Socio Economic Implications of Mitigation in the Power Sector Including Carbon Taxes in South Africa

It is very important, in a developing country like South Africa, that policies and measures aimed at achieving the country’s emissions reduction targets are not applied to the detriment of other national objectives. The reduction of poverty and inequality was put as top priorities by the National Development Plan, together with other policies such as the New Growth Path highlighting the importance of job creation. The government is therefore likely to take a favourable view on mitigation actions that contribute positively to these priorities. However, there is limited understanding of the socio-economic implications of mitigation actions such as the expansion of renewable energy. A number of studies have been carried out to model the potential socio-economic implications of implementing a carbon tax in South Africa. The main limitation of these studies, however, has been that analysis was conducted using only economy wide models so that the energy sector was not detailed and the build plan did not respond to changes in demand, amongst other things. The structure of this paper is as follows. In the first section a discussion of recent developments within South Africa is provided. It aims at increasing the contribution of renewable energy. The second section gives a brief description of the carbon tax that National Treasury plans to implement and also provides an overview of previous studies on the implications of a carbon tax in South Africa. The linked model that we use for our analysis is described in section 3. This is then followed in section 4 by a description of the scenarios that we modelled, with results presented in section 5. The last section presents the conclusions and recommendations for further research.