Fossil fuel support lands SA in the G20 dog box

South Africa has been ranked the second worst performer of the G20 non-OECD member countries, behind Saudi Arabia, for its lack of transparency and continued support for fossil production, fossil-fuel based power and consumption of fossil fuels.

The biggest red flag, according to a new report by the International Institute for Sustainable Development, Overseas Development Institute and Oil Change International ranking G20 countries, is that South Africa continues to heavily back fossil fuel based power through its predominantly coal based electricity system.

The report, entitled, Doubling Back and Doubling Down: G20 Scorecard on Fossil Fuel Funding, says South Africa spends R93-billion a year on direct support for fossil fuel use through subsidies to its predominantly coal-based electricity system. 

A lack of transparency around other hidden forms of price support to fossil fuels and bailouts to the state power utility Eskom means that this figure is likely to be higher, it says.

The exploration and production of coal continue to receive support. 

“Of particular concern is the $68-million in government funding made available for water transportation projects to supply water to coal-based power plants, including the Matimba and Medupi power stations,” the report says.

Progress in ending support is insufficient, with a 14% increase in total government support for fossil fuels relative to the 2014-16 average. 

The report aims to track each of the G20 countries’ progress in phasing out government support to fossil fuels. The scorecard on fossil fuel funding ranks nations according to seven indicators: transparency, pledges, public money for coal, oil and gas, fossil fuel-based power (both production and consumption), as well as how support has changed over time.

For South Africa, the report notes how public finance for fossil fuels also increased by 13% to $235-million in investments made from the Export Credit Insurance Corporation of South Africa, the Development Bank of Southern Africa and the Industrial Development Corporation.

Specific major emitters in the fossil fuel sector are partially exempt from paying the recently introduced carbon tax. 

“Sasol, the partially state-owned coal to liquid fuel company, receives a 90% exemption and many other significant emitters receive a 60% exemption from the 2019 carbon tax. This foregone tax revenue is not accounted for in the estimates.

“South Africa has introduced a three-month deferral of its recently introduced carbon tax payment,” the report reads.

The lead author of the report, Anna Geddes, an energy policy consultant, says South Africa received a score of “opaque” for transparency for several reasons.

“South Africa hasn’t publicly acknowledged that it provides inefficient fossil fuel subsidies. It doesn’t publicly report and quantify its subsidies (regularly or semi-regularly). 

“It hasn’t yet performed or committed to conducting a peer review of its subsidies, and its public finance institutions do not provide comprehensive and specific transaction-level data.”

Geddes says that in terms of how South Africa compares with other countries on transparency, Brazil and Saudi Arabia did equally poorly, tying equal in the last place on scorecard with South Africa.

Jesse Burton, a senior associate at global think tank E3G, said in a statement that South Africa urgently needs to build new renewable energy to ensure sustainable development, address the energy security crisis and start a just transition to a new energy sector.

Overall, the report finds that despite repeated pledges to end inefficient fossil fuel subsidies, G20 governments’ support to fossil fuels has dropped by just 9% since 2014 to 2016, hitting $584-billion annually over the past three years. 

This marginal progress will probably be undone this year by the billions of dollars committed to fossil fuels in response to the Covid-19 pandemic.

Among the research team’s recommendations are that G20 countries develop strategies to end governments’ support for fossil fuels and instead redirect it to more sustainable areas such as health, social support and the shift to clean energy.