Climate Change and Energy

Quantifying financed emissions is a critical first step in building trust that financial institutions are integrating climate change concerns into their core business and that net zero pledges are being taken seriously.

The project developed a proposal for South Africa’s climate change mitigation system for the second and subsequent phases of this system (post-2020), based on the experiences of the first voluntary phase. This included the design, approach and methodology for setting emission limits through the Desired Emission Reduction Outcomes (DEROs) and carbon budgets in South Africa. The system design also addressed the interface between the carbon budgets and the proposed South African carbon tax, required GHG emissions and emissions reduction frameworks, and how the system would interact with the National Climate Change Response Monitoring and Evaluation System. Furthermore, the project elaborated on the institutional arrangements required to operationalise the post-2020 Mitigation System, and outlined all the new tools, processes and systems required. The project involved extensive stakeholder consultation with public, private and non-governmental entities.

A detailed research report on the green economy potential in Mpumalanga was developed, and this formed the basis for the creation a comprehensive implementation plan to develop a greener economy in the province. The project included an international and national review of green economy trends and issues, an analysis of green economy potential in Mpumalanga, and the development of a spatially-targeted implementation plan for the province. Both the research report and the sector plan were developed through engagement with key public and private sector stakeholders in the province.

DNA supported Vivid Economics to review the principles used in approaching greenhouse gas emission reduction in South Africa and of combining the carbon budget and carbon tax, and assess the appropriateness and effectiveness of combining the carbon budget with the carbon tax in achieving South Africa’s emission reduction goals.

DNA Economics, with support from The Green House, was commissioned to undertake an Independent peer review of a spreadsheet model developed to update the data used to forecast South Africa greenhouse gas emissions up to 2050. The peer review considered assumptions about economic growth used in South Africa’s Mitigation Potential Analysis (MPA), the modelling approach, accuracy and suitability of input data, model assumptions, and whether the overall model results were reasonable. Recommendations of how the model could be improved were also provided.

The study analysed the social and economic impact of Phase 1 carbon budgets in South Africa. The economic impact of carbon budgets was considered by analysing the administrative cost of carbon budgets for companies and the DEA, the costs and benefits accruing to affected companies and sectors, job-creation or job-losses and new industries created or enhanced due to adherence to carbon budgets, and the macroeconomic impact on the South African economy as a whole. The social impact analysis focused on how carbon budgets will affect the welfare of individuals and households. These issues were investigated with the help of a Social Accounting Matrix (SAM) model.The project outcome was presented in the form of a cost-benefit analysis.

The project analysed the Draft Carbon Tax Bill clause by clause to identify any uncertainty or ambiguity with respect to the carbon tax liability of entities subject to the tax. The degree of consistency between different clauses in the Draft Bill, and the Draft Bill and the Draft Explanatory Memorandum was also considered, as was the alignment of the Draft Bill with other mitigation policy instruments or processes (like, for example, carbon budgets, mandatory GHG and energy reporting).
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

DNA edited and restructured the draft Public Environmental Expenditure Review Paper prepared by GTAC to develop a shorter, more focused paper and easier to engage with discussion paper. Additional research was also undertaken to update and expand key sections. The Review outlined the broader environmental fiscal review framework and purpose, defined local environmental expenditures, provided an overview of national environmental expenditure programmes, and quantified relevant National, Provincial and Local Government expenditures. The main purpose of the paper was to set the scene for a more rigorous Public Environmental Expenditure Review in future.
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

The project considered how a carbon budget approach and carbon tax could be combined to support the achievement of sub-national mitigation targets. In particular, the study assessed the different interface options for combining a broad-based carbon tax and quantity-based instruments to increase the likelihood that sub-national mitigation targets will be met. The complexities inherent in combining a broad-based carbon tax with quantity-based instruments were highlighted, and guidelines were provided to minimise the possible trade-off between environmental effectiveness and economic efficiency that may arise from the combination of these policy instruments.
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

The project considered the macroeconomic impacts of restricting the exports of low and medium quality coal using an economy-wide model (dynamic general computable equilibrium).
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

This study assessed the various costs and benefits associated with the power buy-back (PBB) agreements entered into by Eskom and a number of its key industrial customers. Detailed analysis was undertaken of the impact of the PBB agreements on Eskom, its key industrial customers, the wider South African economy, and the commodity markets affected. The study included a quantitative cost-benefit analysis.
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

