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Cleaner Energy Cooler Climate: Developing sustainable energy solutions for Africa

Cleaner Energy Cooler Climate: Developing sustainable energy solutions for Africa

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By Harald Winkler. Publshed by HSRC Press.
http://www.hsrcpress.co.za
http://hsrcpress.book.co.za/blog
http://lwb.book.co.za/blog
By Harald Winkler. Publshed by HSRC Press.
http://www.hsrcpress.co.za
http://hsrcpress.book.co.za/blog
http://lwb.book.co.za/blog

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Published by: LittleWhiteBakkie on Sep 16, 2009
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07/03/2013

South Africa’s climate change policy is still in the early stages of formulation and is
influenced by views from different interest groups. Early climate mitigation policy
took a strict ‘no regrets’ approach, refusing to contemplate any actions other than
those that were beneficial even without climate change. Recently, the National
Climate Change Response Strategy (DEAT 2004) put sustainable development at the
centre, providing the basis for a more proactive engagement with the international
climate framework (Van Schalkwyk 2005a).

South Africa’s Climate Change Response Strategy (DEAT 2004) is centred on the
concept of sustainable development. The analysis in this book suggests specific ways
in which this policy can be realised. Policies that make energy development more
sustainable are the core of the national climate change mitigation policy proposed
here. The earlier sections of this chapter summarised the choices available in the
residential demand and electricity supply sectors. Together with similar policies in
other economic sectors, these could constitute national climate policy.

To be called sustainable, climate policy must take a long-term view and consider
the durability of the proposed solutions. South Africa’s climate policy will be more

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cleaner energy cooler climate

222

‘durable’ (Munasinghe & Swart 2005) if it does not give sole priority to reducing
costs, but also achieves social and local environmental benefits. The policies
modelled, evaluated and analysed in the preceding chapters can make important
contributions to both energy and climate policy.

Figure 8.5 shows the emissions avoided in each of the residential policy cases – that
is, reduced from the emissions level in the base case. The upwards movement in all
cases between 2018 and 2020 seems to be an artefact of a sharp increase in generation
from two pumped storage plants (Steenberg and Palmiet). The largest reductions are
seen in the combined, the efficient housing and the SWH/GB cases, in that order. In
the simple estimate of abatement costs in Chapter 7, the efficient housing case was
also the most cost-effective.

The efficient housing and SWH/GB cases are ‘win-win’ opportunities, reducing local
air pollutants, economic costs and the burden on households. What can be seen from
Figure 8.5 is that emissions in the order of 1 to 10 Mt CO2-equivalent per year can
be avoided through these policies.

Figure 8.5 GHG emissions avoided in residential policy cases

The avoided emissions in the case of efficient houses constitute 1.2 per cent of the
emission of GHGs (carbon dioxide, methane and nitrous oxide) compared to 2025

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developing sustainable energy for national climate policy

223

emissions in the base case. For comparison, they amount to 1.9 per cent if divided
by 2001 emissions in the base case. Energy policies such as efficient housing and
SWH/GB should make up an important component of South Africa’s climate policy.
They are cost-effective and address social sustainability, local environmental issues
and GHG emissions.

The scale of emission reductions that might be required in the future, however, will
need to come from higher-emitting sectors. Emissions in the base case are projected
to increase 80 per cent from 2001 to 2025. The electricity supply sector is central in
this regard, accounting for 48 per cent of South Africa’s carbon dioxide emissions
and 37 per cent of all GHGs (RSA 2004; Van der Merwe & Scholes 1998).

Avoided emissions for electricity supply options are shown in Figure 8.6, again
showing the difference of emissions between policies and the base case. The scale
of avoided emissions is indeed larger, reaching up to 50 Mt CO2 per year in the
combined case. If South Africa is to make a contribution to the emission reductions
of 50 to 70 per cent from current levels which the science tells us is required (IPCC
1995), then changes in this sector will be needed.

Figure 8.6 GHG emissions avoided in electricity policy cases

The combined policy case shows the largest absolute emission reductions, followed
by the PBMR. As will be recalled from Chapters 7 and 8, however, the investment
costs associated with these two cases are larger than for others. The two domestic
cases reduce 5 per cent of the emissions projected for the base case in 2025.

Simple estimates of abatement costs indicated that renewables are most cost-effective
in achieving larger-scale emission reductions, slightly cheaper at R2.5 per t CO2 than

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cleaner energy cooler climate

224

the PBMR at R2.9. Even the relatively higher costs of the combined case (R4.8) and
the two import cases (R3.9 for hydro and R5.6 for gas) are well below market prices
for carbon.

Table 8.3 Order of magnitude of carbon revenues for different carbon prices

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both combined cases

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The first row of Table 8.3 adds up the values of avoided emissions from the two
combined cases – in other words, avoiding double counting of reductions. The
carbon price is set at three values, with €10 per t CO2 being close to 2005 prices, and
expected higher levels in future represented by modest increases to €20 and €30 per
t CO2. Further assuming a fixed exchange rate at R8 per €1, revenues in the order of
rand millions to rand billions per year are possible (over R10 billion in 2025 at €30
per t CO2).

