South Africa is the 14th largest greenhouse gas emitter in the world.
- South Africa needs $ 833.6 billion to switch to non-zero emissions, according to a Standard Chartered report.
- The transition to self-financing will see South African households spend more than $ 280 billion in 40 years.
- Financial assistance from developed markets is critical.
South Africa needs $ 833.6 billion (~ R12.3 trillion) to finance its transition to non-zero emissions, and assistance from developed markets is critical, according to a Standard Chartered report.
The report, Just in Time: Financing a fair transition to non-zero, considering the transition funding gap for emerging markets – that is $ 94.8 trillion. This is above the capital already allocated by governments in their climate policy, according to Standard Chartered.
Greenhouse gases contribute to global warming and climate change.
Supplied Standard Chartered
Greenhouse gas emissions contribute to global warming – resulting in severe climate effects. Under the Paris Agreement, signatories pledged to limit the global temperature increase to 1.5 ° C. To do so includes reducing emissions to net zero by 2050.
If the transition from South Africa to net zero is self-financed, it will eat into household spending. Standard Chartered expects South African household spending to fall by $ 281.8 billion between 2021 and 2060.
Self-financing means higher taxes and an increase in government lending – which means households will have to spend less on daily necessities, Standard Chartered said.
However, if developed markets support the transition – whether through subsidies or loans – South African household spending could increase by $ 311.1 billion over the same period.
Similar trends are seen in emerging markets – self-financing will result in household consumption falling by an average of 5%. “Self-financing of a non-zero transition would reduce a significant sum of emerging market households,” the report reads. Households would spend about $ 2 trillion less to spend each year on basic necessities such as food, clothing, housing, and energy. Standard Chartered expects spending on health and education to take the first hit.
The study assumes that 75% of the funding would come from higher household taxes, and 25% of the funding would be in the form of government loans. Moreover, emerging markets are unlikely to be able to finance the $ 94.8 trillion gap on their own. These countries must also give priority to rebuilding their economies following the Covid-19 pandemic. “Taking the self-financing route almost certainly means a failed non-zero transition and a consequent climate crisis,” the report reads.
Developed market finances
On the other hand, developed markets have the potential to provide subsidies to support emerging markets, Standard Chartered noted. This financial support was able to increase the expenditure of household emerging markets by 4.5% every year. Global GDP would expand by $ 108.3 trillion over the next 40 years.
In order to attract developed market funding, emerging markets need to have non-zero strategies in place, such as supportive policies and regulations.
While the public sector can provide subsidies, the private sector will have to provide the bulk or $ 83 trillion – out of the $ 94.8 trillion transitional finance gap.
Standard Chartered also suggests that a “market-by-market” approach be taken when tackling the financial challenge, as each country would have different challenges to move to non-zero.
More than R12 trillion needed to support SA’s transition to net zero – report
Source link More than R12 trillion needed to support SA’s transition to net zero – report