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.
This is according to a Canadian think tank, the Winnipeg-based International Institute for Sustainable Development.
Government support for oil and gas consumption, electricity that is largely generated from coal, and carbon tax exemptions has tripled since 2018 in Africa’s most industrialized nation, according to researchers at the Winnipeg-based International Institute for Sustainable Development wrote in a report published on Wednesday.
Authors of the report, Anna Geddes and Max Schmidt wrote that “subsidies continue to ensure fossil fuels are locked into energy systems.” That is 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.
The report suggested that to reduce its exposure to fossil fuels, South Africa need to develop a road map with deadlines around removing such financial support and ensure clean energy and transport is available for the entire population.
The report by the Canadian think tank also recommended that 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 Africa’s most industrialized economy is exposed to carbon border adjustment mechanisms, according to the International Institute for Sustainable Development. “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.”
