Minister Barbara Creecy addresses 2023 Intergovernmental Summit, Mining Indaba

The energy crisis and the just transition: how are countries and jurisdictions balancing these priorities in the CoP27 context?

International Convention Centre, Cape Town, Western Cape Province, Republic of South Africa

Wednesday, 08 February 2023

 

Hon. Dr. Nobuhle Nkabane, Deputy Minister of Mineral Resources and Energy, Republic of South Africa
Frans Baleni, Chair of the Advisory Board, Mining Indaba
Crispian Olver, Executive Director, Presidential Climate Commission, South Africa
Marie Francoise Marie-Nelly, Country Director for Southern Africa, World Bank
Themba Mkhwanazi, CEO Bulks, Anglo American
Silas Olan'g, Africa Energy Transition Advisor, National Resource & Governance Institute
Andrew Lane, Senior Partner, Deloitte, Moderator

Ladies and gentlemen,

The Collins Dictionary annually selects a word that describes the preceding year. This word is selected for the way it capture the general essence of the year in question: so of course 2020’s word was “lockdown” and “vax” was chosen somewhat more hopefully for 2021.

The word chosen to describe the year 2022 was “permacrisis”, which it defined as “an extended period of instability and insecurity arising from the combined crises of the war in Ukraine, the global energy crisis and global inflation.”

What the Collins Dictionary didn’t mention, is that 2022 also saw the widespread occurrence of climate related crises across the globe including the devastating floods in KwaZulu-Natal last August.

In this context of multi-dimensional, competing and ever-evolving crises how then do we address the energy crisis and the just transition?

Perhaps what’s important, is to start by recognising that we are not talking about an either/or situation here. We are talking about the necessity to do both.

If we fail to tackle the energy crisis we know we will not meet our development targets, we will undermine our gross domestic product (GDP), and exacerbate our already high levels of poverty, inequality and unemployment.

If we fail to mitigate greenhouse gas emissions and build domestic resilience to extreme weather events, we risk damage to human health and well- being, built infrastructure, food and water security.

Equally significant will be ensuring that as our major trading partners transition to greener forms of energy generation and industrial production, South African goods and services, all of which have a high carbon footprint, remain competitive.

The European Union (EU), a major trade partner is already introducing carbon border tariffs to protect investments in greener production from goods and services produced in carbon intensive economies.

So, understanding the physical and economic risks posed by the climate transition is essential as we start to position ourselves to approach the complex question of balancing energy security in the context of the climate transition. 

To negotiate our way through this complexity I want to suggest we should consider five issues:

The first is the timing issue: our government has never advocated a sudden or precipitous move away from either coal fired generation or towards a low carbon economy. The National Development Plan (NDP) and Eskom have talked about attaining net zero emissions by mid-century, nearly thirty years from now.

Building a low carbon economy and a climate resilient society will not happen overnight. It requires wide reaching technological, economic, and societal changes. Changes that will build new forms of power generation, attract new investment in our productive processes, prioritise the needs of vulnerable workers, communities, and social groupings. It is the task of a generation.

This means as many commentators have said coal will remain part of our energy mix into the 2040’s and improving the energy availability factor of our current power stations is a pressing imperative. But this doesn’t mean that we can just sit back and wait.

If we look at our BRICS counterparts, India, and China are developing the biggest renewable generation programmes in the world. Yes, they are currently using coal. But their renewable build tells us that they fully understand the economic transition risks that lie ahead, and they have absolutely no intention of being cut out of future trade markets.

The second question is what are the new opportunities for investment, employment, and prosperity in the climate transition? For the mining sector these have to be in the so-called “minerals of the future” and include rare earth minerals, lithium for battery storage and the platinum value chain where South Africa already has an established advantage.

Mining houses such as Seriti and Anglo Gold have signalled their commitment to renewable energy by investing in solar and wind powered projects. Last year president Ramaphosa participated in the launch of the world’s largest hydrogen-powered mining haul truck at Anglo American’s Mogalakwena platinum mine.

Accordingly, from an energy security perspective, significant opportunity also presents in wind and solar generation, the development of new green liquid fuels and the development of new forms of mining equipment using cutting edge technology in the green hydrogen value chain.

The third issue is the financing issue. We all understand that the climate crisis is primarily a result of 200 years of industrialisation in developed countries.  Developing countries that have contributed the least to the global accumulation of green- house gas emissions, are in many instances least able to develop resilience to the climate crisis.

Finance was one of the most heavily contested issues at COP27 with developing countries putting up a significant battle to attract international support for both mitigation and adaptation. Unfortunately, concrete commitments for all developing countries were not forthcoming.

In our case, outside of the formal United Nations framework, an initial amount of USD $8.5 billion has been offered by a number of developed countries through a combination of financial instruments including grants and concessional loans as a first small step to help finance the country’s just transition.

Prudent use of this initial investment could definitely attract further investment, and indeed there is definite interest and appetite amongst our investors. However, if we are to attract the required investment it will require us to act with speed and certainty, and to have a significant pipeline of projects. Both Indonesia and Vietnam are now competitors in the Just Energy Transition space.

The fourth issue is the regulatory issue. To create the necessary certainty to attract investment, and manage competing interests and stakeholders, a clear regulatory framework is required.

The Climate Change Bill which has been submitted to Parliament, aims to coordinate an effective climate change response. It supports the development of pathways to a low carbon future with a view to building social, economic, and environmental resilience, and an adequate national adaptation response.

And the fifth and final issue is the climate justice issue. Last year our government adopted the Just Transition Framework pioneered by the Presidential Climate Commission (PCC) following extensive national consultation.

The framework highlights that climate justice will only be achieved if vulnerable workers and communities are included in identifying the transition challenges and opportunities of low carbon development pathways; If these pathways create new opportunities for investment ownership and jobs for these workers and communities, and finally the development of a low carbon economy and climate resilient society, they must assist South Africa to overcome our broader development challenges.

In conclusion Chair, it is important to emphasise that the issues of energy security and the just transition are whole of society issues which require all our collective efforts and decisive action.

It is my wish that the actions we take during the course of this year mean that at the close of 2023, when the time comes for the Collins Dictionary to select a new word of the year that that word will be “action”.

I thank you.