Response to the NATIONAL CLIMATE CHANGE RESPONSE WHITE PAPER 2011

1. Response to the NATIONAL CLIMATE CHANGE RESPONSE WHITE PAPER 2011 Presented to The Portfolio Committee on Water and Environmental Affairs, Parliament of RSA Prof. Eugene Cairncross Response to NCCRWP EKC

2. Overview • SA’s Greenhouse Gas Emissions • The carbon intensity of the SA economy • The energy intensity of the SA economy • Reasons for high energy/ carbon intensity • What should the response be? • Comments on the Carbon Tax • Comments on the Benchmark curves • Suggestions for an alternative approach Response to NCCRWP EKC

3. SA’s Greenhouse Gas Emissions Rest of sources Coal mining Eskom coal Cement prod. Steel prod. Al, FeCr, FeMn, FeSi Sasol process Petrol Diesell Response to NCCRWP EKC

4. The carbon intensity of the South African economy Response to NCCRWP EKC

5. The energy intensity of the SA economy – reasons why? • largely due to the dominance of mining and minerals processing in the economy • coal-intensive energy system • coal based electricity emits CO2 • past and present policy of cheap electricity to mining and minerals processing industries -> low efficiency, waste • disincentive to recover/ generate energy Response to NCCRWP EKC

6. Subsidy level to high energy industries? • reportedly 12-19c/kWh to large and energy intensive industries, • below the production cost of 32.8c/kWh (Eskom figure for 2010-11), • Eskom’s tariff to municipalities: 41.57c/kWh for 2010/11, increasing to 65.85c/kWh in the next two years. • domestic consumers, including the poorest of the poor, pay the highest (block) tariffs Response to NCCRWP EKC

7. Consequences of the ‘cheap electricity’ (to energy intensive industries) policy? • Improving energy efficiency requires capital expenditure – cheap power discourages spending capital to improve efficiency • Examples of energy efficiency projects: replacement of inefficient fans with more efficient units, recovery of energy rich waste gases discharged from minerals processing industries to generate electricity Response to NCCRWP EKC

8. Consequences of the ‘cheap electricity’ (to energy intensive industries) policy? • Rapid growth in these industries, particularly during 2002 to 2007, created increasing demand for new energy capacity (at subsidised rates!) • Main producer – Eskom, appears locked into coal based power, hence increased demand drives increased GHG emissions • Everybody else has to pay more, both to cover current production costs and expansion Response to NCCRWP EKC

9. What should the Response be? • Raising cost of electricity to large energy intensive industries, at least to the cost of power produced by new electricity plants • Higher electricity tariffs will support the internal economic case for these companies to recover energy from waste gases and to convert this energy to electricity for internal use, and to sell any surplus into the national grid. • Mandate energy recovery/ energy efficiency measures, based on Best Available Techniques Response to NCCRWP EKC

10. Comments on Carbon Tax • How will it be applied? May even be regressive and counter-productive! • Concept seems to be that a tax on carbon usage will create positive behaviour change – reduction in carbon usage and emissions? • Perhaps – BUT 1st remove perverse subsidies that favour wasteful usage of energy and carbon • What will the revenue be used for? Response to NCCRWP EKC

11. On Carbon Capture and Storage (CCS) • Why commit to a CCS pilot plant and not a ‘desktop’ study of feasibility? • Funding a pilot plant is another subsidy for coal based, carbon emitting power • Diverts scarce resources (money and scientific) from renewable R&D (opportunity cost) • SA already lags far behind in the development of renewable energy Response to NCCRWP EKC

12. The White Paper Response Benchmark Trajectory • The CCRWP Benchmark accepts a further 20% increase in GHG emissions over the next 25 years, then a plateau of 10 years. • This really represents ‘business as usual’. • The global Climate Change crisis demands a decrease in emissions! • This position is untenable. Response to NCCRWP EKC

13. A reminder: SA’s GHG Emissions Rest of sources Coal mining Eskom coal Cement prod. Steel prod. Al, FeCr, FeMn, FeSi Sasol process Petrol Diesell Response to NCCRWP EKC

14. What should the benchmark (better target) GHG trajectory be? • Have to address the carbon emitters responsible for 76% of total emissions: Eskom coal, Sasol, High Energy Consumers and usage of Liquid Fuels • Benchmark all high energy consumers against international best practice and technologically achievable energy efficiency and carbon efficiency benchmarks, set targets Response to NCCRWP EKC

15. Some possibilities for carbon emission reduction, within 5 years • Sasol process, energy, 5-10% reduction • Mining and minerals beneficiation industries – energy efficiency and/ or conversion of waste energy to electricity: 5-10% reduction • Eskom: fast-track pumped water storage projects, serious and rapid commitment to installation of renewable energy systems • Peak carbon emissions within 5-10 years instead of 25-35 years Response to NCCRWP EKC

16. Further possibilities for carbon emission reduction within 25 years • Reduce liquid fuels consumption by renewing and developing more energy (and cost) efficient rail based systems for freight and commuter passenger transport • Development and implementation of large and small scale renewable energy systems • Development and implementation of energy storage systems, including pumped water systems Response to NCCRWP EKC

17. Thank you Response to NCCRWP EKC