Putting a Price on Carbon Economic Instruments to Mitigate Climate Change in South Africa and Other Developing Countries
Total Page:16
File Type:pdf, Size:1020Kb
Putting a price on carbon Economic instruments to mitigate climate change in South Africa and other developing countries Proceedings of the conference held at the University of Cape Town, 23-24 March 2010 Edited by Harald Winkler Andrew Marquard Meagan Jooste Published by the Energy Research Centre, University of Cape Town on behalf of the Energy, Environment and Climate Change Programme at the Energy Research Centre Rondebosch 7701, South Africa, 7701, ERC Website: www.erc.uct.ac.za Published 2010 ISBN 978–0–7992–2357-6 Copyright Energy Research Centre and authors, 2010 The opinions expressed in this document are entirely those of the authors, unless otherwise stated. This conference proceedings document does not necessarily represent any opinion of the editors, or the Energy Research Centre or of the University of Cape Town. Produced by the Energy Research Centre Contents Preface v Acknowledgements viii Theme 1: Carbon pricing and the policy environment Aligning South African energy and climate change mitigation policy 1 Emily Tyler Carbon pricing and industrial policy in South Africa 16 Brent Cloete and Genna Robb Theme 2: Quantitative analyses of carbon pricing What is fair? Meeting a national emission reduction target in an experimental setting 35 Kerri Brick and Martine Visser Estimating the demand elasticity for electricity by sector in South Africa 65 Roula Inglesi and James Blignaut Modelling the impact of CO 2 taxes in combination with the Long Term Mitigation Scenarios on emissions in South Africa using a dynamic computable general equilibrium model 78 Marna Kearney Theme 3: Lessons from the CDM experience Innovative environment for enhancing carbon markets and prices 99 Francis Yamba A comparative analysis of CDM in South Africa and China Redefining the role of CDM in the quest for putting a price on carbon in South Africa 106 John Fay, Farai Kapfudzaruwa and Lin Na Theme 4: Carbon taxes and emissions trading schemes Structuring approaches to pricing carbon in energy- and trade-intensive sectors: options for South Africa 127 Harald Winkler, Meagan Jooste and Andrew Marquard Mitigation in India: Emission trading as a possible policy option 151 Prabhat Upadhyaya Regulating energy demand and consumption in South Africa: Is carbon pricing sufficient? 166 Tebogo Makube Theme 5: Carbon tax versus emissions trading schemes A comparison of emissions trading and carbon taxation as carbon mitigation options for South Africa 181 Michael Goldblatt Carbon trading or carbon tax? Weighing up South Africa’s mitigation options 196 Genna Robb, Emily Tyler and Brent Cloete Contributing authors 214 List of conference participants 218 v Preface The conference, Putting a price on carbon: Economic instruments to mitigate climate change in South Africa and other developing countries, was organised by Associate Professor Harald Winkler, Dr Andrew Marquard and Meagan Jooste, who are all researchers in the Energy and Climate Change Programme of the Energy Research Centre (ERC) at the University of Cape Town. The conference was held at the Uni- versity on 23 and 24 March 2010. There has been extensive debate among researchers in developed countries whether an emissions trading scheme or carbon tax is the best means to ‘put a price on car- bon’. Other economic instruments could contribute to mitigation of greenhouse gas emissions indirectly, including tradable certificates for renewable energy or energy efficiency. The conference organisers intended to take up the debate on how such instruments might apply in South Africa and other developing countries, putting carbon pricing in the context of broader policy on climate and development. This has not been done in depth previously. Specifically, the intentions behind the conference were to: • Build on discussions undertaken at a side-event and a workshop at the Climate Change Summit 2009 (see the scoping papers on economic in- struments to mitigate climate change in South Africa at www.erc.uct.ac.za), • Contribute to the development of climate policy in South Africa, by fur- ther exploring practical options for putting a price on carbon, • Deepen the understanding of economic instruments, • Broaden the community of experts working in this emerging field, by at- tracting papers from researchers and analysts in cognate disciplines who are not currently working on carbon pricing – including economics and environmental economics, but also researchers working on institutional and political dimensions • Draw on experiences and lessons from other countries, in particular other developing countries in their exploration of the same issues in similar contexts, but also looking at the experiences of implementation