Environmental Goods & Services

Author: Peet du Plooy - Chairman Environmental Goods and Services Forum

( Article Type: Overview )

Also known as Green Industries, the Environmental Goods and Services (EGS) sector comprises the set of companies that provide products and services to measure, prevent, reduce or reverse damage to the natural environment and the depletion or pollution of natural resources.

Natural resources, including water, minerals, soil, ecosystems, biodiversity and the atmosphere underpin a variety of economic activities, as well as life itself. Over the last few decades (since the mid-1970’s) the impact of economic activity on natural resources have exceeding the planet’s ecological capacity. Increasing scarcity of key natural resources have also led to an increase in commodity prices and, in some cases, even gave rise to conflict.

In South Africa – a country known for its natural wealth, both above and below the ground – we have lagged behind on the global growth of environmental goods and services. The UK government estimated the size of the global ‘low carbon environmental goods and services’ sector in 2008 at over £3 trillion, dominated by clean energy (renewable energy and energy efficiency). This compares to a South African EGS sector estimated at R18.7 billion and dominated by waste management.

The green industries sector is one of the focal areas of South Africa’s industrial policy (IPAP). Its growth also contributes to the vision of government’s New Growth Path, which targets the Green Economy as a driver for more equitable and sustainable growth and the creation of 300 000 ‘green jobs’. The growth of the sector is supported by a number of existing policies and regulations: A global pledge (at the Copenhagen climate conference) to reduce greenhouse gas emissions by 34% by 2020 compared to a ‘business as usual scenario’. This commitment will be further elaborated on by a White Paper on Climate Change Response.

A massive scale-up in the amount of renewable energy targeted under the emissions-constrained 20-year Integrated Resource Plan for electricity (IRP2010-2030), which targets 42% of all new generation capacity to come from renewable energy sources.

Clean energy incentive schemes are considered, including a rebate on the installation of solar water heaters (administered by Eskom) and a feed-in tariff for large-scale, grid connected electricity from renewable energy sources (the REFIT, administered by the Department of Energy), and building efficiency standards, which include a requirement for efficient water heating in new buildings. A suite of fiscal measures, including a carbon tax on vehicles; tax breaks for investment in energy efficiency and land stewardship; and tax exemption of primary carbon credits and contributions to environmental/ conservation organizations. Provision under the water pricing regime for the costs of managing catchments, including thorough removal of invasive alien plants (the Working for Water programme) and provision in mining legislation for the forced rehabilitation of mines.

Future policy support, already under development, is likely to include:
• A carbon tax – an economy-wide instrument for driving lower-carbon growth
• Concessionary finance through the South African Renewables Initiative (SARI)

These measures borrow from international best practice and are all designed to improve the efficiency with which the economy uses energy, water and other natural resources. In the process, they provide much-needed support for jumpstarting the growth of the EGS sector.

For its part, the South African industry itself is improving its own coordination, with the emergence of multiple, active industry associations. In the renewable energy field alone, these include:

• The South African Wind Energy Association (SAWEA)
• The South African Photovoltaic Industry Association (SAPVIA)
• The South African Solar Thermal Electric Association (SASTELA) and
• The South African Bioenergy Association (SABA).

The Environmental Goods and Services Forum is an umbrella association which has worked specifically to include the EGS sector as a focal area under the Department of Trade & Industry’s industrial policy. In one area in particular – climate change – the world’s eyes were on South Africa as host country for the 17th Conference of the Parties (COP17) to the UN Framework Convention on Climate Change (UNFCCC) in December 2011.

However, South Africa’s pursuit of a growing EGS sector goes far beyond the issue of climate change and the country’s international responsibilities. The country needs to act rapidly to address looming threats to:
• energy security, (both from a mismatch in electricity demand and supply and continuously rising oil prices),
• water resources (with the national resource almost fully subscribed and new threats like acid mine drainage) and
• food security (in the context of rising food prices and global pressure on both food crop production and demand).

The promise of the EGS sector lies in the fact that it can be instrumental in addressing these key threats to the economy of South Africa and the wellbeing of its citizens, while simultaneously tapping into new opportunities for:
• economic growth (growth in the EGS sector has outpaced growth in other sectors globally and for some products, like solar energy, growth is as high as 30% year-on-year);
• industrial development (where South African companies can supply products, components or services to these growth industries); and
• jobs (with a potential for around 300 000 new jobs).