CLEAN EN­ERGY: SA busi­ness must speak up on

Finweek English Edition - - COLUMN - ALEX HETHERINGTON Hetherington is the found­ing mem­ber of Car­bon Cal­cu­lated.

In South Africa there’s a fo­cus on our fu­ture

en­ergy mix. Sur­pris­ingly, we’ve heard

lit­tle from busi­ness on

the is­sue

EN­ERGY CON­TIN­UES to be big news. In South Africa there’s a fo­cus on our fu­ture en­ergy mix: that is, to say how much en­ergy we should be gen­er­at­ing from fos­sil fu­els, nu­clear or re­new­able en­ergy re­sources. It’s a crit­i­cal is­sue, not just from an en­vi­ron­men­tal per­spec­tive but also from an eco­nomic view­point. Sur­pris­ingly, we’ve heard lit­tle from busi­ness on the is­sue and ar­guably cur­rent Gov­ern­ment de­lib­er­a­tions aren’t to busi­ness’s lik­ing.

The In­te­grated Re­source Plan (IRP), Gov­ern­ment’s frame­work for meet­ing SA’s fu­ture en­ergy needs, is be­ing fi­nalised. Un­der this sce­nario SA will re­quire far more en­ergy than is cur­rently avail­able and, the IRP pro­poses, up to 70% is to be sourced from fos­sil fu­els (pri­mar­ily coal-based en­ergy), 14% from nu­clear and 16% from re­new­able sources by 2030.

While the re­duc­tion of fos­sil fu­els from its cur­rent 95% of SA’s en­ergy sources is to be ap­plauded, there will still be an in­crease in fos­sil fuel us­age in ab­so­lute terms and a con­cur­rent in­crease in associated green­house gases. Eskom’s two new coal-fired power sta­tions – Medupi and Kusile – will pro­vide an ad­di­tional 9 500MW of elec­tric­ity to the grid. Medupi alone will be the world’s fourth largest coal-fired power sta­tion. An­ti­quated sta­tions such as Ko­mati, Grootvlei and Cam­den are be­ing re­vived, in­di­cat­ing that Eskom re­mains well wed­ded to coal to meet SA’s fu­ture en­ergy de­mands.

Busi­ness needs to be chal­lenged on whether that’s in its best in­ter­est. There are nu­mer­ous rea­sons why I’d ar­gue it is not. First, Gov­ern­ment com­mit­ted SA to con­di­tional, but am­bi­tious, green­house gas re­duc­tion tar­gets at the Copen­hagen cli­mate change talks in 2009. Against a “busi­ness as usual” growth tra­jec­tory, SA aims to re­duce green­house gases by 34% by 2020 and by 42% by 2025. With the help of some in­no­va­tive leg­is­la­tion, Gov­ern­ment must ex­pect busi­ness to meet those tar­gets on its be­half. That will be dif­fi­cult if SA brings on line ad­di­tional fos­sil fuel-based elec­tric­ity.

Sec­ond, Gov­ern­ment ap­pears set on the idea of car­bon taxes. A dis­cus­sion pa­per re­leased by the Na­tional Trea­sury in De­cem­ber last year mooted levies from R75/t of CO ris­ing to as high as R360/t. Busi­ness will find that ex­pen­sive, es­pe­cially when bolted to in­creased elec­tric­ity costs.

Third, com­pa­nies are set­ting their own car­bon re­duc­tion tar­gets. Some of those are in ab­so­lute val­ues, such as FirstRand’s 11% re­duc­tion be­tween 2008 and 2011. Those tar­gets are pub­licly de­clared and in this day and age of in­te­grated re­port­ing are gain­ing promi­nence. Such tar­gets will be dif­fi­cult to achieve with­out sig­nif­i­cant re­duc­tion in fos­sil fuel-based power and the avail­abil­ity of al­ter­nate clean re­sources.

Fi­nally, busi­ness faces var­i­ous forms of com­pli­ance, in­clud­ing the sub­mis­sion to the Car­bon Dis­clo­sure Pro­ject (CDP) of its car­bon foot­prints and achieve­ments (or not) in meet­ing re­duc­tion tar­gets. The CDP has proven ex­tremely suc­cess­ful in pub­li­cis­ing busi­ness’s per­for­mance and that’s of­ten picked up by the me­dia. There’s an in­her­ent rep­u­ta­tional risk for com­pa­nies whose car­bon foot­prints in­crease but are un­able to achieve stated re­duc­tion tar­gets.

So why the mute­ness from busi­ness when the is­sue of car­bon and en­ergy is of such di­rect concern to it? One could sur­mise it’s be­cause busi­ness be­lieves it’s more ben­e­fi­cial to en­gage with Gov­ern­ment be­hind closed doors. How­ever, that would strike a blow for trans­parency and misses the op­por­tu­nity to join forces with other clean en­ergy voices.

Cyn­i­cally, per­haps, it’s be­cause fos­sil fu­el­based en­ergy is per­ceived as the cheap­est al­ter­na­tive – which it cur­rently is – and busi­ness wants the least ex­pen­sive op­tion, even if that’s con­trary to na­tional or cor­po­rate car­bon tar­gets. But such a view­point would be short-sighted of busi­ness. With taxes and other in­stru­ments in the off­ing, fos­sil fuel en­ergy will be­come in­creas­ingly ex­pen­sive and, if cli­mate change is a concern, then busi­ness should be un­equiv­o­cally call­ing for a rapid re­place­ment of such en­ergy with cleaner al­ter­na­tives.


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