The effect of response measures to climate change on South Africa's economy and trade

Jooste, Meagan; Winkler, Harald; van Seventer, Dirk; Truong, Truong P

The effect of response measures to climate change on South Africa's economy and trade

Journal Article

2009

Publisher

Energy Research Centre, University of Cape Town.

Publisher

University of Cape Town

Department

Energy Research Centre

Faculty

Faculty of Engineering and the Built Environment

License

http://creativecommons.org/licenses/by/4.0/

Abstract

Article 4.8 of the United Nations Framework Convention on Climate Change (UNFCCC) provides that ‘Parties shall give full consideration to … the impact of the implementation of response measures, especially on … (h) Countries whose economies are highly dependent on income generated from the production, processing and export, and/or on consumption of fossil fuels and associated energy intensive products’. Article 2.3 of the Kyoto Protocol to the UNFCCC requires that developed country Parties (Annex I) ‘shall strive to implement policies and measures … in such a way to minimize … effects on international trade’ as well as minimizing the adverse effects on developing country Parties (Article 3.14). If Annex I Parties implement mitigation, they are assumed to buy less oil, coal or other fossil fuels. In this context, response measures are actions taken or initiated by developed countries (Annex 1) but with the impacts and ramifications flowing on to developing countries. The concern of developing countries, therefore, is in those impacts which to a greater or lesser extent depend on the degree of exposure of developing countries to trade (with or without the implementation of corresponding climate measures within the developing countries themselves). The South African economy derives much of its growth from production related to the energy-intensive sectors of its economy. In general, with the climate negotiations on the future of the climate regime post-2012, the implications for energy-intensive and trade-exposed sectors of the economy need to be clearly understood. This research confirms findings of previous studies (see Section 1.3), that the impacts of response measures may imply losses of exports in some sectors, but also possibly gains in other sectors. In this report the scenarios examined are broader than those examined under an earlier Fund of Research into Industrial Development, Growth and Equity (FRIDGE) study. In particular, this study highlights the impacts which response measures have on sectors other than the manufacturing sector, including mining, agriculture and tourism. The present report has provided a more specific identification of energy-intensive and trade-intensive sectors – and those that are both energy- and trade-intensive. We have also examined variations related to scenarios with and without emission trading among Annex I countries, and extended this to the consideration of a no-lose crediting approach for non-Annex I (NAI) countries.