Potential Impacts of a Global Cap and Share Scheme on South Africa JEREMY WAKEFORD RESEARCH DIRECTOR, SOUTH AFRICAN NEW ECONOMICS (SANE) NETWORK September 2008 Feasta, 14 St. Stephen’s Green, Dublin 2. Ireland Tel: +353 (0)1 6619572 • Email:
[email protected] • Web: www.feasta.org SA FeastaReport.S_F.indd 1 3/12/08 18:11:44 Potential Impacts of a Global Cap and Share Scheme on South Africa CONTENTS 1 INTRODUCTION 1 1.1 Overview of the Cap & Share scheme 1 1.2 Aims of the study 1 1.3 Scope 2 1.4 Assumptions 2 1.5 Methodology 2 1.6 Data 2 2 South African Background 3 2.1 Energy supply and consumption 3 2.2 CO2 emissions 3 2.3 Socio-economic context 4 3 Impact on Prices 5 3.1 Energy prices 5 3.2 Direct impact on the consumer price index 6 3.3 Indirect price effects 6 3.4 Sensitivity of price effects to initial prices and assumptions 8 4 Impact on the Macroeconomy 8 4.1 Balance of payments 8 4.2 Aggregate expenditure on CO2 and PAP income 10 5 Impact on Households 11 5.1 Household expenditure 12 5.2 Household income 16 5.3 Net impact on households 17 6 Impact on Industry 18 6.1 Energy use, emissions and CO2 costs by major sector 18 6.2 Second order effects 19 6.3 Export industries and international competitiveness 20 7 Opportunities for Renewable Energy 21 8 Summary and Conclusions 21 9 References 22 Appendix A: Fossil Fuel Scarcity Rents 24 APPENDICES Appendix B: Comparative Energy Intensities of SA Industries 26 Figure 1: Shares of total primary energy supply in South Africa, 2005 3 FIGURES Figure 2: Carbon dioxide emissions from fossil fuel