I am writing against the smug greenies, a rare species. Nearly every serious environmentalist in this nation is embattled and mainly wallowing and defeating the unfortunate impression left behind by John Fraser and Mike Schussler. Their most recent articleThe truth is that the economics community is ignorant of accounting techniques to reduce pollution and depletion.
They advocate for fast-track offshore gas exploration and argue that the economy as well as the people living on the ground will be hurt if everything is only seen through a pair green-tinted glasses. It is time to unite those who are aware of the economic forces at work and call for balance, reason, and debate rather than the destruction of potential.
If they truly seek balance, Schussler or Fraser might have informed their readers about the subdiscipline called environmental economics. Its purpose is to price externalities, such as polluting, into market transactions that are not yet incorporated into monetised.
Society can rationally address externalised expenses and eliminate hidden subsidies through either compensatory taxation (as an incentive to pollute or to finance damages such as cleanup funds) oder more hands-on regulation by the state.
Robert Solow, Nobel laureate for 1974, was credited as having authored IntroduceAmerican Economic Review published his research on resource economics in 1977. John Hartwick was his student. appealed:Invest all profits from exhaustible resources or rents in reproducible capitalism… to solve ethical problems of the current generation and shortchange future generations by overconsuming current product. This is partly due to current use of exhaustible ressources.
The Hartwick Rule promotes the reinvestment and development of natural capital into long-lasting productive, human and human capital. This is done to balance different generations’ claims on environmental family silver. This economic logic is consistent with Brundtland Commission’s 1987 definition of sustainability. Development that meets the current needs without compromising future generations ability to meet their needs.
This principle has been long infringed upon by the so-called “m”inerals-energy complex Eskom and the Group of Energy-Intensive UsersThree dozen multinational corporations, responsible for the extraction and export of low-cost electricity as well as most non-renewable wealth. The minerals are exported from SA permanently: as profits, dividends, and as illicit financial flows (tax-dodging fees SA up to 7% annually, even the Treasury). Recognize), and as unbeneficiated raw material exports.
The extractive industries counter argument is that, although most of the companies are headquartered overseas, some profits are returning to local shareholders. They point out the vital local benefits of resource extractive industries: jobs in mining, upstream/downstream, royalty and taxes, import cutting-edge technology and infrastructure investment, as well as corporate social responsibility gifts. Empowerment shares, which are also given to the likes Chancellor House and Batho Batho Trust, so as to keep Luthuli Houses lights on.)
But across Africa such economic benefits are often worth less than the costs of the permanent wealth exhaustionAnd wealth depletion. Other factors are being invoked by beleaguered antigas activists, especially Shell, Total, and Johnny Copelyns Impact African, who continue to offer inadequate, outdated environmental impact statements on the localised costs of seismic blasting.
Two high courts from Makhanda and Cape Town will soon resume session after temporary antiblasting orders. They will decide if the expected profits of the gas companies outweigh irreparable damage to marine conservation, fisherfolk territories, coastline community welfare and the oceans spiritual connectivities.
If exploration proceeds and gas is discovered at large, environmental economists can help society face the two most costly externalities of all depletion. (Following the Hartwick Rule to determine if society is being adequately compensated for the valuable hydrocarbons permanently taken from sovereign wealth) and the social cost carbon.
The credit will be wiped out if we take into account climate-catastrophic damages from methane extraction, transport, and combustion.
The IMF sets the carbon cost at $60 for each tonne of greenhouse gas emission. September 2021’s report on global fossil fuel subsidies,IMF still hasn’t gotten energy prices right. The IMF estimated that SAs annual explicit subsidies to the fossil fuel industries cost R770bn. This includes climate externalities.
It didn’t seem to register, so Friday’s IMF Research paper How can structural changes support the climate ambitions of SA? was even more clear: Pretoria’s emergency plans, which include Eskoms proposed methane infusions from Karpowership or DNG Energy competitor, are often incompatible to a low carbon economic rebound.
Problem is, 2GW of energy isn’t enough. [to be]The carbon-intensive gas technology used in the procurement was used. The 20-year power purchase agreements could therefore mean high-carbon generation for a longer period. The IMF will continue to be an important player in the long-term. ResignationEskom seems too committed to investing only in high-carbon industries, such gas, and not enough concern for low-carbon technologies.
IMF advice should be thoroughly discredited. However, this suggestion to avoid stranded investment in fossil-gas Eskom generators or Transnet pipelines and termins and Big Oils drilling platforms is perfectly sound.
Eskom’s alleged meth addiction will in turn invite climate sanctions against SA exports as President Cyril Ramaphosa has already suggested. Warned in November 2021: As our trading partners strive to achieve net-zero carbon emission, they will likely increase import restrictions for goods made from carbon-intensive energy.
South32 is aware of this and its managers are trying, instead, to divorce the Richards Bay Aluminium Smelter, the largest SA energy consumer from Eskoms coal or gas-fired power. Feed in a new pumped-storage hydropower source (Tubatse, at De Hoop Dam).
The government and Eskom are promoting gas so passionately that they have not begun full-cost accounting. They threaten South32 and all other exporters by imposing climate taxes known as Carbon Border adjustment Mechanism tariffs.
For two reasons, the IMF is far too conservative to properly internalise global climate externalities. First, the 2C maximum warming target for this century (at least half a degree above average) is too high to avoid runaway climate changes and catastrophic Global South damage such last weeks’ cyclones that claimed more than 100 lives in neighbouring countries.
Second, the IMFs $60/tonne price of greenhouse gas emissions isn’t based on mortality and feedback loop factors. Recent economic cost estimates of $3,000/tonne have been made. If you apply that to SAs500Mt per annum, your climate debt rises by nearly five-folds our GDP each year.
The next major hurdle for the minerals and energy complex’s new meth addicts will be overcoming climate sanctions. Ironically, Schussler & Fraser claim that they want the voice of business or the logic of the economy to be heard.
Right then, even a small dose of environmental-economic logic could restore the needed balance.
Bond is a sociology professor at the University of Johannesburg. His books include Politics of Climate Justice, Paralysis Above, Movement Below.
