Minister Barbara Creecy: Launch of a Research Publication

A keynote address by Minister Barbara Creecy at the launch of a Research Publication: A just transition to a low carbon future in South Africa, Thursday, 24 February 2022

Programme director: Dr Nqobile Xaba;

Mr Joel Netshitenzhe – Executive Director of the Mapungubwe Institute for Strategic Reflection (MISTRA);

Mr Saliem Fakir- Executive Director- African Climate Foundation;

Ladies and Gentleman,

Thank you program director.

At the outset allow me to thank the Mapungubwe Institute for Strategic Reflection (MISTRA) for the invitation extended to me to share insights on a Just Transition Framework for South Africa.

United Nations Secretary General Antonio Guterres has described the climate emergency as the defining issue of our time, arguing that the shocks resulting from climate change not only damage the environment on which we depend, they also weaken our political, economic and social systems.

Concern for the climate crisis is no longer confined to multilateral institutions or the non-governmental sector. This year, the World Economic Forum’s annual Global Risks Perception Survey (GRPS) identified climate action failure, extreme weather events, biodiversity loss and ecosystem collapse as the top three of the top ten global risks by severity over the next ten years.

Government, in considering the climate risk in our own context, has identified two categories of risk to our economy and our society.

The first category of risk is a physical one. Scientific evidence indicates that sub-Saharan Africa is particularly vulnerable to climate change and is warming at twice the global average rate. This means that the average temperature increase is already above two degrees in our region.

Apart from temperature increase, climate change causes severe storms, drought, and sea level rise. These pose a risk to our food and water security, built environment and human and animal health.

The second category of risk we face is the transition risk – the global transition to a low-carbon economy has begun and will continue. Countries that are investing significantly in low carbon technologies are seeking to protect their investments with a range of non - tariff and border tax adjustments.

Unless we join the technological transition taking place across the globe, our economy risks of being left behind, and in due course facing redundancy and/or non-competitiveness of our exports in a trade environment that favours goods and services produced in a low carbon environment. Our research indicates that this transition risk will affect major sectors of our economy including energy, mining, agriculture, transport and manufacturing.

A concrete example of the threats that lie ahead is the recent decision by the European Union to ban the import of motor vehicles with internal combustion engines from 2035.

Conscious of both the physical and transition risks, and the decision by more than 12 of our major trading partners to a 2050 net zero emissions target, our National Development Plan has a commitment to building a low carbon economy and climate resilient society by mid - century.

South Africa as a signatory to the Paris Accord, has a responsibility to respond to all three goals relating to temperature, financial and resilience targets. We must pursue policies to achieve these goals and to ensure that our approach reflects both progress and enhanced ambition.

Over the last two and a half years we have steadily put in place the architecture to pursue the Paris goals. Our revised Nationally Determined Contribution to reducing greenhouse-gas emissions was submitted to the UNFCCC in October last year. The range of the reduction has the two degree temperature increase as its upper limit. The lower limit is compatible with keeping temperature increase to 1.5 degrees.

The Climate Bill was approved by Cabinet for submission to the National Assembly last year. We are working with seven sectors of our economy to set sectoral emission targets and the mechanisms to monitor compliance once low emission pathways are defined.

To enhance domestic financing of the transition, National Treasury has introduced the carbon tax, and I must say we welcome the announcements made by Minister Godongwana yesterday on the proposed trajectory for the carbon tax over the next ten years.

The National Adaptation Strategy has been adopted and we are working with municipalities across the country to mainstream climate resilience into municipal planning and budgeting.

Central to our government’s understanding of the role and place of our transition to a low carbon economy and climate resilient society is the understanding that this transition will only succeed if it helps us not just to address climate risk but to also address broader development challenges.

When government included green technology in the Economic Reconstruction and Recovery plan, we understood that this sector can open up new sectors for energy generation, mining, manufacturing and the agricultural sector. But we are also clear that it must also help us with our broader objectives of re-industrialisation, localisation, economic inclusion and most importantly, job creation.

The second aspect of our understanding of the climate transition is the concept of climate justice. This means that workers and communities in sectors most effected by the transition, cannot carry a disproportionate burden of the technological changes.

A central aspect of identifying transition pathways must be addressing the transitional processes facing workers and communities and how they will be an integral part of developing and benefitting from new industries and enterprises, so that no one is left behind.

