With coal generating nearly 80% of the country’s electricity, South Africa is particularly vulnerable to the European Union’s upcoming Carbon Border Adjustment Mechanism (CBAM). This mechanism, coupled with domestic carbon taxes, threatens to increase production costs and jeopardize $3 billion (52.4 billion rands) in exports, according to experts at the conference.
Rising carbon tax: A crushing blow to industries
Some industries could face a staggering 340% increase in carbon tax payments on top of existing fiscal charges, experts cautioned. South Africa, one of the world’s highest carbon emitters, recently enacted legislation imposing taxes on carbon emissions for all companies operating domestically. However, the law primarily targets greenhouse gas-intensive businesses.
The EU’s CBAM is expected to favor exports from wealthier nations, potentially exacerbating poverty, unemployment, and inequality in developing economies, including South Africa.
A call for renewable energy investments
Speakers at the conference emphasized that South Africa must shift towards renewable energy to reduce emissions, create growth opportunities, and ensure the sustainability of its industries. By embracing cleaner and more cost-effective energy sources, the country could build a more resilient and sustainable economy.
“Transitioning to clean energy is essential for maintaining business profitability and generating jobs,” participants noted, urging the newly established government of national unity to revisit its economic policies. They called for a deeper analysis of factors stifling business growth, improved economic resilience, and policies fostering sustainable development.
South Africa’s energy transition challenges
Joanne Yawitch, head of the country’s Energy Transition Plan Management Unit, outlined the immense financial and structural challenges of reducing carbon emissions.
Yawitch confirmed that coal would remain a significant part of South Africa’s energy mix until at least 2030-2050. However, achieving a low-carbon, climate-resilient economy by 2030 requires initial funding of approximately $82 billion (1.5 trillion rands). Investments are needed in renewable electricity, green hydrogen, and new-energy vehicles to support this transition.
A delicate balancing act
While the urgency of transitioning to renewable energy is clear, South Africa must strike a balance between decarbonizing its economy and sustaining its coal-reliant industries. Any misstep could intensify existing economic disparities.
The conference concluded with a resounding call for public and private collaboration to secure funding, drive innovation, and accelerate the green transition while safeguarding the country’s economic and social stability.
