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The initial direct cost of placing South Africa on an energy transition pathway over the coming five years in line with its decarbonisation targets is calculated at a hefty R1.5-trillion in the Just Energy Transition Investment Plan (JET-IP).

Less visible, however, are the socioeconomic costs associated with failing to pursue the Nationally Determined Contribution (NDC) goal of reducing carbon dioxide-equivalent (CO2-eq) emissions to the lower end of the NDC range of between 420-million and 350-million CO2-eq tons in 2030.

The lower target is said to be compatible with South Africa's fair contribution to helping to cap the global rise in temperatures to 1.5°C above pre-industrial levels.

To assess these direct and indirect costs, the Presidential Climate Commission (PCC) and Cambridge Econometrics have applied Cambridge Econometrics' E3ME model in a bid to understand the trade impacts of future policy choices and the economic impacts associated with the environmental damage caused by higher temperatures.

The macroeconomic simulation model has been used in this instance to capture the socioeconomic and energy implications for South Africa under conditions where the country and the world adopt decarbonisation paths, premised on:

a business-as-usual outcome calibrated to the stated energy policies of governments, as articulated by the International Energy Agency and where no carbon border adjustment measures are implemented and no just transition funding is available for South Africa; and

a 1.5°C compatible pathway for South Africa and the rest of the world, that assumes energy system decarbonisation plans for South Africa somewhat more ambitious than the prevailing Integrated Resource Plan, as well as carbon taxation, recycling of carbon tax revenues, just transition funding and global carbon border adjustment measures.

These outcomes have been tested against four scenarios, including one where both South Africa and the rest of the world pursue business-as-usual pathways. A second scenario where South Africa pursues a 1.5°C-compatible pathway and the rest of the world remains on a business-as-usual trajectory. Thirdly, where South Africa implements a business-as-usual policy and the rest of the world a 1.5°C-compatible pathway. And fourth, where both South Africa and the rest of the world aim for the 1.5°C-compatible, or net-zero, pathway.

PCC head of climate mitigation Steve Nicholls tells Engineering News that, when climate-related loss and damage is excluded, the model shows South Africa fairing best from a growth and employment perspective under a scenario where it implements net-zero policies and the rest of the world remains on a business-as-usual pathway.

Growth would be 7.5% better by 2030 and 5.2% higher by 2040, while employment would be 0.8% and 1.5% higher for the same periods respectively. However, the associated 3°C global temperature pathway could offset those gains as the country faced more and increasingly costly extreme weather events, for example from floods and droughts.

The most economically and employment damaging scenario for South Africa, however, would be one where it adopted a business-as-usual stance, while the rest of the world implemented 1.5°C-compatible policies.

Under such a scenario, the model shows that South Africa's gross domestic product (GDP) would be 4.2% lower in 2030 and 3.9% lower by 2040 than under a scenario where the rest of the world also remained on a business-as-usual pathway. Likewise employment creation would be far weaker.

The key reason for the decline, Nicholls explains, would be the loss of exports as the rest of the world imposes carbon border adjustment measures on South Africa's higher-carbon products.

The model shows that several domestic sectors, including agriculture, construction, industry, energy, services and...