Green Economy and Climate Mitigation

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Climate change is real and is impacting on economies and lives in Africa, especially rural livelihoods. The effects of the climate change phenomena have drawn bitter debate between both the developed and developing countries. To address some of the concerns, the authors identified topics of relevance to Africa, among them: discourses surrounding the green economy and sustainable development; financing green economies; carbon benchmarking; role of multilateral development banks in carbon financing; and carbon taxation. The book mainstreams climate change into �unfamiliar� territories, such as accounting, fi nance, management, education, economics and banking.

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Published 25 March 2012
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EAN13 9780798303088
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Edited by
Godwell Nhamo
Green Economy and
Climate Mitigation
Topics of Relevance to AfricaGreen Economy and Climate Mitigation: Topics of Relevance to Africa
First Published in 2011 by the
Africa Institute of South Africa
PO Box 630
Pretoria 0001
South Africa
ISBN: 978-0-7983-0293-7 
© Copyright Africa Institute of South Africa 2011
No part of this publication may be reproduced, stored in a
retrieval system, or transmitted by any form or by any means,
electronic, mechanical, photocopying, recording or otherwise,
without prior permission from the copyright owner.
To copy any part of this publication, you may contact
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Any unauthorised copying could lead to civil liability and/or criminal sanctions.
Telephone: 086 12 DALRO (from within South Africa); +27 (0)11 712-8000
Telefax: +27 (0)11 403-9094
Postal Address: PO Box 31627, Braamfontein, 2017, South Africa
www.dalro.co.za
Opinions expressed and conclusions arrived at in this book are those of
the authors and should not be attributed to the Africa Institute of South
Africa, the University of South Africa nor Exxaro Resources Ltd.
T e Africa Institute of South Africa is a think tank and research organisation,
focusing on political, socio-economic, international and development
issues in contemporary Africa. T e Institute conducts research, publishes
books, monographs, occasional papers, policy briefs and a quarterly
journal – Africa Insight. T e Institute holds regular seminars on issues of
topical interest. It is also home to one of the best library and documentation
centres world-wide, with materials on every African country.
For more information, contact the Africa Institute at PO Box 630, Pretoria 0001,
South Africa; Email ai@ai.org.za; or visit our website at http://www.ai.org.zaContents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .x
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
About the sponsor and the Exxaro Chair in Business
and Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xii
Exxaro Resources Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xii
Exxaro Chair in Business and Climate Change . . . . . . . . . . . . . . . . . . . . . . . . xiii
About the contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv
Abbreviations and acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xvii
1 The green economy and climate change . . . . . . . . . . . . . . . . . . . 1
Risks and opportunities for Africa
Godwell Nhamo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Climate Change Discourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Outline of this Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2 The green economy and sustainable development . . . . . . . .13
Towards a common understanding
Godwell Nhamo, Soul Shava and Muchaiteyi Togo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Emergence of a Green Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Sustainable Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Sustainable Development in an African Context . . . . . . . . . . . . . . . . . . . . . . 30
Green Economy and Climate Mitigation iiiContents
The Nexus: Diverging and Converging Points . . . . . . . . . . . . . . . . . . . . . . . . 31
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3 Environmental fi nancing through green
stimulus packages 43
Challenges and opportunities
Godwell Nhamo and Senia Nhamo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Global Financial Crisis: Origins and Key Impacts . . . . . . . . . . . . . . . . . . . . . . 45
Fiscal Stimulus Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Green Economic Stimulus Packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Emerging Future Development Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4 Carbon benchmarking and accounting . . . . . . . . . . . . . . . . . . . . 65
Godwell Nhamo and Ashley Mutezo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Carbon-Accounting Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Fundamentals in Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Carbon Accounting: Focus on International Frameworks . . . . . . . . . . . . . . . 70
Carbon-Accounting Frameworks in South Africa . . . . . . . . . . . . . . . . . . . . . . 80
Future of Carbon Accounting in (South) Africa . . . . . . . . . . . . . . . . . . . . . . . 83
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
5 Carbon assets in a contested global climate