The project provided a deeper understanding of socio-economic implications of the chemicals sector in South Africa attempting to meet a theoretical minimum carbon budget. The project employed a purpose-built emissions model to combine information relating to the technical and financial feasibility of mitigation options with investment plans and output projections to develop a theoretical minimum carbon budget for the sector. This budget was shown to be consistent with possible chemical sector carbon budgets based on current government policy processes. The assumptions underlying the emissions model was combined with qualitative and quantitative inputs obtained from chemical sector firms to analyse the socio-economic impact of actions required to remain within the theoretical minimum carbon budget.
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

DNA Economics co-authored a conceptual paper with Prof Nick Segal considering how green growth (or the development of a green economy) might impact upon SA‟s other developmental objectives.
A carbon tax spreadsheet model was developed to interrogate the impact of different carbon tax design components and choices on firms’ carbon tax costs and incentives to undertake mitigation action. The model was used to highlight possible unintended consequences.

This research addressed the issue of whether South Africa’s current infrastructure spending pattern is likely to lock the economy in to a high carbon development path. The research forms part of an ongoing programme run by Sustainable Energy Africa to assist the National Planning Commission (NPC) in interrogating issues that may influence the development of a national development plan.

A formal design assessment of the Department of Science and Technology (DST)’s Draft Energy Research Development and Innovation (ERD&I) Strategy was undertaken. The ERD&I Strategy is aimed at meeting the Energy Grand Challenge, one of 5 key policy initiatives contained in the DST’s Ten Year Innovation Plan for South Africa. The purpose of the ERD&I Strategy is to guide all the DST’s interventions in the energy space in South Africa.

DNA Economics was part of the team that designed DFID’s proposed 2.5 million pound Strategic Climate Change Policy Fund. The Fund will aim to to support South Africa’s low carbon transition via demand-driven focused interventions to influence low carbon transition policy and the development of supporting legislative frameworks in the energy, industry and transport sectors.

The presentation deals the role of transport in meeting South Africa’s greenhouse gas mitigation targets and considers the potential impact of the current carbon tax proposal on liquid fuel prices.

Contributed to the development of a green procurement policy for the Western Cape Province by advising on the constitutional and legislative frameworks that govern supply chain management in South Africa.

Scoping potential paths to a low carbon economy in South Africa given current institutional and structural realities.

Assisting an industry association in an energy intensive industry to engage with government around climate change policy.

Evaluated the viability of various policy instruments to mitigate greenhouse gas emissions in South African, highlighted important design considerations and assessed the likely impact of mitigation policy on a number of South African sectors.

Considering the interaction between climate change mitigation and industrial policies and providing recommendations on how industrial policy could be used to move the economy to a low carbon growth path.

Road Show to the asset management industry regarding policy issues surrounding climate change and how they may affect long-term asset allocation and investment decisions.

A South African fruit and wine industry initiative to identify and address the risks and opportunities of climate change on the industry and formulating a strategic framework within which to address climate change issues.

DNA Economics was part of the project team that developed the South African Coal Roadmap.The Road Map established baseline data and assessed options and scenarios for the future development of the domestic Coal Value Chain over the medium to longer term (25 years.It also provided recommendations on how to maximise the economic opportunities for coal as a valuable energy and industrial resource in a way that is consistent with sustainable development objectives.DNA Economics focused on intellectual property rights, coal market developments, energy security and training, education and other socio-economic issues.

DNA Economics was part of the team that developed a robust planning approach and toolkit – the Low Carbon Action Plan for South Africa. The Action Plan provided an understanding of the technical, economic, social, institutional and political implications of meeting South Africa’s climate change commitments. It also contextualised the South African government’s current climate mitigation commitment against a carbon budget approach and existing government and private sector mitigation plans. The Action Plan provided a detailed planning process and set of tools (process, policy and quantitative) to drive a low-carbon economy transition in South Africa.

Input into strategy processes looking at ”The Green Economy as a lever for innovation” and ”Understanding the Next Economy as a springboard for innovation” at two of the four largest South African banks. Insight were provided into how government in South Africa and elsewhere in Africa are likely to respond to the need to integrate a cost for carbon into taxation and tariffs, and some of the potential implications of this shift. An overview of the outlook for climate finance in South Africa relative to the rest of Sub-Saharan Africa was also included.

