Greening SA’s economy is a way to combat unemployment and poverty

By Professor Margaret Chitiga-Mabugu, Dean of the Faculty of Economic and Management Sciences at the University of Pretoria.

Climate change comes with detrimental economic effects – and as one of the biggest polluters in the world, South Africa is not absolved from this reality, given its ailing economic growth in recent years. This calls for a new “green impetus”.

Findings from modelling exercises reveal that by focusing on green economic recovery measures, SA can reconstruct its economy in an improved, more inclusive way. We can also achieve higher economic activity and increase employment, while allowing for significant cuts in carbon dioxide (CO2) emissions.

SA 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 (over 40%), with carbon dioxide making up 85% of the gases we emit.

A green economic recovery plan that seeks to reduce CO2 emissions can also yield economic benefits. Studies show the benefits of carbon taxation on reducing emissions, and that a carbon tax and revenue recycling scheme is likely to reduce emissions, increase economic growth and lower poverty in the long run.

SA does have green economic policies and ambitions. The updated 2021 Nationally Determined Contributions Report includes more ambitious projections than the initial 2016 report: by 2025, SA’s peak CO2 emissions will have reduced to 510 metric tons (a 17% reduction in relation to its 2016 ambition) and by 2030, we’ll peak at 420 metric tons (a 32% reduction).

But, SA still has a long way to go. Renewables have increased very slowly, while coal still dominates. According to the World Economic Forum’s latest Energy Transition Index, SA is ranked 110 out of 115 countries worldwide.

Yet, there is some increase in momentum towards finding a different path. The Economic Reconstruction and Recovery Plan (ERRP) launched in October 2020 showed signs of movement towards a more sustainable growth path that is pro-poor and pro-environment.

To assess the viability of this plan, researchers from UP and Cambridge Econometrics analysed the green versus the non-green economic recovery potential for SA. We modelled the impact of the ERRP and analysed the long-term plans to determine environmentally sustainable ways that would offer SA prosperity without reducing production. We concentrated on electricity, focusing on investments in renewables and analysing their contribution to growth, employment and the environment. We also modelled a “green push” scenario.

The results showed that the stimulus package would enable SA to recover faster than without it. Economic growth and employment would increase with non-green investments and the green components of the ERRP, and be boosted with the green push. Green elements would lead to reduced emissions, and the green push would move SA rapidly towards reaching its 2030 emissions projections. Some sectors would suffer job losses due to reduced coal mining, so it is imperative that just transition policies are put in place if a green growth path is to be followed.

For this to happen, we need funding. The stimulus package is one source, and the US and Europe have made R130 billion available to SA for its greening agenda, but it is not enough. Developed countries need to significantly increase their investments in SA.

There is an opportunity to contribute towards SA’s economic growth and save the planet. Our research can be used for policy formulation to contribute to a green economic recovery and employment path, environmental sustainability and move SA towards net-zero emissions.