policy regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Godwell Nhamo and Alfred Bimha
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
The Evolution of Carbon Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Carbon Assets in a Contested Climate Regime . . . . . . . . . . . . . . . . . . . . . . . 94
Carbon Assets in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Fast-Start Climate Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
iv Green Economy and Climate MitigationContents
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
6 Carbon pricing in cap-and-trade systems . . . . . . . . . . . . . . . . 103
International perspectives and lessons for Africa
Godwell Nhamo and Alfred Bimha
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Theories and Models of Asset Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Structure of the Carbon Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Emissions Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Cap and Trade in (South) Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .126
7 Multilateral development banks . . . . . . . . . . . . . . . . . . . . . . . . . . .131
In climate and carbon asset fi nancing in Africa
Alfred Bimha and Godwell Nhamo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131
Theory of Multilateral Development Banks . . . . . . . . . . . . . . . . . . . . . . . . . 133
Understanding Carbon Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
The role of MDBs in Climate and Carbon Asset Finance . . . . . . . . . . . . . . . 138
Carbon Financing and the World Bank in Africa . . . . . . . . . . . . . . . . . . . . . . 143
African Development Bank and Carbon Financing . . . . . . . . . . . . . . . . . . . . 150
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
8 Financing REDD+ in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Cecilia van Zyl and Godwell Nhamo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
The Commodifi cation of Carbon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
REDD+ on Global Climate Negotiations Agenda . . . . . . . . . . . . . . . . . . . . . 166
Climate and REDD+ Financing: A Global Overview . . . . . . . . . . . . . . . . . . 168
Financing REDD+ in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .170
The Future of Redd+ Financing in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Green Economy and Climate Mitigation vContents
9 Towards climate-compliant trade regimes . . . . . . . . . . . . . . . 193
The case of South Africa
Godwell Nhamo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
Carbon Emission and Climate Compliance in Case Countries . . . . . . . . . . . 195
South African Trade with China, UK and US . . . . . . . . . . . . . . . . . . . . . . . . 198
Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214
10 Carbon taxation in the context of environmental decay
and climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217
Cecilia van Zyl and Johan Lötter
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217
Economic Approach to Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217
Institutional and Interventionist Policy Measures: The African Context . . . 222
Carbon Taxes and Marketable Permits:
A Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Experiences with Carbon Tax in Selected Countries . . . . . . . . . . . . . . . . . . 231
Welfare Aspects of a Carbon Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
Environmental Control Cost and Border Adjustments . . . . . . . . . . . . . . . . . 240
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Notes and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
11 Looking ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Africa’s future in a green global economy
Godwell Nhamo and Muchaiteyi Togo
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Key Topics Addressed in This Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
An African Road Map for a Green Economy . . . . . . . . . . . . . . . . . . . . . . . . 256
Areas for Further Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
vi Green Economy and Climate MitigationForeword
In recent years, with the increasing focus on issues of sustainability,
climate change and the environment, the colour green has taken on
new meanings. How often have we read, heard or spoken about green
buildings, green fi nancing, green jobs, greenwashing, green accounting,
green schools, green agriculture, green tourism, green politics, green
procurement, green business and green cars? Since the global fi nancial
meltdown of 2008, the world has moved swiftly in embracing yet
another term linked to ‘green’, namely the green economy. Although a
universally accepted defi nition of this concept has not yet emerged, there
is a rapidly growing understanding of the green economy and how it is
inextricably linked to issues relating to global sustainable development
and, concomitantly, poverty eradication.
T is book marks the hosting of the 17th Session of the Conference
of Parties (COP17) by the United Nations Framework Convention on
Climate Change, which will take place in Durban, South Africa, in
November and December 2011. T e importance of the subject is also
highlighted in that the green economy has been identifi ed as one of
the twin themes of the United Nations Conference on Sustainable
Development scheduled to take place in Rio de Janeiro, Brazil, in 2012
– the ‘Rio+20’.
