Coal can handicap exports — Creecy

SA’s just energy transition plans do not suggest a rapid phasing out of coal as the primary fuel source for energy generation. However, without a gradual transition to low-carbon energy, the country will struggle to export goods and services that have a large carbon footprint, according to forestry, fisheries & environment minister Barbara Creecy.

SA’s just energy transition plans do not suggest a rapid phasing out of coal as the country’s primary fuel source for energy generation.

However, without a gradual transition to low-carbon energy, which would include a move away from coal towards renewable sources of energy, the country will struggle to export goods and services that have a large carbon footprint, according to forestry, fisheries & environment minister Barbara Creecy.

In an interview with Business Day, Creecy said that she had already been told by India and Italy, who consume most of SA’s forestry fibre, that unless the carbon footprint of forestry fibre was reduced by half by 2030, “we will have to find somebody else”.

The same applies to the country’s car industry, which contributes 3%-5% to GDP.

“The EU has said that from 2035, they will no longer accept imports of internal combustion engine vehicles. This means that if we want to protect our vehicle industry in the long term, we’ve got to be able to switch to the production of electric vehicles,” said Creecy.

In addition, implementation of regulations by the EU that will penalise exporters from highemission countries through the introduction of carbon border taxes could soon pose a barrier to trade for SA businesses that rely on coal-fired electricity.

As part of the European Green Deal, the EU will phase in the Carbon Border Adjustment Mechanism 2023 and 2026. This will present a risk for SA exports to the EU that are now valued at about R300bn a year.

According to Creecy, as these regulations start taking effect, goods and services produced under a high carbon footprint will no longer be competitive in international trade.

SA produces about 87% of its electricity from coal and it has the most emissions-intensive power sector among G20 countries, according to the 2022 Climate Transparency Report.

“We can ... say, we have coal, we love coal, and we’re sticking with [it]. [But] the consequence of that is going to be that by the mid-2030s, we are going to struggle to export our goods and services.”

Developing the capability to manufacture electric vehicles is one of the main pillars of SA’s Just Energy Transition Investment Plan (JET-IP) that was launched at the UN climate conference COP27 in Egypt in early November.

The JET-IP, developed by the Presidential Climate Task Team under the leadership of Daniel Mminele, focuses on three priority sectors — electricity, electric vehicles and green hydrogen.

An estimated R1.5-trillion will be needed to implement the plan over the next five years.

But, Creecy said not all of the money will have to come from grant financing.

The funds can also be raised through concessional loans and private investment because “a lot of that work (detailed in the plan) is going to happen in the private sector”.

During a media briefing at COP27, President Cyril Ramaphosa expressed the country’s disappointment that, according to initial proposals, only about 2.7% of the $8.5bn pledged by SA’s partner countries in the Just Energy Transition Partnership (JETP) would be provided in the form of grants.

The rest will be loans and concessional loans from development and commercial finance institutions, Ramaphosa said.

PARTNERSHIP

The JETP, announced at COP26 in November 2021, is a partnership between SA, France, Germany, the UK, US and the EU to support SA’s transition to a low-carbon economy and specifically the decarbonisation of SA’s coal-reliant energy sector.

Funding partners have pledged to mobilise an initial $8.5bn over the next three to five years.

SA’s revised nationally determined contribution (NDC) submitted at COP26 committed the country to reduce domestic carbon emissions within a target range of 350Mt to 420Mt of carbon dioxide equivalent by 2030, and to achieve net-zero emissions by 2050.

That would be a reduction of about 20%-33% from present emissions by 2030.

The more international support SA receives, the closer the country can get to reaching the more ambitious target to cut about 33% of emissions by 2030, but with limited support the country is likely only to reach a less ambitious target closer to a 20% reduction in emissions, said Creecy.

“If we have to rely on our own resources, we will also get within our NDC range, but we want to get to the best place in the range.”