South African Cap and Share report almost complete

[rdouthwaite]

Good news: the report on the effects that Cap and Share would have in South Africa if introduced as part of a world climate treaty is almost complete. It was commissioned by Feasta from Jeremy Wakeford, who was an economics lecturer at the University of Cape Town until earlier this year and is now Research Director for both the South African New Economics (SANE) Network and the Association for the Study of Peak Oil South Africa.

All Jeremy has to do to complete his report is to find data for the final table which is to compare the emissions intensity of South African exporters with those of the firms with which they have to compete. In view of this, we decided to circulate the report within Feasta to see if anyone has suggestions for improvements before it is finalised in two or three weeks' time.

I think it's a very impressive piece of research which shows quite clearly that 70% of the South African population would benefit financially from the use of C&S to reduce emissions. I should emphasise that the report assumes that C&S is introduced overnight and that all its price effects happen instantaneously, and it looks at who would win and who would lose in such a situation. Of course, as Jeremy stresses, C&S would not be introduced that way. As everyone would get a lot of warning about the higher energy prices it would bring, it would begin to have effects months before it actually began to be used. However, it is impossible to say what all these effects would be and how rapidly they would proceed, so looking at the initial “balance of advantage” is all a study like this can do.

The report is a key part of the Feasta strategy for getting C&S adopted internationally. As soon as it is complete, we would like to use it as a model for similar reports on the other BRICSA countries – Brazil, Russia, India and China – as these countries will play a crucial role in determining what climate strategy the world adopts. We need to find funding before we can commission those studies and have already written to two foundations. We will also be circulating Jeremy's report to development organisations in order to convince them to support and promote C&S.

In view of its importance, please look at the attached report very carefully and post any comments on this list so that Jeremy and others can reply. The spreadsheet containing his data is also available if you'd like to see that.

Richard.

[Edited Sept 3: You can now download the final version of this paper here: http://www.feasta.org/documents/energy/ ... Africa.htm . I have removed the draft version. CW]

[Emer O'Siochru]

This is a very high quality and persuasive report and very good value for Feasta, if I might add. It will be an excellent model for further BRICSA studies.

The one concern I have is the use of per capita figures for PAPS. In other words, the study is based on distributing PAPS to every resident including children. South Africa already operates social redistribution schemes that incentivise having more children; we should not be seen to advocate another such scheme.

The very poor have fewer children as we see by the figures so distributing PAPS only to adults will help them more. The very substantial income represented by PAPS given to adults only will encorage parents to have only as many children as they want, as opposed to need, to secure their future old age. It should not be too difficult to adjust the existing figures to adult per capita even if some crude assumptions have to be made.

Emer

[Anandi Sharan Meili]

Dear All:

Thank you for your kind introduction to Feasta members, Richard.

After the disappointing experience with CDM and the first commitment period generally, I welcome the opportunity to join in the Feasta efforts. I will read the RSA report carefully and if necessary request you to send me the spreadsheet. Then I will get back to you with my comments. My father and I are keen to develop the India case study. Interestingly environment and development politics in India is not openly in favour of climate change mitigation as an overall environment and development strategy at all. Therefore I am especially interested in how coal was tackled in the South Africa study. More soon.

Kind regards

Anandi

[Caroline Whyte]

A well-researched and clearly-written report. The big question for me is what exactly we wish to sustain when we talk about the virtues of sustainability. For that reason, these two paragraphs from page 6 of the report particularly interest me:

South Africa represents a fascinating case study of the potential impacts of a C&S scheme as in many ways the country resembles a microcosm of the world. Although classified as an 'emerging market' or 'developing' economy, SA contains a mixture of a fairly well developed formal economy with sophisticated financial, corporate, transport and telecommunications sectors, together with what President Thabo Mbeki refers to as the "second economy", comprised of the informal sector, the underemployed and the unemployed.

The South African economy dominates the region and some of its largest corporations are multinational giants. Economic growth over the past few years has averaged around 4-5%. And yet about half the nation’s population lives in poverty [....] The degree of income inequality is amongst the highest in the world [....] In short, South Africa is a land of stark contrasts.

I find it striking that the relatively high GDP has failed to benefit the poor. I think it's important, when reading the report, to bear in mind the many problems with using economic growth as a measure of success. A decrease in GDP need not be such a dreadful thing, even in a country such as South Africa.

The economist who originally devised the GDP measure would probably turn in his grave if he saw how it's bandied around now. He insisted that one should always ask what kind of growth is taking place, and who is benefiting from it. We know that our current financial system needs continual, relentless economic growth in order to function adequately. But human beings don't.

On a more general note:

The report shows how increasing energy prices, brought on by an emissions cap, would affect the economic welfare of different segments of the population in South Africa. If a cap was imposed without any share, the elite who own the energy-intensive industries would be able to simply pass on their higher costs to consumers. The emissions cuts would - hopefully- help to stabilize the climate, but at an enormous social cost.

Some West African friends of mine, while discussing the subject of sustainability, quipped that "the things that are most important for us to sustain are our families and friends". The very fact that they found this enormously funny shows how environmental sustainability tends to be perceived as undermining the social good. What is the point of stabilizing the climate if already-extreme poverty is worsened, perhaps to the extent that many people die? Exactly what, or who, are we trying to sustain?

To me, this is why we badly need Cap and Share, or something like it. The fact that South Africa can be seen as a microcosm of the world makes this report all the more valuable. Just one caveat: I share Emer's concern that allocating permits to everyone could backfire, and so it would be better just to allocate them to adults.

Caroline

[rdouthwaite]

Jeremy was able to finish the report more quickly than he had expected and the final version is now posted at http://www.feasta.org/documents/energy/ ... Africa.htm . It is being publicised on the CLIMATE-L e-mail list, which goes out to thousands of the world's climate researchers, policymakers and activists.

A lot of attention is likely to be given to the report's finding that South African GDP is likely to be reduced under C&S because its extensive use of coal means that its emissions are high in relation to the size of its domestic economy and it therefore has to devote part of its national income to importing emissions permits until it can reduce coal use. To some extent, however, this finding is a construct of the way we have organised ourselves into nations and are trying to deal with the climate crisis on that basis. I wrote to Jeremy yesterday:

South Africa's borders are artificial. Suppose we regarded Mozambique, Botswana, Namibia and Zimbabwe as part of South Africa - or at least its economic area. What would the C&S outcome be then? Very much more favourable to SA, I think, because more permits would be available and incomes higher. So global C&S would create rich local markets for SA production, services etc which would offset the fall in GDP.

He replied

Good point. The populations of the BLNS countries that together with SA make up the SA Customs Union at the very least could be treated together, especially considering some of them get most of their electricity and/or liquid fuels from SA. Their combined population is about 6 million, to add to SA's 47 million. Zambia is now SA's largest trading partner in Africa, such has been the economic meltdown in Zimbabwe. Some people reckon about 3 million of Zim's erstwhile population of 13 million are already living in SA.

Politically this raises all kinds of issues. I also wonder how long the nation state will continue to exist as the main political entity as the peak oil crisis and climate impact increasingly take their toll on the poor countries especially.

Richard.