T e present study is essentially an interdisciplinary refl ection and
record of the pertinent issues, and it sees the light of day at a most
opportune moment, given the promising synergies of key global
development agendas and policy frameworks. In the main, it covers the
following areas: discourses on sustainable development; discussions of the
Millennium Development Goals; advocacy for good governance; key
global environment concerns, such as climate change, energy provision,
food security, loss of biodiversity and water scarcity; and the reality of
the economic crises. T ese are issues to which no individual or
government can be immune.
At the heart of the discourse on the green economy is the subject
of climate change and the need for a transition to low-carbon-driven
Green Economy and Climate Mitigation viiForeword
economies. T e climate change dialogue seeks to address fi ve
thematic areas, namely mitigation (the reduction of greenhouse gases that
cause global warming leading to climate change); adaptation (living
with the changing climate); research and development (which include
technological development, diff usion and transfer); fi nance and
capacity development; and awareness raising. T is book focuses on climate
mitigation, which has been gaining prominence in Africa. T e
growing focus on climate mitigation has occurred despite sometimes being
overshadowed by the more fundamental need for the continent to adapt
to climate change. T e authors believe that this timely contribution will
add to the burgeoning literature and discussion on the green economy
and climate mitigation.
T e book focuses on several aspects that relate to the risks and
opportunities presented by the green economy in the African context. It
also seeks to address ways in which governments can make a smooth
transition to low-carbon-driven economies. T e book addresses
thought-provoking questions: Is the green economy a new paradigm
or sustainable development repackaged? How does the green economy
relate to green economic stimulus packages? What is Africa doing to
harness the new green growth path? What is carbon accounting, and
why should Africa engage with this concept within the green economy
context? What impacts does a contested global climate-negotiating
regime have on the green economy and a carbon-pricing future? What is
the role of multilateral development banks in climate and carbon
asset fi nancing? In the context of forestation in Africa, how can African
governments engage with reducing emissions from deforestation and
degradation? How can we initiate and implement eff ective policies and
modalities to ensure that Africans are paid for the environmental
services they perform? How does the green economy aff ect African trade
and economic growth? What role should carbon taxation play in a green
economy in Africa?
T e authors of this book share a clear vision of a healthier and
sustainable global environment. T eir contribution will certainly help us
address the concerns and challenges of the complex subject of
sustainable development and climate change mitigation. T e interdisciplinary
nature of the author team brings together many years of research,
teaching and community-engagement practices associated with
institutions of higher learning. T e authors and associated publishing partners
of this remarkable project deserve our sincere congratulations for this
profound and transformative piece of work in a very important area of
viii Green Economy and Climate MitigationProfessor Mandla S. Makhanya
national, continental and global signifi cance. I have no doubt that it will
serve as a valuable reference for everyone who is concerned with the
future of our environment.
Professor Mandla S. Makhanya
Principal and Vice Chancellor
University of South Africa
Green Economy and Climate Mitigation ixPreface
T is book addresses current thinking in the fi eld of sustainable
development, and in particular the transition to a green global economy and
its implications for Africa. Although the book is a direct product of the
Exxaro Chair in Business and Climate Change, hosted by the Institute
for Corporate Citizenship, which falls within the College of Economic
and Management Sciences (CEMS), its production is the result of eff orts
of a number of programmes and initiatives at the University of South
Africa (Unisa). T ese programmes and initiatives include the Vice
Chancellor’s Sustainability Mainstreaming Programme, the CEMS
Going Green Initiative, CEMS research fl agships, which include
business and climate change, and the Exxaro Chair in Business and Climate
Change Research Associates Programme. T e book is also a product of
the 17th Session of the Conference of Parties’ collaborative work carried
out by the Institute of Global Dialogue, the Africa Institute of South
Africa and Unisa’s Institute for Corporate Citizenship.
T e topic of the green economy and climate mitigation was selected
in view of the developments since the global fi nancial crisis of 2008.
