South Africa is setting itself on the path to a low-carbon future, with the national government having accepted its Long Term Mitigation Scenarios as a basis for new strategies. In the meantime, the country is the largest carbon emitter on the African continent, depending on coal for 90% of its electricity needs, and for synfuels manufactured by Sasol.
Sasol and Eskom have recently been labelled SA's duopoly in emissions, and the reality of their dominance in the country could have implications for a future local carbon market by limiting liquidity. As in any market, insufficient activity (which can result in uncertainty and volatility) is bad for business. And for the local market to tie in with international carbon trading mechanisms, it needs to be a healthy one. Perhaps this is another reason for establishing a regional market rather than independent national ones, particularly as smaller economies in Southern Africa will struggle on their own.
While the carbon market is ultimately intended to reduce emissions globally, part of the UN's intention is to raise cash for climate-related projects in developing countries. These countries therefore need to know what they want in terms of development, since projects will influence economic direction and community wellbeing.
An appropriate approach to development is key to ensuring that the South slows its emissions, and is able to adapt to climate change at the same time. Countries pursuing growth at all costs, without regard to their particular circumstances, will find themselves unable to reap the benefits. Without developing low-carbon industries, some sectors are likely to find themselves locked out of international markets. And without a more detailed articulation of a development agenda, they may also risk being pressured, under future carbon offset agreements, to invest in projects that might be low-carbon but not useful for job creation or other policy objectives.
South Africa in the recent past has shown an unsettling willingness to encourage what seem to be inappropriate industries. This suggests a lack of coordinated effort towards shared policy objectives among government sectors. Last December Earthlife Africa pointed this out:
While the Minister [van Schalkwyk] is taking part in the international negotiations, SASOL and the IDC are working their way towards starting construction on a new 80,000 barrels coal-to-liquids (CTL) plant, to be built in Limpopo... SASOL produces 72 million tons of CO2 a year, and its Secunda CTL plant is the world’s single biggest emitter of CO2 on the planet. For every 100 atoms of carbon that enter a CTL plant, roughly 70 of those atoms leave the plant as CO2. Essentially, SASOL’s primary product is CO2, with petroleum as a by-product.
Yesterday's Business Report raises other inconsistences in the transport sector that present challenges. One is that while the Department of Trade and Industry is trying to keep jobs in the automotive sector (about 100,000 in vehicle and component manufacture and another 195,000 in the vehicle-related retail sector), the same arm of government is trying to change its industrial policy to establish a low-carbon economy. Government is also planning to encourage lower vehicle emissions, but has done nothing to encourage the oil industry to convert from Euro 2 to Euro 4 fuel emissions standards.
And the current frenzy of infrastructure development across the country might be creating jobs, but many of these projects are designed to make it easier to travel by car - while it is a strong policy objective at all levels of government to encourage a shift from private to public transport.
If South Africa, with its economic strength and developed infrastructure, cannot develop a more consistent and equitable approach to development, one wonders how under-resourced countries will be able to resist pressures to implement projects that might be to their detriment.
The global financial crisis is an opportunity to invest in efficiency, with the dual benefit of reduced carbon emissions and business costs. It's more cost-effective than investing in renewable energy in the short term, and there is huge potential for improving energy efficiency in many sectors. So technology transfer to developing countries for climate change mitigation (as agreed under the Kyoto Protocol) should focus on growth with reduced energy demand rather than on trying to feed exponential growth in demand with new power sources. It's not clear to me, however, whether efficiency will be as attractive to investors as projects that generate energy from renewable sources. I don't think there has been much emphasis on investment in efficiency under the CDM so far - if I am not mistaken, most CDM projects are for new sources of renewable energy rather than for reducing demand.
That said, where new energy generation is contemplated, it should certainly be low-carbon as far as possible. And while Eskom is actively planning new coal power stations (in SA and in neighbouring Botswana), it is now also considering a solar thermal generator as a baseload plant - the first acknowledgement by the electricity utility that solar can do more than toy around on the sidelines. Not only that, but Eskom's climate change and sustainability manager Mandy Rambharos says a 100MW solar plant could be built within 18 months. That is a far quicker than any conventional plant.
South Africa's chief director of air quality management and climate change at the Department of Environmental Affairs and Tourism, Peter Lukey, has stated that South Africa has more solar energy than any other place in the world. The country's total energy reserves of coal, at 1.2 TJ, constitute a mere 15% of the country's yearly solar potential of about 1.6 TJ. And there's plenty of opportunity for wind power.
The paucity of projects in South Africa (indeed in all of Africa) under the Clean Development Mechanism is not from lack of opportunity. It is more likely lack of local awareness of the funding opportunity here and a related failure to seek investors. If other developing countries have managed to attract CDM projects, so can we.
But there is an additional challenge. In many cases, potential projects are too small to be worth the administrative hassle and cost. What we need is streamlining of the CDM process and an easier way to aggregate small projects together to gain economies of scale, as well as allowance for programmatic funding. With these changes (and they are being negotiated), it would be much easier to channel investment into clean projects that are indeed more appropriate developmentally.
Mega-projects rarely achieve the range of objectives that are needed in developing countries. The challenges here are greater, and call for projects that meet policy objectives across multiple sectors of governance. Government is strongly focused on the need for benefits to be equitably distributed; big, single-issue projects simply cannot make that happen.