With COP26 well under way, governments and businesses worldwide have issued strong messages that the time to act on climate change is now, and time is running out. COP26 could well be the pivotal turning point in the fight against global warming. Under the Paris Agreement on Climate Change 2015, most countries committed to raise their carbon-emission commitments on a recurring five-year basis. Those commitments were due for renewal in November 2020 but were delayed by the COVID-19 pandemic. COP26, however, provides us with a platform for these decarbonisation commitments to be stepped up.
The overarching aim of COP26 is to mobilise stronger and more ambitious climate action from governments to keep the 1.5°C Paris Agreement goal within reach. Adhering to the Paris Agreement requires a significant strengthening of climate commitments from all countries, and especially from the G20. COP26 has also inspired many private sector organisations to step up their commitments for reducing emissions.
We recognise that action must happen now and that significant steps must be taken by 2030. From COP26, we want to see ambitious commitments that put the world on a 1.5° trajectory, with the goal of halving global GHG emissions by 2030 and achieving net zero by 2050.
As the global net zero journey accelerates, there is an increased focus on developing countries and the financial impact of meeting their net zero targets. Whilst these countries may not have contributed much to global emissions that are causing climate change, they face significant constraints in adapting to climate change and financing mitigation and transition activities. Africa, for example, is home to 17% of the global population and yet produces less than 5% of global annual emissions and has contributed only 3% of global cumulative emissions. Nonetheless, Africa is also likely to be one of the regions most affected by climate change, and most in need of support.
Considering Africa’s modest contributions to global emissions, the majority of Africa’s 54 countries (35) have still made admirable commitments towards net zero emissions. The cost of actualizing those commitments, largely related to transitioning Africa’s energy base, is estimated at $2.8 trillion – a largely unaffordable cost, across the board. That message has been communicated, loud and clear, at COP26. Developed nations, which have contributed the majority of emissions, have been held to task for providing increased financial support.
That message is now urgent. To date, there has been limited progress on climate finance in Africa. In 2009, developed countries committed to deliver $100bn annually in climate finance by 2020 to less developed countries. This commitment has not been delivered fully; sub-Saharan Africa has received just 10% of approved multilateral climate funds since 2003. In South Africa, for example, funding supported by the Clean Technology Fund (CTF) has helped facilitate Eskom’s renewable energy programme, but there is still a long way to go.
Without financial support, those countries that have contributed less to carbon emissions continue to suffer at the forefront of climate change. Considering their options, developing countries would do well to avoid repayable loans or similar instruments; loans, being repayable, ultimately associate the cost of energy transition with those countries that can least afford it, and which have contributed the least amount to emissions, and which have not benefited from the historic carbon debt that has financed growth elsewhere. Grants, however, associate the cost with the grantors as emitters. By providing grants to developing countries and helping to finance climate change mitigation and transition, countries that have produced the majority of emissions are paying back part of their historic carbon debt.
South Africa’s climate commitments, transition, and challenges
Last week, South Africa secured a multi-billion deal at COP26 that will help to reduce the country’s reliance on coal and curb its high-carbon emissions. The EU, France, Germany, the UK, and the US announced their partnership with South Africa, pledging R131 billion over the next three years in the form of loans, grants, and investment risk-sharing instruments, as well as mobilising private sector funding. The funding will be used for renewable energy investments, the development of new sectors such as green hydrogen and electric vehicles, and other activities.
As the PwC Net Zero Report 2021[1] highlights, South Africa is one of the largest contributors to climate change in relative terms. While carbon intensity decreased by 2.4% globally in 2019, South Africa recorded an increase in carbon intensity of 1.3%, the second consecutive year of increase. This solidifies the country’s position as the most carbon intensive economy in the G20 with a carbon intensity of 599 tCO2/$m GDP, more than double the global average of 286 tCO2/$m GDP.
Although South Africa’s historic and current emissions are still a fraction of the global total, the country’s emissions are still relatively high and require urgent attention. South Africa is also likely to experience the impacts of climate change acutely in the years ahead.
The South Western Cape region, for example, came under threat of ‘day zero’ water shortages in 2018, and is predicted to become substantially drier, with temperature increases of more than 4°C plausible by the end of the century according to the Wits Global Change Institute. A similar ‘day zero’ threat looms for Gauteng. Limpopo is also projected to become substantially drier, with temperatures plausibly increasing by more than 6°C by the end of the century if we do not act now.
Climate change has been shown to intensify socio-economic inequality and in South Africa, climate change has the potential to fuel even more sensitivity around politics, power, and vested interests. A just transition to decarbonisation must deliver good jobs, opportunities for advancement and skills development, and economic benefits. In short, it must make life better for the majority of people.
Transition also requires a consistent, methodical approach to decarbonising certain sectors of South Africa’s economy. Fossil fuels, internal combustion engines and platinum converters are major exports for South Africa, and yet export markets like the EU are moving towards carbon border tax policies, raising the prices for these products and discouraging demand. South Africa’s carbon footprint is becoming a cost that the country increasingly cannot afford.
Governments like South Africa’s must create an enabling environment for the transition to net zero through policy and regulatory reform and investment. Legislative action like a carbon tax, as has been proposed in South Africa, can provide a disincentive for future carbon-intensive investments but we still need to incentivise energy efficiency through alternative and cleaner technologies. South Africa’s industries and utilities (including Eskom) need ‘carrots’ as well as ‘sticks’: a conducive environment to deliver change, incentives to achieve change, and measures to discourage reluctance.
To reduce our emissions and decarbonise at a rate consistent with limiting global warming to 1.5 degrees, South Africa needs all actors in the economy to play their part. Not all of them are on board fully, although some have made progress. We need the pace of change and commitment to increase rapidly now, and to be sustained at least through 2030. The regulatory environment can provide a powerful impetus for change, such as by requiring mandatory climate reporting in more sectors of the economy and implementing carbon pricing and trading more widely. Pressure from value chain partners, investors and climate-aware consumers can also drive change.
One of the most powerful messages emerging from COP26 is the fact that we have agency. We can work together to deliver systemic change and also individually, in the best interests of the climate. If the COVID-19 pandemic has taught us anything, it is that global problems require global collaboration and also individual action.
The challenge now is to translate commitments and rhetoric into urgent action. This is a tall order; for decades, we have heard promises and yet global temperatures are still rising. The thinking that created the problem will not solve it. We must demand urgent action, at an accelerated pace, to protect the future for us all.
PwC’s contribution to climate
On a global strategic level, PwC has committed to become net zero by 2030. This is an ambitious target that will require the reshaping of our operations, working across our value chain and engaging in public policy discussions. As part of our journey as a professional services firm, we are also committed to supporting our clients in their sustainability and net zero journeys.
