteEver since the National Treasury published its discussion paper on environmental reform in 2006, a carbon tax has been on the cards in South Africa. In this year's National Budget, it was mentioned that a carbon tax would be formally announced in the 2013 National Budget and implemented before the end of the 2013-14 fiscal year. Given the public outcry that preceded the planned implementation of the e-toll system in Gauteng in April this year (despite the e-tolls first being announced by Sanral in March 2008, and the first indicative tariffs being published in February 2011), it is prudent to consider whether the South African public is prepared for, or even aware of, the impeding carbon tax. One readily available metric for measuring public awareness is the number of web searches devoted to a topic. Read Article
Infrastructure investment and the risk of carbon lock-in
Posted: July 02, 2012
Brent CloeteInvestment in infrastructure in South Africa peaked in 1981,
and then languished for two decades. From 2000 onwards, gross fixed capital
formation increased dramatically, doubling in a period of 8 years. In the wake
of the global financial crisis of 2008 investment levels dropped somewhat, but as
a result of the FIFA 2010 World Cup and the related infrastructure projects,
remained at a high level. South Africa's infrastructure investment drive has
been spearheaded by public
corporations. Whereas the spending patterns of general government and private
business have remained relatively stable since 2000, investment by public
corporations has risen sharply, and this largely explains the recent rise in
overall capital formation.
Even after a decade of accelerating infrastructure
investment, South Africa still faces an infrastructure backlog that is now
acting as a major constraint on economic growth. It is no wonder then that a
substantial expansion in infrastructure investment was one of the central
themes of the 2012 Budget. Failing to consider future climate change policies
when investing in infrastructure, however, may lead to suboptimal long-term outcomes.
Read Article
Reflecting on the Treasury's latest Carbon Tax proposals
Posted: February 28, 2012
Brent CloeteThe Minister of Finance on Wednesday reiterated in his budget speech that the need for carbon pricing in South Africa is accepted. This should not have surprised anyone - the fact that a carbon tax was on the cards was clearly signalled in last year's budget and a discussion paper dealing with carbon taxes in South Africa was released in December 2010. What was more surprising, however, was that the implementation date for a carbon tax, its proposed design features, and its suggested levels were included in the Budget Review. The 2011 Budget Review did mention that the design features and implementation schedule for a carbon tax would be announced in the 2012 Budget, but this was scheduled to follow the publication of an updated carbon tax policy paper for public comment in November 2011. The revised carbon tax discussion paper will now only be published in 2012. Until the Carbon Tax Policy Document is released uncertainty remains on how exactly the proposed carbon tax design features mentioned in the 2012 Budget Review will be implemented. This blog post aims to provide some initial reflections on the latest proposed carbon tax design features and highlight some of the uncertainties that remain. Read Article
SA needs to find a shared vision on carbon tax
Posted: August 01, 2011
Brent Cloete, Emily Tyler and Saliem FakirThe release of National Treasury's carbon tax discussion document late last year raised carbon pricing higher on the economic agenda. The private sector is against a carbon tax, calling for an emissions trading scheme instead. Read Article
Carbon tax on cars off to a bumpy start
Posted: October 15, 2010
Contributed by Brent CloeteSouth Africa's new CO2 emissions tax aims to encourage the purchase of fuel-efficient vehicles. The tax applies to domestic sales of new passenger cars and is levied at R75 (before VAT) for every gram of CO2 emitted per kilometre driven (g/km) above a threshold of 120g/km. The tax will be extended to double-cabs in March 2011 (at R100 a g/km above 175g/km) and other light commercial vehicles will follow. Minibus taxis may be included in future. The National Treasury is also considering the use of annual vehicle licence fees, differentiated by emissions levels, and higher fuel levies to incentivise people to switch from their current cars to more fuel-efficient alternatives. Read Article
