Coal trade as a socio-economic buffer in South Africa's energy transition

Posted on May 23, 2024

The energy crisis in South Africa, heightened by climate change, has prompted calls for a shift from coal-dominated energy to renewable sources. Advocates, including government bodies, international organisations, researchers, and activists, emphasise the need for a just transition to low-carbon energy that mitigates environmental threats. This transition is expected to address energy poverty and foster economic growth through decarbonisation and coal trade adjustments.

The Just Energy Transition (JET) has become a contentious topic, with various interest groups expressing differing views. Despite the long-term environmental benefits, the socio-economic impacts could be severe. While some countries have transitioned smoothly, South Africa faces unique challenges. These issues were the focus of a recent public debate hosted by the Energy Economics Research Unit (EERU) of the Faculty of Economic and Management Sciences at the University of Pretoria (UP), in collaboration with the United Nations Development Programme (UNDP) and the Presidential Climate Commission (PCC).

The debate explored the complexities of South Africa’s energy transition, highlighting the potential socio-economic buffer offered by the global coal trade. Through thoughtful dialogue, it aimed to position South Africa strategically in the evolving global energy landscape.

In her welcome address, Dr Deshni Pillay of UNDP stated that “energy transition has emerged as one of the defining issues of our time with far-reaching implications for our environment, economy, and society”. She stressed the socio-economic impact, noting that the coal sector made a significant contribution towards poverty alleviation in lower-income households.

“At the heart of this multifaceted issue lies the question of coal – a resource that has long been a source of prosperity and subject of great contention in South Africa. The coal industry holds immense importance in South Africa, serving as the primary energy source, key contributor to exports, and most importantly, employment,” said Pillay.

Steve Nicholls of PCC, referencing President Cyril Ramaphosa’s 2023 State of the Nation address, remarked that “we need to transition at a pace that the country can afford and that ensures energy security”. Elaborating on the pace of the transition, Nicholls noted: “The timing of this is very important. If we move too fast, we create unnecessary economic pressure. If we move too slow, we strand these assets and communities,” which ultimately will have a knock-on effect on the economy.

In South Africa, coal produces the highest emissions and is the most carbon-rich fuel. A transition to cleaner and less harmful emissions is imminent because “for every ton of coal that you burn, you’re producing two tons of carbon dioxide”, said Ian Hall of IH Energy Hall during his keynote address.

Hall pointed out the economic opportunity available to South Africa, as world energy consumption is expected to rise significantly with renewable sources, given that coal remains the largest single contributor to global electricity production.

Expanding on the economic opportunity through international coal trade, Hall, a professional engineer with over 20 years’ experience in the coal industry, said: “By exporting more coal like Australia and others, we would generate more jobs than would be lost. Coal exports would sustain mines, generate foreign revenue, and positively impact GDP. There is sufficient coal of 75 million tonnes per annum until 2035. This can have a positive spin on the GDP.”

During the panel discussion, moderated by Head of the EERU Prof Roula Inglesi-Lotz, Jesse Burton from the Energy Systems Research Group at the University of Cape Town offered a different perspective, noting that although there might be a case to export coal, the effect on the climate will remain the same, as emissions and climate consequences are a global crisis.

 “Exporting that coal does not impact our own climate targets and emissions. Unfortunately, that is not how climate change works. A ton of coal burned has the same effect, regardless of who burns it,” she stressed.

Burton cautioned about the potential risks and trade-offs of coal exporting, stating that transition risks need to be managed carefully.

One of the panel members, Mike Teke, CEO of Seriti Resources, echoed Hall’s remarks on the potential economic benefits of exporting coal. Teke said South Africa needs to seize the economic opportunity, harness international coal export and participate in international coal trading. “If we do not export it, someone else will, and it will still be burned,” he said.

Teke emphasised that the route to decarbonisation must be responsible and equitable. “There are many stakeholders impacted by this journey. Shutting down coal power stations without considering socio-economic benefits will widen inequality and lead to persistent poverty.”

At the centre of the transition are people and their livelihoods. With South Africa's staggering unemployment rate, careful planning is essential. The transition to renewable energy must be paced to consider the potential socio-economic impacts on coal industry workers. These were the views of panellist Enos Mbodi, National Secretary of the NSSC of Numsa in Eskom and Chairperson of the Sub-Saharan Energy Network of Industrial Global Union, who called for a balanced approach to transitioning.

“With our declining economy, we need to think about the ghost towns and their economic costs. We must decide whether we can go all ecological or economical, or whether we can strike a balance. I think what is important is to find a balance,” said Mbodi.

He further noted that South Africa’s transition challenges are unique and that global transition solutions need to be adapted to the South African context. “Our socio-economic conditions are different. The fact that some countries are transitioning faster does not mean South Africa needs to transition faster,” he added.

The public debate, part of the UNDP/PCC JET Platform initiative, underscored the need for innovative solutions to achieve a sustainable and inclusive energy transition. The UNDP/PCC JET Platform aims to foster interdisciplinary discussions and research to support South Africa's energy transition. The platform brings together institutions such as Stellenbosch University, the University of Johannesburg, and UP, where the EERU leads it.

Watch the public debate:

- Author Refilwe Mabula

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