South Africa adopts climate change law

South Africa's president Cyril Ramaphosa has signed into law the country's climate change bill, which sets out a national response to climate change for the first time.

The new climate change act will enable the orderly reduction of greenhouse gas (GHG) emissions through the implementation of sectoral emission targets towards South Africa's commitment to reach net zero by 2050.

Currently, the country is the 15th largest GHG emitter in the world, according to the World Resources Institute.

The law provides policy guidelines to ensure South Africa reaches its nationally determined contribution (NDC) under the Paris climate agreement by assigning individual enterprises carbon budgets and facilitating public disclosure of their progress.

In its updated 2021 NDC, the country has undertaken to cut its GHG emissions to 350mn-420mn t of CO2 equivalent (CO2e), equivalent to 19-32pc below 2010 levels, by 2030. The lower end of this range is in line with the Paris Agreement's 1.5°C global warming threshold.

To meet this, South Africa will have to achieve a steep decline in coal-fired electricity generation.

A carbon tax is seen as a vital component of the country's mitigation strategy, according to the president.

"By internalising the cost of carbon emissions, carbon tax incentivises companies to reduce their carbon footprint and invest in cleaner technologies, and also generates revenue for climate initiatives," Ramaphosa said.

South Africa's carbon tax was introduced in a phased approach in June 2019 at a rate of 120 rands/t ($7/t) of CO2 equivalent (CO2e) and increased to R134/t of CO2e by the end of 2022.

But tax-free allowances for energy-intensive sectors such as mining, and iron and steel, along with state-owned utility Eskom's exemption, implied an initial effective carbon tax rate as low as R6-48/t of CO2e.

South Africa's National Treasury is targeting an increase to $30/t of CO2e by 2030. But the extension of phase one from the end of 2022 to the end of 2025, together with an uncertain future price trajectory and lack of clarity on future exemptions, means the effective carbon tax rate is likely to remain well below the IMF's recommended $50/t of CO2e by 2030 for emerging markets.

The new climate change act seeks to align South Africa's climate change policies and strengthen co-ordination between different departments to ensure the country's transition to a low-carbon and climate-resilient economy is not constrained by any policy contradictions.

It outlines South Africa's planned mitigation and adaptation actions aimed at cutting GHG emissions over time, while reducing the risk of job losses and promoting new employment opportunities in the emerging green economy.

The law also places a legal obligation on provinces and municipalities to ensure climate change risks and associated vulnerabilities are acted upon, while providing mechanisms for national government to offer additional financial support for these efforts.

The new act formally establishes the Presidential Climate Commission (PCC) as a statutory body tasked with providing advice on the country's climate change response. Among other things, the PCC is developing proposals for a just transition financing mechanism, for which a platform will be launched in the next few months.

Over the last three years, South Africa has seen an increase in extreme weather events often with disastrous consequences for poor communities and vulnerable groups. To address the substantial gap between available disaster funds and the cost of disaster response, the government announced in February that it would establish a climate change response fund.

At the time of the announcement, Ramaphosa reiterated that South Africa would undertake its just energy transition "at a pace, scale and cost that our country can afford and in a manner that ensures energy security".

Elaine Mills