Jointly presented Development Dialogue Seminar on ”Carbon Tax – Its Role in the Macroeconomy & Climate Negotiations”.

The project assisted a multinational firm to devise a strategy for engaging with the South African government around the development of a carbon pricing regime in South Africa. The project focused on analysing the impact of different carbon tax designs on revenues and the attractiveness of the firm’s main mitigation options. The critical carbon tax design issues from the firm’s perspective were identified and recommendations were put forward as to how these issues could be addressed in a way that strengthening the overall design of the carbon tax. A number of structural issues that could complicate the use of economic instruments to mitigate climate change locally were also addressed.

The project provided an overview of the climate finance landscape internationally, and also highlighted salient features of the local climate finance landscape that are important to consider when devising a national strategy for attracting and dealing with climate finance flows. A number of principles that, given the current fluid and highly uncertain nature of the international climate finance framework, should inform the institutional infrastructure developed for South Africa to access and manage climate finance were proposed. The project fed into the Department of Environmental Affairs process to draft the National Climate Change Response White Paper.

The project assessed the desirability and viability of a number of potential carbon tax design options that could be included in the South African carbon tax framework. The purpose of the project was to identify design options that effectively incentivise greenhouse gas emissions mitigation while providing sufficient flexibility for firms to mitigate their emissions at lowest cost.

The study investigates options to create viable enterprises by recycling and adding value to wood waste originating from sawmills and furniture manufacturers in South Africa. In order to maximise the socio-economic impact of downstream wood waste processing activities, the emphasis will be on activities that are accessible to SMMEs A methodology was created to assess the attractiveness of downstream wood waste utilisation opportunities. Based on this methodology, the most attractive downstream wood waste utilisation options within a South African context were identified. The quantity and quality of available wood waste streams were assessed via an electronic survey. A framework was also developed to assess whether local conditions are in place to successfully implement attractive downstream wood waste utilisation options. The framework was applied to four case study locations and promising project opportunities were identified.

The project assessed the ability of South African firms to respond to higher energy prices. The study provided an overview of the extent to which local firms have responded to higher energy prices over the last 3 years, and also considered the ability of firms to respond to further electricity price increases in future. The impact of higher energy prices on energy efficiency was assessed, as was factors that may have constrained firms from adopting energy efficiency technologies despite strongly upward-trending electricity prices. The impact of current government policies on the uptake of energy efficiency technologies was also evaluated, and the study highlighted areas where policies were lacking, insufficient, or could potentially have had unforeseen or perverse impacts.

The project formed part of a WWF stakeholder engagement process to facilitate an open and frank dialogue about the likely impact of a carbon tax in South Africa. Outputs of the project included a technical background document and an opinion piece (co-authored with the WWF). The technical background document dealt with issues like the rationale for carbon pricing, the use of carbon pricing in developing countries, factors that may complicate the implementation of carbon pricing in South Africa, and ways in which carbon tax design can support the transition to a low carbon economy.

A link to the opinion piece is provided below. The technical background document is available as ”Carbon Tax Design Options – A Discussion Document” on the publications page of the DNA website.

The use of voluntary agreements could provide flexibility to the proposed carbon pricing regime in South Africa. The project considered the use of voluntary agreements within current (UK and Denmark) and proposed (Australia) carbon pricing frameworks internationally to inform the potential design and use of voluntary agreements in South Africa. The public reaction to the use of voluntary agreements in the three countries were also assessed to provide insight into the potential reaction to the use of voluntary agreements locally.

The presentation deals the role of transport in meeting South Africa’s greenhouse gas mitigation targets and considers the potential impact of the current carbon tax proposal on liquid fuel prices.

DNA Economics was part of the team that designed DFID’s proposed 2.5 million pound Strategic Climate Change Policy Fund. The Fund will aim to to support South Africa’s low carbon transition via demand-driven focused interventions to influence low carbon transition policy and the development of supporting legislative frameworks in the energy, industry and transport sectors.

This research addressed the issue of whether South Africa’s current infrastructure spending pattern is likely to lock the economy in to a high carbon development path. The research forms part of an ongoing programme run by Sustainable Energy Africa to assist the National Planning Commission (NPC) in interrogating issues that may influence the development of a national development plan.

