South Africa’s reliance on coal – once a competitive advantage because it allowed the country to produce electricity cheaply – now poses significant risks.

This is according to President Cyril Ramaphosa addressing delegates during the Climate Resilience Symposium at the Council for Scientific and Industrial Research International Convention Centre in Tshwane on Monday, July 15. His speech highlighted the urgent need to transition to sustainable energy sources to mitigate climate change impacts and drive economic growth.

“The reality we must confront is that the carbon intensity of our economy is unsustainable,” he said.

As global markets shift towards greener economies, South Africa’s emissions-intensive energy system threatens its competitiveness. “Instruments like the European Union’s Carbon Border Adjustment Mechanism, which has potential to cause great damage to developing economies, signal the inevitability of carbon pricing in global trade systems,” added Ramaphosa.

He reiterated that South Africa would decarbonise at a pace and scale that is affordable to its economy and society. “If we act too fast, we risk damaging huge sections of our economy before we have built alternative energy and industrial capabilities. At the same time, not acting now risks our economic stability. We must embrace a managed transition to a low-carbon economy.”

Carbon tax revenue

South Africa’s revised nationally determined contribution takes into account the feasibility of undertaking a climate response through a set of just transition pathways, Ramaphosa said.

“Carbon tax is a vital component of our mitigation strategy to lower greenhouse gas emissions. By internalising the cost of carbon emissions, the carbon tax incentivises companies to reduce their carbon footprint and invest in cleaner technologies.”

The carbon tax also generates revenue for climate initiatives. “These funds can be reinvested in renewable energy projects, energy efficiency programmes and social support mechanisms,” said Ramaphosa.

He also noted the success of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). “The REIPPPP has been a success, attracting over R209 billion in investment and adding much-needed capacity to our electricity grid.”

Launch of investment platform

The Just Energy Transition Investment Plan is at the core of this strategy and involves an investment of around US$98 billion in grid infrastructure, green hydrogen, electric vehicles, economic diversification, skills development and more, Ramaphosa said.

He called for innovative financing solutions and international cooperation to support the energy transition. “Mitigation and adaptation financing remains a challenge. We call on our international partners to fulfil their commitments to finance both. National Treasury’s Climate Finance Strategy is pivotal in this regard, outlining how we can leverage public and private finance to achieve our climate goals.” He also noted the importance of domestic capital and financial markets in mobilising resources for the just transition.

The Just Energy Transition Funding Platform will be launched in the next few months, Ramaphosa pointed out. “It will be an important precursor to a broader Just Transition Financing Mechanism – proposals for which are being developed by the Presidential Climate Commission. International development finance institutions and governments of the Global North, which made financial pledges under the Paris Agreement and COP26, are important sources of cheap and concessional capital. To access this and other funding, we need a credible project pipeline.”