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The global energy crisis has seen fuel prices in SA rise to record levels, increasing by more than 40% over the past 12 months. Data released by the Central Energy Fund earlier this week suggested that July will bring another painful price hike that will see the price of petrol breach the R25/l mark. This after taking into account the temporary reduction in the fuel levy that the government first introduced in April to bring motorists and commuters some relief from soaring prices.

This R1.50/l reduction in the fuel levy will be adjusted to 75c/l in July before falling away in August, and will cost the government about R10.5bn. The bulk of this was to be funded by selling off some of SA’s strategic oil reserve, and the National Treasury is also banking on receiving more tax revenue from the windfall of high export commodity prices.

It would be almost impossible to argue against the government intervening in some way to lighten the burden of sharply higher fuel and food prices. But the money being spent to subsidise fuel is just more taxpayers’ money that is being used to support the fossil fuel industry, instead of the development of less carbon-intensive energy sources.

By intervening to limit fuel price increases the government has been doing the same things many other governments around the world have been doing during the unfolding energy crisis. At a time when the world should be pursuing radical reform in the energy sector, exactly the opposite is happening.

Rising energy consumption and a hike in fossil fuel use outpaced growth in renewables in 2021. The current crisis started emerging in 2021 when the rise in energy demand as countries exited their Covid-19 lockdowns coincided with a supply crunch that was worsened by the way in which the pandemic disrupted international supply chains. Already high energy prices soared further when Russia invaded Ukraine, leading to an unprecedented global energy crisis.

The rebound in economic activity in 2021 resulted in a 4% increase in global energy demand as well as record carbon dioxide (CO2) emissions, according to the Renewables 2022 Global Status Report released this week by REN21, a global community of renewable energy stakeholders. It said the increase in global energy demand in 2021 contributed to the largest increase in global CO2 emissions (6%) in history.

Even more disappointing is that the share of renewables in global energy use stagnated in 2021, despite record additions to renewable power capacity, while the share of fossil fuels in total final energy consumption has remained almost the same since 2009. Renewables met just more than 12.6% of global final energy demand in 2020, up slightly from 10.6% in 2009.

The report highlights how fossil fuel subsidies have been the go-to choice to mitigate the effects of rising energy prices (such as we have seen with fuel price relief measures in SA), adding that despite renewed climate commitments governments have continued to heavily subsidise the production and consumption of fossil fuels, which highlighted “a worrying gap between renewable energy ambition and action”.

A record 314.5GW of new renewable power capacity has been added globally — about six times the amount of total installed capacity in SA. However, to meet global net-zero emissions by 2050 annual renewable power additions must almost triple to 825GW each year until 2050, and emissions need to reduce 45% by 2030.

Failing to do so means any hope of limiting global warming to below the target range of 1.5˚C (the line that should not be crossed to avoid catastrophic changes in climate and damage to ecosystems), or even 2˚C, all but evaporates. One way or another, ultimately the world will pay for fossil fuel price subsidies.


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