The presentation deals the role of transport in meeting South Africa’s greenhouse gas mitigation targets and considers the potential impact of the current carbon tax proposal on liquid fuel prices.

DNA Economics co-authored a conceptual paper with Prof Nick Segal considering how green growth (or the development of a green economy) might impact upon SA‟s other developmental objectives.

The project provided a deeper understanding of socio-economic implications of the chemicals sector in South Africa attempting to meet a theoretical minimum carbon budget. The project employed a purpose-built emissions model to combine information relating to the technical and financial feasibility of mitigation options with investment plans and output projections to develop a theoretical minimum carbon budget for the sector. This budget was shown to be consistent with possible chemical sector carbon budgets based on current government policy processes. The assumptions underlying the emissions model was combined with qualitative and quantitative inputs obtained from chemical sector firms to analyse the socio-economic impact of actions required to remain within the theoretical minimum carbon budget.

This study assessed the various costs and benefits associated with the power buy-back (PBB) agreements entered into by Eskom and a number of its key industrial customers. Detailed analysis was undertaken of the impact of the PBB agreements on Eskom, its key industrial customers, the wider South African economy, and the commodity markets affected. The study included a quantitative cost-benefit analysis.

The project considered the macroeconomic impacts of restricting the exports of low and medium quality coal using an economy-wide model (dynamic general computable equilibrium).

The project considered how a carbon budget approach and carbon tax could be combined to support the achievement of sub-national mitigation targets. In particular, the study assessed the different interface options for combining a broad-based carbon tax and quantity-based instruments to increase the likelihood that sub-national mitigation targets will be met. The complexities inherent in combining a broad-based carbon tax with quantity-based instruments were highlighted, and guidelines were provided to minimise the possible trade-off between environmental effectiveness and economic efficiency that may arise from the combination of these policy instruments.

The Industrial Development Corporation (IDC) and the German Development Bank (KfW) have partnered to make a R500-million facility available for energy-efficiency and self-use renewable energy projects called the Green Energy Efficiency Fund (GEEF).The GEEF targets smaller firms (widely defined as meeting any one of the following three criteria: turnover of less than R51m, assets of less than R55m assets, or employing less than 200 people). DNA Economics assisted the GEEF to organize focused workshops (10-15 people) to highlight the availability of GEEF funding.

The project assessed the alignment of policies in five South African sectors (Agriculture, forestry and other land use, Energy, Industry, Transport, and Waste) with the National Climate Change Response Policy (NCCRP). A detailed policy gap assessment framework was developed based on NCCRP general principles and customised for use with four types of policy documents (High-level policy frameworks and strategies, Legislation/Acts, Regulations, and Implementation plans). The “effectiveness” (whether a mitigation option is likely to reduce GHG emissions) and “appropriateness” (whether a mitigation option conforms to the general NCCRP principles) of mitigation elements included in policy documents were also considered.

The National Business Initiative (NBI) implemented the £8.6 million Private Sector Energy Efficiency Programme PSEE) on behalf of UK Department for International Development (DFID) to improve the energy efficiency of commercial and industrial companies in South Africa. The PSEE assisted companies to identify and implement energy saving measures. Assistance was differentiated by company size and provided throughout South Africa. DNA Economics developed the PSEE monitoring and reporting framework by customising an initial framework proposed by the Carbon Trust to ensure that it is suited to South African conditions; consistent with DFID’s reporting requirements; cost-effective; and in line with the PSEE Business Case and logical framework (logframe). The framework included both data collection and process tools for monitoring the success of PSEE interactions with firms. DNA administered an online survey to beneficiaries of PSEE remote advice and implemented outcome monitoring calls to 450 medium and large firms that benefited from PSEE site surveys or strategic energy management interventions. In addition, DNA also provided monitoring and reporting capacity building and training to PSEE personnel and provided quality assurance services.

The project developed a high-level technology implementation plan for the Departments of Environmental Affairs and Science and Technology to support climate mitigation efforts in South Africa as a complement to work already undertaken by the Departments (most notably the 2013 Mitigation Potential Analysis (MPA)). The project identified short, medium and long-term technology development, commercialisation and roll-out support programmes for priority technologies (and where possible, related technologies for which broadly similar technology support programmes may be relevant).

