Balancing economic growth and sustainable development

What are the challenges preventing developing countries from setting up ambitious green targets? How to shift domestic energy  economy away from coal? This article tells about the South African path towards green growth, explains strengths and challenges of this process and what makes difficult for South Africa -  the world’s 11th largest carbon emitter – to balance growth and sustainable development. 

by Romy Chevallier

Linking economic growth to environmental protection and sustainable resource consumption is a pressing challenge, especially for countries whose economic production and consumption patterns are largely based on coal. For South Africa, and others in the developing world, a move away from fossil fuel dependence presents an additional economic challenge and it is often seen to detract from their current (and pressing) development agendas. Other barriers also exist, particularly in light of insufficient financial support and costly energy alternatives; inadequate infrastructure; low human and social capital; institutional fragmentation; incomplete property rights and subsidies; regulatory uncertainty; barriers to competition, as well as insufficient local demand for green innovation. Many of these challenges prevent developing countries from setting ambitious mitigation commitments and movement in these areas is often the result of concerns around a shortage of electricity and energy security.

However, the 2011 OECD Green Growth Report states that a shift towards a green economy has sizeable job creation potential – especially with regards to the expansion of the renewable energy industries – stating that ‘20 million jobs could be created globally by 2030 in renewable energy generation and distribution’. Drawing on the parallels between global green growth and local realities, Africa needs to urgently investigate these benefits and if the predications hold true, they need to work towards fostering the necessary conditions for innovation, investment and competition that can give rise to new sources of economic growth and energy efficiency, consistent with resilient ecosystems.

The OECD report states that renewable energies will develop to a considerable extent and that associated job losses from the polluting industries are only likely to be a small portion of the total workforce.  Indeed, while the most intensely-polluting industries account for a large share of carbon dioxide emissions, they account for only a small share of total employment. Overall, most studies agree that the restructuring of the energy sector towards a cleaner energy mix has the potential to generate sizeable net employment gains. This is because the renewable energy sector generates more jobs per unit of energy produced, and per dollar of investment, than the fossil fuel-based energy sector. These socio-economic benefits of renewable energies, mixed with increased community participation and locally-owned resources, represent a potential opportunity for a large carbon dioxide-emitting, developing country like South Africa.

This international ‘greening response’ needs to be tailored towards unique national circumstances and individual stages of development. South Africa's New Economic Growth Path sets an ambitious target of creating five-million jobs and reducing unemployment from 25% to 15% by 2020. ‘Green jobs’ also forms part of South Africa’s New Industrial Policy Plan. The vision is to have an industrialisation trajectory that promotes labour-absorbing industrial sectors, with an emphasis on economic linkages that promote job creation, especially for those historically disadvantaged people and regions marginalised from the mainstream economy. This includes the promotion of labour-intensive industries such as mineral beneficiation. Energy experts predict that in the short-term the main source of job creation will come from the installation and maintenance of renewable energy technologies such as solar-water heaters and solar panels. In this regard, national policies and incentives are now being designed to increase South Africa’s local contribution to solar, wind and biomass energy technologies. South Africa’s Integrated Energy Resource Plan (20 year electricity capacity plan) and its Renewable Energy Procurement Programme have raised future solar energy targets by a substantial amount, accounting for 8400 MW of new capacity on the power grid by 2030. If one also includes other renewable energy sources, 42% of new South African electricity over the next 20 years will come from renewable energy. Coal is now expected to make up 15 percent of all new energy generation, open cycle gas turbines 9 %, hydro 6 %, imported gas 6 %, while nuclear will be 23 %.

Also, South Africa’s National Climate Change Response White Paper (approved by National Cabinet in October 2011), among other things, aims to expand the countries scientific and research capacity to build innovative green technologies. There is a need for South Africa to urgently strengthen the local manufacturing capacity of renewable energy components. This in turn will have sizeable job creation benefits.

South Africa has set exemplary climate change targets under the Copenhagen Accord, committing to reduce its emissions by 34% against business-as-usual by 2020 and by 42% by 2025. After all, South Africa, as the world’s 11th largest carbon emitter, has important mitigation responsibilities. However, these targets will be impossible to meet without long-term changes in its current patterns of economic growth and without the transformation of the domestic energy economy away from coal. Despite attempts made for long-term energy planning and the greening of policy, further integration of national energy planning is required and the urgent implementation of its renewable energy targets. 

There is also a need to further transform the institutional and regulatory environment to allow for the greater participation of clean electricity suppliers in a market (currently dominated by South African parastatal, Eskom). Government fiscal and regulatory interventions are necessary to incentivise the uptake of green industries, such as the renewable energy feed-in tariff, or to penalise those not willing to comply (in the form of carbon tax and levies). Also, it is essential that the government remove policy barriers and fossil fuel subsidies that hamper progress towards a viable green economy. These decisions need to be made in consultation with key sectors and companies, including mining, Eskom and Sasol, as well as the cement, paper, liquid fuel, chemical and manufacturing sectors. 

Substantial headway has been made within the last year on policy harmonisation and legislation. The engagement of policymakers on the desirability and viability of a green development growth path has increased substantially. There has also been an increase in the commitment shown from the business sector and from financial institutions as key enablers of green technologies and innovation. Media and civil society need to elevate and broaden this debate within South African society. Fostering a culture of ‘green entreneurship’ to further encourage green investments will ultimately support local businesses initiatives and move the country towards diversifying its economy away from its reliance on coal and mining exports, to build a more resilient economy.

If South Africa is to truly adopt this green strategy it will need to urgently redefine its competitive advantage and structurally transform its economy. This must happen by either shifting from an energy-intensive to a climate-friendly path or rather, by encouraging an energy intensive path that uses climate-friendly energy sources. Job creation needs to underpin all these decisions. An enabling domestic and international framework and progress at the multilateral level will also assist South Africa in meeting these goals. 

 

Romy Chevallier is a senior researcher for the Governance of Africa’s Resources Programme at the South African Institute of International Affairs (SAIIA). 

 

Photo: J. J. Verhoef/flickr