In this regard, we fully agree with the point made in the World Economic Forum’s Global Risks Perception Survey that, and I quote, “the least disruptive climate transition measures will be those that holistically integrate the needs of individuals, societies, businesses and planet.”

And so we have said that our just transition towards a low carbon, climate resilient economy and society must happen in a manner that does not impede socio-economic development, is socially just and results in an increase in sustainable jobs.

The Just Transition is not a sudden shift in economic activity but must occur in a conscious, researched and phased manner over time.

Equally important, it must be characterised by the active involvement of workers and communities who will be impacted upon by the transition in defining both the objectives and road map of the transition.

It is for this reason that the Presidential Climate Commission (PCC) has been established and driven by the Presidency to ensure a focused drive on the Just Transition, particularly identifying pathways for all sectors and buy-in by all stakeholders.

From a national government point of view, we are clear that a central starting place for our low carbon transition must be our energy sector. Eskom generates eighty-eight percent of our energy from coal fired power stations and is responsible for over forty percent of our greenhouse gas emissions.

This sector not only poses a significant risk to future economic competitiveness, it also offers new opportunities to promote access to new sources of cheaper and reliable energy and take advantage of our natural resources (sun and wind), and the opportunities offered by international cooperation under the Paris Agreement.

The vulnerability of the coal sector emphasises the importance of our concept of a Just Transition. This is where both our power utility and our country are now entering new and unchartered territory on just exactly how we will ensure workers and communities in the coal value chain are both active framers and beneficiaries of the climate transition.

To support this process, Eskom has already completed socio- economic studies at three power stations namely Komati, Grootvlei and Hendrina and we have secured funding for seven more studies of stations scheduled for decommissioning by 2030.

These studies focus on the conditions in the plants themselves, in surrounding communities and in the broader environment. They analyse direct and indirect job losses and opportunities for repurposing, re-skilling and retraining and the development of new local industries and new job creation.

Early findings from the completed studies suggest that repurposing can prevent any direct job losses in stations due for decommissioning. Furthermore, indirect job losses could be more than compensated for with a conscious and deliberate programme to develop downstream industries in related technologies and components.

Because Eskom believes we can only learn the true meaning of what is involved in a Just Transition from doing so, Komati Power Station is the proof of concept project where Eskom is piloting the repowering of a station on existing Eskom land. To reach this point, households, organised labour, business, community formations and NGOs have been actively involved in conceptualising the project.

This project involves the current installation of an agrivoltaics plant and a microgrid assembly plant. Eskom is completing the engineering studies to confirm the capacities of PV and Battery storage that will be installed in the next 12-28 months.

Obviously to implement Eskom’s transition is going to take resources, and so by way of conclusion let me say a few words about the offer made to South Africa of $8.5 billion from a number of developed countries on the side lines of Cop26. In this regard four points are relevant:

Firstly, given our economic and social context, and the current constraints on government and private balance sheets, it is unlikely we can transition without significant international support.

Secondly in terms of the Paris Agreement, developed countries have an obligation as historical beneficiaries of high carbon emissions, to provide support to developing countries to transition to a low carbon future.

Thirdly, the Political Declaration which accompanied the offer, makes it clear that the pace and extent of decarbonisation in South Africa will be determined by the financial support available, recognising the socio-economic challenges faced by South Africa.

Fourthly, and perhaps most importantly, the funding offered will be used for targeted programmes of reskilling and upskilling, creating employment and providing other forms of support to ensure workers, women and youth are the major beneficiaries of our shift to a greener future.

A joint negotiations team will be established between South Africa and the partner group of countries to discuss an investment plan and financing modalities as reflected in the Political Declaration.

The Finance Work Stream, Chaired by former Deputy Reserve Bank Governor Daniel Mminele, will provide input to support the work of the SA component of the negotiations team, to ensure that the process is in line with the national regulatory environment and our socio-economic objectives.

The joint negotiations process is expected to be finalised over the next six months. The negotiation team will provide regular progress updates to Cabinet, including the approval from Cabinet on the final negotiated outcome.

Executive Director, the research study you are launching today could not have come at a better time. As a country we will have to take several important and far-reaching actions, to ensure a just transition. The policy advice you offer will assist us in further defining our own Just Transition Framework.

The path that lies ahead has the possibility to support the achievement of our broader development agenda and integrate the needs of individuals, societies, businesses on a more sustainable road for our country and our planet.

Achieving this powerful objective needs us all to work together with common understanding. Your study is an important contribution in this regard.

I thank you

Source: Government of South Africa