South Africa fossil fuel subsidies top $6 billion, study shows
South Africa’s fossil fuel subsidies rose to a 118 billion rand ($6.3 billion) in the 2023 fiscal year, providing incentives that encourage their continued use, according to a Canadian think tank.
Government support for oil and gas consumption, electricity that’s largely generated from coal, and carbon tax exemptions has tripled since 2018 in Africa’s most industrialized nation, researchers at the Winnipeg-based International Institute for Sustainable Development wrote in a report published Tuesday.
“Subsidies continue to ensure fossil fuels are locked into energy systems,” authors Anna Geddes and Max Schmidt wrote. That’s as South Africa has made commitments to transition to cleaner sources of energy to achieve a net zero emissions goal by 2050, while over the shorter term it plans to run coal-fired power stations for longer to help prevent blackouts caused by a failure to meet electricity demand.
To reduce its exposure to fossil fuels, South Africa should develop a road map with deadlines around removing such financial support and ensure clean energy and transport is available for the entire population, the authors suggested.
The report also recommended South Africa adjust its carbon taxes to a higher rate.
While carbon tax for big emitters, including Eskom Holdings SOC Ltd., have increased, the current rate is still a fraction of what the World Bank’s High-Level Commission on Carbon Prices estimates it should be.
This will grow more complicated as the country is exposed to carbon border adjustment mechanisms, according to the IISD. “Government should phase in higher taxes to reflect environmental costs and remove carbon tax exemptions and allowances, making the fossil fuel industry fully responsible for their pollution liabilities.”