A model (the Biofuels Incentive Model) has been developed on behalf of the Department of Energy to calculate the value of a fiscal production incentive for biofuels announced by the South African government in 2013. The incentive is to be funded by a biofuels levy on all petrol and diesel sold for domestic consumption. The National Treasury requested an assessment of this model to understand its theoretical underpinnings, the calculations behind the model, conduct sensitivity analyses to highlight risks and their likely magnitudes, and identify possible risk mitigation options. The assessment will assist the National Treasury to assess the fiscal risk related to the incentive and to respond effectively to possible parliamentary and other queries on the subject.

The Western Cape Department of Agriculture (WCDoA) commissioned DNA to consider the impact of policies and legislation on the agriculture sector in the province. The study identified both commodity-specific and cross-cutting issues that negatively impact the development of a number of key commodity groupings in the Western Cape. Issues were defined broadly to include both policies, regulations and laws at all levels of governments, and voluntary and mandatory requirements that farmers felt they had to comply with to ensure local and international market access. A combination of primary (interviews and focus groups) and secondary research was used to identify issues and propose solutions to key issues. A framework was developed to assist the WCDoA to priorities addressing 5 issues out of a total of 115 issues identified. 11 recommendations were put forward to address the 5 priority issues, with a further 60 recommendations suggested to addresses other issues in future.

USAID partnered with the Department of Environmental Affairs (DEA) and Department of Science and Technology (DST) in South Africa to implement the $14 million South Africa Low Emissions Development (SA-LED) Program.
The SA-LED Program aims to address capacity and analytical needs related to low emission development planning and project development at the Municipal level and to transform the South African economy in such a way that it supports jobs and sustainable growth, while lowering GHG emissions. Initiated in May 2015 and continuing until 2020, the Program provided project development capabilities and strengthening public sector development planning skills for low emissions development. In addition, technical assistance and capacity building activities facilitated private sector participation in potential low-emissions bankable projects through identifying opportunities, bringing relevant actors together and facilitating feasibility studies and innovative financing models.
DNA Economics was part of the consortium implementing the project, led the program’s M&E and communications efforts, and provided targeted appraisals, studies, and feasibility analyses. This included value-chain research in specific sectors, to assess the potential for ‘greening’ industrial

South Africa’s INDC forms the basis of the contribution it undertakes to make to prevent and address climate change in the medium term in the international arena. BUSA commissioned DNA to consider what an INDC would look like that adequately reflects South Africa’s socio-economic development and climate mitigation ambitions. The international and local mitigation policy contexts (including the nature of South Africa’s existing pledge under the UNFCCC and local process being undertaken to reduce national GHG emissions) were considered to develop a number of approaches that could be considered to develop South Africa’s INDC. These approaches were presented to BUSA members who voted for their preferred approach. The outcome of this process was a BUSA-mandated view of what South Africa’s INDC should look like. The proposed INDC option, and the process required to fully develop and present it to the UNFCCC, were presented in a position paper that BUSA shared with the Department of Environmental Affairs.

DNA Economics supported The Green House in assisting the Department of Environmental Affairs (DEA) to review and update the Guidelines for the Development of Pollution Prevention Plans for greenhouse gases (PPP-GHGs). The Guidelines provide guidance to companies that have been allocated carbon budgets by the Minster of Environmental Affairs. The requirement for submitting PPP-GHGs has been specified in the National Pollution Prevention Plans Regulations in Respect of GHGs developed by the DEA in terms of the National Environmental Management: Air Quality Act, 2004. The project is funded by GIZ.

DNA Economics developed an assessment framework that can be used to evaluate, compare and contrast the implementation of the Near-term Priority Flagship Programmes driving climate change adaptation and mitigation responses in South Africa at scale. The framework allowed for the identification of Flagship Programmes which are being successfully implemented, and for highlighting barriers and challenges faced by Flagship Programmes from a programme perspective. DNA Economics also assisted with the creation of detailed operational model that will guide the roll-out of Flagships in future.

DNA supported The Green House to consider how the proposed South African carbon tax would impact the attractiveness of Carbon Capture and Storage (CCS) as a mitigation technology in South Africa.