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Thinking Green

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Thinking Green

25th November 2011

By: Terence Creamer
Creamer Media Editor

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As maddening as it may be for those who believe the current emphasis on greenhouse-gas emissions is misplaced (particularly in the context of South Africa’s massive poverty, unemployment and inequality problems), there is no question that South Africa is embracing green thinking.

As host of the United Nations Framework Convention on Climate Change seventeenth Conference of the Parties, or COP 17, which gets under way in Durban next week, this is arguably only natural.

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But, for me, it is also interesting to note the approach that is being adopted by government and civil society. Dire warnings about the potential for drought, coastal degradation and other extreme weather phenomena have been given some prominence. But, on the whole, South Africa is paying far more attention to the opportunities associated with building climate resilience and green infrastructure.

This attitude came to the fore again last week when government, business, labour and organised community groups signed a ‘Green Economy Accord’, which was described as one of the most comprehensive social partnerships on the green economy internationally.

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The document highlights the potential for green industrialisation and green jobs, while a commitment had also been made by South Africa’s still nascent renewable-energy industry to minimum local content thresholds.

The accord is the fourth to be signed under the aegis of the New Growth Path, which expects green industries to contribute some 300 000 jobs to the bigger goal of adding a total of five-million jobs to the South African economy by 2020.

The localisation commitments made are part of a plan to create at least 50 000 jobs directly in the renewable-energy sector by 2020. The balance of the green jobs will be created through producing green products and com-ponents, pursuing energy efficiency targets, producing biofuels and through rolling out lower-carbon public and private transport alternatives.

The accord also follows hot on the heels of the closing of the first bidding window for the Department of Energy’s (DoE’s) plan to procure 3 725 MW of renewables capacity from independent power producers by 2016 (see our cover story on page 16). A total of 53 bids have been sub- mitted, representing more than 2 000 MW of potential wind, solar and small hydropower capacity and there is said to be much interest in the next window, which closes in March.

That said, there is also some awareness that these green industries have the potential to raise the cost structure of the South African economy, especially already surging power prices. This, in turn, carries the downside risk of displacing employment in other key sectors and undermining South Africa’s job creation, poverty elimination and inequality reduction ambitions.

But it is heartening to see that government is starting to interrogate various innovative funding mechanisms to lower the cost of green-project funding. The Industrial Development Corporation will extend up to R25-billion in green-economy funding over the coming five years. In addition, the South African Renewables Initiative, or SARi, will be launched on December 6, alongside COP 17.

SARi will seek to mobilise and channel international public finance into the development of renewables generation capacity in a way that could also deliver economic, social and environmental benefits. It is understood that the launch is likely to be backed by funding from the UK, Germany, Norway and possibly Denmark.

The initiative is premised on crowding in low-cost loans, insurance products, and other financial instruments ‘at scale’ to lower the cost of capital and reduce the incremental cost of renewables.

If it is successful, the initiative could go some way to ensuring there is more gain than pain in integrating green industries into South Africa’s relatively carbon-heavy economy. If it and other plans to moderate the cost impacts fail, however, the green dream could well go horribly wrong.

For the moment, though, there is much room for optimism.

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