What is not clear is whether South Africa would be able to sell credits for avoided
emissions as currently through the CDM. By 2025, South Africa might need to
reduce emissions to meet a future commitment of its own. This question raises the
implications of the policies described so far for the future of the international climate
change regime, which is considered in Chapter 9.

The implications of energy policies for sustainable development for domestic climate
policies are twofold. Firstly, residential energy policies permit the growth of energy
services and reduce the costs of those services, but also reduce local environmental
pollution and provide social benefits. These policies, in particular efficient housing
and SWH/GB, can contribute to a thrust of climate policy that is strongly allied to
social sustainability and poverty alleviation. By including these policies in an overall
portfolio, climate policy will be made more relevant to local development.

Since the absolute emission reductions achievable in this way are not adequate to
the task, a second component is needed. In the electricity supply sector, there is
potential to make development more sustainable but no clear ‘winners’ emerge that
are superior in every dimension. A long-term climate perspective is one reason to
make short-term changes to begin a long-term transition. Greater flexibility will be
needed in trading off some degree of economic optimality, in favour of both local
and global environmental benefits.

Recent analysis suggests that there may be means to soften the trade-offs. This
book focuses on the direct costs of energy policies. Complementary recent work

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developing sustainable energy for national climate policy

225

(Van Heerden et al. 2006) has examined the broader economic effects of climate
policies, including direct GHG taxes or energy taxes, using a CGE model. The use
of a CGE model means that not only direct costs are counted, but also the indirect
economic benefits and costs. However, note the limitations on the approach to GHG
analysis, as discussed in Chapter 4. The authors argue that energy in South Africa
is complementary to capital and that this factor, together with tax recycling that
increases unskilled labour demand, can produce a double or even ‘triple dividend’.
They find that recycling environmental tax revenues through reduction in food costs
is particularly effective in achieving carbon dioxide reduction, economic growth and
poverty alleviation (Van Heerden et al. 2006). Macroeconomic analysis thus provides
an indication that there may be synergies at the societal level, yet climate policy
would affect individual sectors, with winners and losers. Hence a degree of trade-off
is likely to remain.

The need for trade-offs should not be taken to suggest that no attention is paid
to economic costs. The electricity supply policies described in this book provide
options to meet environmental goals cost-effectively. And there are significant
synergies that remain, even if not all dimensions can be optimised at once. Synergies
exist in meeting goals for improving local air quality and reducing GHG emissions.
Local benefits also accrue from greater diversity, both in lessening dependence on
coal and increasing resilience by increasing the number of alternatives.

Combining residential and electricity policies would provide a mix that overall
provides a durable balance of economic development, social sustainability, and both
local and global environmental benefits. Together with other sectoral policies that
are not the focus of this book, an approach that starts from meeting sustainable
development objectives can form the core of national policy on climate change
mitigation. A strong national approach can also make a major contribution to the
multilateral effort to mitigate climate change, as the next chapter argues.

notes

1 B Bredenkamp, Efficient Lighting Initiative, Eskom manager.

2 The subsidy levels found here are consistent with earlier studies that used market prices
(Holm 2000; Irurah 2000; Spalding-Fecher et al. 2001; Spalding-Fecher, Clark et al. 2002;
Winkler, Spalding-Fecher & Tyani 2002). However, none of the previous work disaggregated
results by household type or considered the feedback effects in the context of national
energy models.

3 AD Surridge, Director: Coal and Gas, Department of Minerals and Energy.

4 J Blignaut, Professor of Economics, University of Pretoria.

5 Another attraction of the modular design is that units can be built to more closely match
supply – investment is not as ‘lumpy’ as for a PWR such as Koeberg (which has a capacity of
some 15 PBMRs). The same applies to any smaller electricity-generation options.

6 There are no investments in the first years of the model run, which starts from 2001, due to
lead times.

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226

Implications for international climate
change negotiations

Much of this book so far has focused on policies at the national level – a sustainable
development approach to climate change mitigation has clear benefits at that level.
A major advantage lies in capturing the co-benefits of climate change, whether they
lie in reduced local air pollution, savings through energy efficiency or providing
services to local communities. The question we now turn to is how such an approach
could be integrated into the multilateral framework to address climate change.

This chapter does four things. First, it sets out a variety of approaches to the future of
the climate regime, focusing particularly on dimensions of equity and development.
Second, it sets out an approach (sustainable development policies and measures, or
SD-PAMs) to international negotiations that integrates the national approach into
those negotiations. Third, some brief evidence is presented that SD-PAMs make a
difference. And finally, the approach is contextualised in the broader discussions
about the future of the climate change framework.

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