in devel- oped countries and examining their applicability in the context of devel- opment. The ERC issued a call for papers in May 2009. In April and May 2009 ERC identified and appointed a Review Committee of the following people: • Bamikole Amigun, Council for Scientific and Industrial Research • Prof James Blignaut, Department of Economics (University of Pretoria) • Michael Goldblatt, Environmental Economist (Palmer Development Group) • Dr Yvonne Hansen, African Centre for Cities (University of Cape Town) • Dr Andrew Marquard, Energy Research Centre (University of Cape Town) • Josephine Musango, Council for Scientific and Industrial Research • Emily Tyler, Climate Change Economist (Private Consultant) • Dr Martine Visser, Environmental Policy Research Unit (University of Cape Town) Putting a price on carbon: Conference proceedings vi • Assoc Prof Harald Winkler, Energy Research Centre (University of Cape Town) • Dr Russell Wise, Environmental and Resource Economist (Australia) The ERC conducted an internal assessment of the abstracts submitted in response to the Call for Papers and requested the committee to comment on the ERC assessment and ranking of abstracts. The Review Committee finally chose to rank abstracts as follows: Category 1: Accepted as is, invite author(s) to submit full paper. Category 2: Would like to accept abstract and invite paper, but request a re- submission which shows a clear alignment with the conference topic (carbon pricing and climate change mitigation). Category 3: Abstract could be accepted but there is no developing country co-author and thus a re-submission of the abstract will be requested which shows such co- authoring. Category 4: Abstract not accepted. On the grounds that it is either no relevance to our conference or the developing country context, or the topic does not appear to have been well-thought through. Authors in categories 2 and 3 were approached to request they amend their abstracts accordingly and resubmit. Once authors re-submitted their abstracts, ERC issued a request for draft papers by November 2009. In early November 2009 reviewers were assigned to review each of the fifteen papers received. In mid-November 2009 reviewers were asked to complete a reviewer form in the template of the Climate Policy Journal’s Reviewer form by January 2010. ERC collated reviewer comments and through discussions with the committee chose to reject two of the Draft Papers submitted. During this time one paper’s author had to withdraw due to a schedule conflict with the conference. As such, twelve authors were approached to complete edits to their conference papers by mid-February 2010. Authors submitted revised papers based on independent peer review by early March 2010. The ERC then compiled this volume. The papers in this proceedings address a variety of themes in this area: emissions trading, carbon taxes, fiscal and non-fiscal instruments, policy and institutional di- mensions, and lessons from the Clean Development Mechanism. As can be seen from the list of participants, the conference attracted researchers from a wide range of disciplines who share an interest in the use of economic instruments to mitigate climate change, as well as South African and other developing country government decision-makers. Five themes emerged from the conference papers, as indicated in the table of con- tents. All of the academic conference papers are included in this publication; papers that were not peer-reviewed but reflect inputs by South African government policy- makers and a guest researcher from Brazil are not included here. This latter group of papers included the following: • Lingela, V (Department of Science and Technology). 2010 International strategy to develop technology capability in South Africa through the Clean Development Mechanism. Putting a price on carbon: Conference proceedings vii • Lucena, A et al (Energy Planning Program, COPPE, Federal University of Rio de Janeiro, Brazil). 2010. Calculating the marginal cost of mitigation in various sectors of the Brazilian economy. • Visagie, M (Department of Trade and Industry). 2010. Climate change and government’s drive to promote green employment’. Putting a price on carbon: Conference proceedings viii Acknowledgements The Energy Research Centre would like to extend a thank you to the mem- bers of the conference Review Committee for their time assist us in the plan- ning of the conference, as well as reviewing the conference papers included in this document. We are also grateful to our funders, the European Commission Directorate- General for Environment. Their sponsorship has allowed the Energy Research Centre to conduct research into economic instruments to mitigate climate change in South Africa and to organise this conference. Finally, to the organising committee and support team of the conference: