Commerce and Manufacturing

 

Although the economic contribution (measured as the percentage of total value added) of the primary economic sectors of mining, quarrying, agriculture, forestry and fishing has been steadily reducing from 14.3% in 1980 to 8.5% in 2007 as have the secondary economic sectors of manufacturing and construction (20.3 to 17.7% and 4.2 to 3.8% respectively), there has been some growth in the electricity, gas and water sectors (1.9 to 2.3%) and strong growth in most of the tertiary economic sectors, including: financial services, real estate and business services(14.5 to 22.2%); wholesale/retail trade, catering and accommodation(12.7 to 15.4%); andtransport, storage and communication(7.2 to 10.7%).

With respect to the secondary and tertiary economic sectors, climate change holds various threats and opportunities, including:

  • The commercial and manufacturing sector is responsible for around 16% of total greenhouse gas emissions. However, as 45% of electricity consumed is used by the manufacturing sector and 10% by the commercial sector, greenhouse gas emissions that can be attributed to this sector then rise to approximately 45% of total emissions – a very significant contribution.

  • Notwithstanding the fact that our energy intensity, measured as primary energy supply divided by GDP, dropped by 9% from 5.20 MJ/R in 1993 to 4.73 MJ/R in 2006, South Africa’s commercial and manufacturing sector is still considered to be highly energy-intensive and relatively energy-inefficient.

  • Although industrial and commercial energy efficiency is regarded as being a significant and cost-effective means of mitigating greenhouse gases, electricity savings at the point of consumption does not necessarily translate into equivalent greenhouse mitigation at the point of generation.

 

Some greenhouse gas emissions are not specifically energy-related, such as the process emissions associated with the coal to liquid conversion process and in the manufacturing of cement. Hence, although these emissions may be marginally mitigated through process and general efficiency improvements, significant reductions will only be achieved through the use of technology that is still under development and potentially very expensive such as carbon capture and storage.  As a significant global greenhouse gas emitter, South Africa is vulnerable to measures taken both internationally and nationally, to reduce GHG emissions. The sectors that are particularly vulnerable are those that are emissions intensive, and trade exposed, and may include iron and steel, non ferrous metals, chemicals and petrochemicals, mining and quarrying, machinery and manufacturing, some agricultural exports, as well as transport services and tourism. Potential economic risks emerge from, among others, the impacts of climate change regulation, the application of trade barriers, a shift in consumer preferences, and a shift in investor priorities. International climate change measures, such as the EU directive on aviation and moves to bring maritime emissions into an international emissions reduction regime, could significantly impact on a variety of South Africa’s manufactured export products through increasing the costs of air freight and shipping. Products likely to be affected include mineral products, base and precious metals, pulp and paper products, prepared foodstuffs, and chemicals. There is also the potential for border tax adjustments being considered by the EU and the USA that could affect South Africa’s cement, iron and steel industries.There are, however, also economic opportunities that arise from new or expanded markets, enhanced efficiencies and improved competitiveness, development of low carbon infrastructure with strong socio-economic benefits, and development of a national environmental goods and services sector.

To address these challenges, South Africa will –

  1. By 2012, compile and publish a climate change response action plan for the commercial and manufacturing sector that details short-, medium- and long-term response actions and provides measurable, reportable and verifiable outcomes for the actions with details on related responsible implementing agents, inputs and international support requirements, if any.

  2. Ensure that climate change considerations are fully incorporated into the Industrial Policy Action Plan and . Importantly, these policies, strategies and plans should aim to effectively manage and reduce economic risks, and build on and optimize the potential opportunities, to ensure a smooth and just transition to a lower carbon economy. In the short-term, there will be a need to focus particularly on the development of mitigation plans for vulnerable emission intensive sectors as well as identifying and incentivizing potential areas of competitive advantage that are less emission intensive or vulnerable. In the medium term industrial policy will be introduced that favours sectors using less energy per unit of economic output and supports the building of domestic industries in these emerging sectors.

     

    Begin the work necessary to have a clear understanding of the costs to the economy in the short medium and long term of the approach to climate change mitigation.  This work should begin and be aligned with other similar studies, including that of the economic impact of the IRP and should be reflected in the final Climate Change White Paper.

  3. Use Section 29(1) of the Air Quality Act, to manage GHG emissions from all significant industrial sources (i.e. sources responsible for >0.1% of total emissions for the sector) in line with approved mitigation plans prepared by identified industries and/or sectors.

  4. Continue to develop and implement an escalating CO2 tax on all energy related CO2 emissions, including process emissions from the coal to liquid fuel process.

  5. Improve industrial and commercial energy efficiency as described in 5.4through, among others, improved boiler efficiency, HVAC, refrigeration, water heating, building energy management systems, lighting and air compressors, motors, compressed air management, building shell design, optimising process control, energy management systems and the introduction of variable speed drives.

  6. Support accelerated research, development and implementation of carbon capture and storage applications for CO2 rich industrial process emissions, especially those related to the coal to liquid process.

  7. Engage vigorously in the multilateral climate change negotiations, to ensure a fair and effective outcome that is in accordance with the principles of equity and common but differentiated responsibility, and that provides developing countries with sufficient time and development space for economic transition. 

Comments

Potential for border tax adjustments

The statment that there is the "potential for border tax adjustments being considered by the EU and the USA that could affect South Africa’s cement...industry" has to be questioned as we are not exporters of cement to these areas.

Incorporation of Other Process Emissions

In terms of point 4 of the South African commitments, a suggestion inclusion of other industry process emissions is as follows:

Continue to develop and implement an escalating CO2 tax on all energy related CO2 emissions, including process emissions from the coal to liquid fuel process, cement manufacturing, aluminium electrolysis production, etc.

Waste & Energy

Again these two items are missing from the long-term strategy of the green paper.Waste Management, manufacturing (with recyclate, recycled materials and/or a mix of virgin/recycled materials), renewable energy and emissions below the Scottish Act are a priority for emerging markets in South Africa and SADC as a whole.With your numbers on natural resources and M&C on a downward trend, looking to establish ourselves on the new market growth sectors is paramount to achieving both our goals for this green paper and for job creation.Look at Dubai and you'll see a model that has more positives than negatives to shift its perogatives from natural God-given resources to 'something' else that can sustain it into the future. In Dubai's case tourism and the spin-off's associated with that industry. In our case, we should be looking at waste, renewable energy, water & food security.