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South Africa fails to capitalise on a green opportunity to link fiscal recovery to climate crisis mitigation

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Richard Freund holds a Bachelor of Business Science degree from the University of Cape Town and has recently completed a master’s degree in Economics for Development at the University of Oxford. He is starting employment as a research assistant at Young Lives, an international study of childhood poverty coordinated out of the Department of International Development at the University of Oxford. The opinions in this article are his own.

The government needs to recognise that economic growth and decarbonisation are not mutually exclusive. Instead, since the beginning of the pandemic, it has committed significant fiscal resources towards protecting environmentally damaging sectors, including SAA.

In July, I wrote in Daily Maverick on how Covid-19 gives South Africa a unique opportunity to combat the climate crisis. In it, I highlighted that the country needs to ensure that its Covid-19 fiscal recovery plan is focused on improving its contribution to climate change through decoupling economic growth from greenhouse gas emissions.

So far, it has failed.

Vivid Economics and the Finance for Biodiversity (F4B) Initiative have recently released a Greenness of Stimulus Index (GSI) report which assesses the efficacy of Covid-19 stimulus packages in protecting the climate and biodiversity. The GSI is essentially a tool that categorises a country’s fiscal spending in response to Covid-19 as either having a positive or negative net impact on the environment. 

As the figure below displays, the South African government has, to date, failed to use its response packages to boost resilience to the growing climate risks, with South Africa’s index score well in the negative.

Source: Greenness of Stimulus Index, Vivid Economics and the Finance for Biodiversity Initiative.

 Since the beginning of the pandemic, South Africa has committed significant fiscal resources towards protecting environmentally damaging sectors. 

The largest of these allocations, the recent R10.5-billion allotment towards South African Airways, epitomises an opportunity missed to implement “pro-green” investment.

As emphasised by economists Brian O’Callaghan and Cameron Hepburn, airline bailouts can promote a transition to sustainable growth by making public support contingent upon implementing specific environmental improvements, such as committing to environmental offsets or reducing their carbon footprint. 

Yet, the South African government failed to capitalise on this opportunity, and the bailout to SAA has no environmental conditions attached to it.

The government also recently announced that sustainable sources of power, such as wind, are being curtailed in response to reduced demand for energy during Covid-19. 

Furthermore, it has announced new air pollution standards for sulphur dioxide – an indirect greenhouse gas that can increase the risk of respiratory infections – that are twice as weak as previous standards.

This is the opposite of what we need to be doing. 

We should be using this opportunity to bolster the environment, reduce our greenhouse gas emissions and diversify our power supply away from Eskom towards renewable energy. The government needs to recognise that economic growth and decarbonisation are not mutually exclusive.

The GSI report includes a toolkit of fiscal measures that governments can use to shape their economic stimulus for the better, based on analyses of international measures announced to date. 

The list includes, among others, corporate bailouts with green strings attached, loans and grants for green investments, and subsidies or tax reductions for green products. 

The South African government would do well to read the report.  

To date, the government’s economic response to the Covid-19 pandemic is set to reinforce its negative environmental impacts. However, there is still an opportunity to learn from our mistakes and act to prevent irreversible environmental degradation. 

The Covid-19 response has shown that the government can, and will, act decisively if there is a sense of urgency.

We, as a society, need to create this urgency and convince the government that it needs to do more to protect the climate. Unless we do so, we are likely to find ourselves in a far more permanent crisis. DM

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  • South Africans should invest savings in ESG companies ( overseas also ). These investments will reward with good returns ,and the choice of investment is also ethically right.

    No goverment want to see it citizens investing overseas.It will also send a signal to the goverment that we are not interested in bankrolling their “dirty companies” ( oil,gas,airlines ect)
    Let the money talk

  • This piece overlooks the most significant carbon bomb included in SA’s economic stimulus efforts (now packaged as the ERRP): the mandate it provides for big gas infrastructure, including FOUR port projects for landing LNG… (possibly preceded by the deployment of powerships burning gas, or perhaps even dirtier ‘fuel oil’)

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