State capture and the transition to a green economy
State-owned corporations (SOCs), which have been particularly prone to state capture, have an important role in supporting the transition to a greener economy in South Africa. State capture can negatively impact this role, and the broader transition to a greener economy in South Africa, in several ways: State capture creates incentives for rent-seeking and corruption rather than innovation and entrepreneurship, limiting investment in the skills and capabilities required to drive transitions; it compounds existing structural rigidities and makes it more difficult for resources to migrate to where they are most useful during the transition to a low carbon economy; it reduces the capacity within public institutions to implement policies and initiatives that could support the transition. It also drains resources that could be used to support the transition; and it reduces the likelihood that the move to a green economy can reduce inequality.
Electricity efficiency in South Africa and the dangers of nominal data
As a follow-up to an earlier blog that considered the energy efficiency performance of the South African economy from 2000 to 2012, this blog looks at the electricity intensity of the economy from 1995 to 2015. The data not only tells an interesting story, but also highlights the dangers when using nominal data to consider the relationship between variables.
Proposed SA carbon tax: international context
On 2 November 2015 the National Treasury released the Draft Carbon Tax Bill for public comment. Comment is due by 15 December. This is the first in a series of blogs to be published by DNA Economics related to the proposed carbon tax, and focuses on the level of the carbon tax in relation to existing carbon pricing schemes internationally.
Time for a renewed focus on the EGS sector in Southern Africa
After a long lull in developments in Environmental Goods and Services (EGS) trade policy, there is increased impetus globally to liberalise the EGS sector. South Africa’s relatively advanced position in the EGS market within Southern Africa makes it well placed to drive the reduction of barriers to EGS trade in the region. However, this requires a deeper understanding of the regional EGS market and the barriers constraining its growth.
Fracking the Karoo: many uncertainties remain
The discourse surrounding the possible exploitation of shale gas from the Karoo Basin has focused on emphasising its likely benefits (trumpeted by government and energy sector insiders) and costs (the focus of environmental groups and concerned citizens). A rigorous assessment of these expected costs and benefits, however, is currently lacking. On the benefits side, two factors in particular, namely the size of the shale gas resource and the impact of the possible greater integration of the South African market for natural gas with international and regional markets, do not seem to have received sufficient attention.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
South Africa’s energy efficiency performance since 2000
The National Energy Efficiency Strategy (NEES) released in 2005 set a national target for energy efficiency improvement of 12% by 2015 compared to a 2000 baseline. This monitoring system envisaged to accompany the roll-out of the NEES, however, is still under development and there has been no monitoring of the NEES to date. This makes it difficult to rigorously assess progress towards meeting this target. Consequently this blog provides a non-rigorous glance at what the available data can tell us about South Africa’s energy efficiency performance between 2000 and 2012.Over this period, energy intensity decreased by 13.2 percent and electricity intensity by a whopping 25.4 percent.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
Comparing apples and oranges – the case for regulatory impact assessment
Policymaking is difficult. It involves opportunity costs, trade-offs, and unintended consequences. Ideally the process should be open and transparent, and should include a vigorous debate on all aspects of the policy being developed: its purpose, cost, mechanics, alternative designs, the likelihood of success, and the like.
Public awareness of carbon taxes – the blindside remains
Somewhat against expectations, the National Treasury announced the implementation date for the proposed South African carbon tax in the recent budget. In my last blog post (Nov 2012), I mentioned that public awareness of carbon taxes (crudely approximated by the frequency of Google searches) has been declining steadily since the run-up to the implementation of the CO2 vehicle emissions tax in September 2010. This blog explores whether anything has changed since November last year, especially in reaction to this new announcement.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
Public awareness of carbon taxes – beware the blind side
Ever since the National Treasury published its discussion paper on environmental reform in 2006, a carbon tax has been on the cards in South Africa. In this year’s National Budget, it was mentioned that a carbon tax would be formally announced in the 2013 National Budget and implemented before the end of the 2013-14 fiscal year. Given the public outcry that preceded the planned implementation of the e-toll system in Gauteng in April this year (despite the e-tolls first being announced by Sanral in March 2008, and the first indicative tariffs being published in February 2011), it is prudent to consider whether the South African public is prepared for, or even aware of, the impeding carbon tax. One readily available metric for measuring public awareness is the number of web searches devoted to a topic.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.
Infrastructure investment and the risk of carbon lock-in
Investment in infrastructure in South Africa peaked in 1981, and then languished for two decades. From 2000 onwards, gross fixed capital formation increased dramatically, doubling in a period of 8 years. In the wake of the global financial crisis of 2008 investment levels dropped somewhat, but as a result of the FIFA 2010 World Cup and the related infrastructure projects, remained at a high level. South Africa’s infrastructure investment drive has been spearheaded by public corporations. Whereas the spending patterns of general government and private business have remained relatively stable since 2000, investment by public corporations has risen sharply, and this largely explains the recent rise in overall capital formation.
Over the same period, the contribution of the tertiary sector (which is typically less energy-intensive than the primary and secondary sectors) to GDP increased by 8 percent (to 69.6 percent), while the contribution of the primary sector fell by almost a third (to 7.9 percent). It is clear that the energy intensity picture in South Africa is changing over time. What is not clear yet, however, is whether this is predominantly due to increased energy efficiency and decoupling between economic growth and energy use, or whether this is being driven by structural changes to the South African economy.
A cost-benefit analysis is only as good as the assumptions that underlie it. If a rigorous assessment of the relative merits of exploiting Karoo Basin shale gas is to be undertaken, it is important that these two factors (amongst other critical assumptions – on both the cost and benefit side of the analysis) are considered in detail.