MARTIN DE WIT: Jobless coal-and-carbon nexus is in dire need of energy-economic reform

Extremely high levels and rising unemployment is an alarming feature of the SA economy. An analysis of data from the country’s economic growth phase illustrates that the environmental costs of meeting the employment crisis is substantial. A strong shift away from coal and carbon is needed in our country’s post-pandemic energy economy.

It is notable that during the relatively strong economic growth phase of our economy from 2001 to 2008 an additional 3-million jobs were created, of which 1.6-million were generated domestically and another 1.4-million in other countries through increased imports.

The period not only produced strong economic growth and a reduction in unemployment, but also a steep increase in carbon dioxide produced  ̶  from 320,000 kilotonnes (kt) in 2001 to a peak of 470,000kt in 2008. The carbon-intensity of employment, measured as tonnes of CO₂ per job, has been rising steadily over a far longer time period (1990-2015) already. It has increased from 21 tonnes of CO² per job in 1990 to 30 tonnes in 2009 and has maintained a level of 29-30 tonnes up to 2015.

This illustrates that there is a trade-off between the number of people employed and the levels of CO₂ produced in the SA economy. However, the relationship is not strictly linear; a disproportionately rapid increase in CO₂ from about 240,000kt to 370,000kt occurred during employment growth from 11.5-million to 12.5-million jobs.

An increase of 1-million jobs (as envisaged in a 2019 plan by the National Treasury) without any structural change to the energy economy, would come at the expense of an additional 50,000kt of CO₂, or a 14% increase on 2015 CO₂ levels.

Boosting exports as part of a strategy to address unemployment (as experienced in 2001-2008) would come with an increase in embodied CO₂ exported and consumed elsewhere in the world. An increasing amount of CO₂ is already embodied in SA’s exports to the rest of the world, rising from 64,500kt in 1990 to 152,100kt in 2008, before declining again to 134,600kt in 2015. Together with China, Russia and India, SA is one of the larger net CO₂ exporters in the world.

Repercussions

The analysis presented here has important repercussions for economic policymakers.

First, creating additional jobs within the current energy economic structure are costly to the environment. The narrative that SA’s carbon intensity has decreased due to growth in the financial and services sectors, a decrease in the mining sector and the 2008/9 global economic crisis, needs to be critically assessed.

Furthermore, the net job creation to be achieved through the promotion and expansion of green economy sectors (as for example envisaged in SA’s national climate change response strategy released in 2011 already), has yet to have a measurable impact on the country’s development path.

Second, the embodied carbon in SA exports is at risk of becoming a real cost to the economy in a carbon-constrained world. It can be expected that rising carbon prices at our main trading partners will raise the incentive to tax imported carbon as well.

The results presented underscore the urgency of energy economic reform focused on reducing SA’s dependence on fossil fuels (notably coal) as the primary source of the country’s energy supply. Despite a recent rapid increase in the use of renewable sources for electricity generation, it is too early yet to speak of the impact of economywide substitution effects because coal still accounts for about 83% of all electricity generated in the country as measured in terms of maximum generating capacity in 2019.

In the post-pandemic phase of rebuilding SA’s economy, policymakers will be faced with more than a “triple challenge” of increasing employment and reducing poverty and inequality. Rather, SA is faced with a “quadruple challenge” when the challenge of reducing its environmental impact is included. Economic development in SA would be faced with hard trade-offs between addressing unemployment and diminishing environmental impacts translated into economic costs through carbon pricing.

The sideways drift of SA’s jobless coal-and-carbon nexus after the economic crisis of 2008 provides evidence that the country’s fragmented climate and employment plans and policies have yet to show meaningful impact on the country’s development trajectory.

The additional shocks of the Covid-19 pandemic to a jobless and drifting economy are another reminder that the coal-carbon nexus of SA’s energy economy is in dire need of reform.

• De Wit is professor of environmental governance at Stellenbosch University's School of Public Leadership. This article is based in part on his chapter in ‘A Triple Bottom Line Analysis of Global Consumption’.