15 November 2011 Response to NCCRWP EKC 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

15 November 2011 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

15 November 2011 Response to NCCRWP EKC 3 SA’s Greenhouse Gas Emissions Diesell Coal mining Cement prod. Steel prod. Al, FeCr, FeMn, FeSi Petrol Sasol process Eskom coal Rest of sources

15 November 2011 Response to NCCRWP EKC 4 The carbon intensity of the South African economy

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 15 November 2011 Response to NCCRWP EKC 5

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 ), 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 15 November 2011 Response to NCCRWP EKC 6

15 November 2011 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

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 15 November 2011 Response to NCCRWP EKC 8

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 15 November 2011 Response to NCCRWP EKC 9

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 1 st remove perverse subsidies that favour wasteful usage of energy and carbon What will the revenue be used for? 15 November 2011 Response to NCCRWP EKC 10

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 15 November 2011 Response to NCCRWP EKC 11

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. 15 November 2011 Response to NCCRWP EKC 12

15 November 2011 Response to NCCRWP EKC 13 A reminder: SA’s GHG Emissions Diesell Coal mining Cement prod. Steel prod. Al, FeCr, FeMn, FeSi Petrol Sasol process Eskom coal Rest of sources

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 15 November 2011 Response to NCCRWP EKC 14

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 years 15 November 2011 Response to NCCRWP EKC 15

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 15 November 2011 Response to NCCRWP EKC 16

Thank you 15 November 2011 Response to NCCRWP EKC 17