T is fi nancial crisis made the world realise the importance of
addressing environmental and sustainable development concerns, and
especially addressing climate change more urgently and in a holistic manner
as a result of the fi nancial crisis.
x Green Economy and Climate MitigationAcknowledgements
T e Green Economy and Climate Mitigation book project leader and
editor, Professor Godwell Nhamo, wishes to thank the following
organisations and people for their generous support fi nancially and in
kind. Exxaro Resources Ltd is hereby acknowledged for its fi nancial
support since 2008, now running in the second phase from 2011–
2015. T e Unisa Principal and Vice Chancellor, Professor Mandla
Makhanya, is recognised for his scholarly and visionary support for
this project, his swift response in endorsing the book project and for
volunteering to write its foreword. T e authors, blind peer
reviewers, editors from Unisa Edit, the CEMS Deanery, and the Institute for
Corporate Citizenship had an invaluable input in the writing process.
Professor Neil Eccles, you really know how much you contributed in
terms of ideas and refi nement of this work. Please keep this spirit in
the future. T e publishers, Africa Institute of South Africa, are hereby
acknowledged for a quality product.
Professor Godwell Nhamo
Programme Manager: Exarro Chair in Business & Climate Change
Institute for Corporate Citizenship
University of South Africa
Green Economy and Climate Mitigation xiAbout the sponsor and the
Exxaro Chair in Business
and Climate Change
Exxaro Resources Ltd
Exxaro Resources Ltd is one of the largest South African-based
diversifi ed resources companies, with a well-balanced portfolio including coal,
mineral sands and base metals, with a signifi cant indirect interest in
iron ore. It is a top 40 company listed on South Africa’s securities
exchange, the JSE Limited.
T e group’s strategic focus, record of innovation and commitment to
sustainable development underpin its promise to contribute to the
economic growth of South Africa. In 2007, Exxaro’s leadership recognised
that it had to deal with energy in its broadest context (shortages,
rising costs, climate change, environmental concerns) in order to remain
competitive and sustainable for the benefi t of all its stakeholders.
Exxaro’s response to energy and carbon-related risks have been
multi-faceted. An internal Clean Energy Forum was established in 2007,
which led to the formulation of the Energy and Carbon Management
Framework in 2008 and a Climate Change Position Statement fi nalised
in 2010. A Climate Change Response Strategy is also being devised. T e
Energy and Carbon Management framework has also seen the
company’s general risk register being updated to take account of climate
change risks. Exxaro participates in the energy debate at a local,
national and international level.
In 2009 Exxaro embarked on the formation of a new energy company
aimed at generating power for the country through a mix of renewable
and cleaner energy sources. T e group is also identifying
opportunities in strategic minerals, which will be necessary for the low carbon
economy, and hedging through investment in businesses, which will be
prominent in a low-carbon economy.
T e company’s participation in the international Carbon Disclosure
Project has facilitated the introduction of processes to measure the
company’s carbon emissions and provides valuable insight into the
company’s overall emissions performance and thus allows for clear
xii Green Economy and Climate MitigationAbout the sponsor and the Exxaro Chair in Business and Climate Change
target setting in its energy strategy. Exxaro achieved a tied-fourth
highest score in the CDP 2010.
T e Exxaro Foundation and Exxaro Chairman’s Fund are
committing over R15 million a year in sponsoring three chairs at diff erent
universities. T ey are the Exxaro Chair in Business and Climate Change
at the University of South Africa, the Exxaro Chair in Business and
Biodiversity at the University of Pretoria and the Exxaro Chair in Global
Change and Sustainability at Wits University. T ese chairs are actively
pursuing advocacy, research and training in their respective areas of
specialisation. T e results will be shared nationally and internationally.
Responsible business practices remain a long-term value proposition
for Exxaro. Based on universal values and accountability, it makes
business sense to invest in creating a sustainable environment in which to
operate.
Exxaro Chair in Business and Climate Change
Unisa, in partnership with Exxaro Resources Ltd (Exxaro) established
an endowed Chair in Business and Climate Change – the Exxaro Chair
in Business and Climate Change (Chair) in 2008 with a life span of
three years. Following the Chair’s success, Exxaro renewed the Chair’s
mandate for a further fi ve years to 2015. T e vision of the Chair is ‘To
create a centre of excellence in business and climate change research,
education and advocacy oriented community engagement’. Its mission
is ‘To support South African and African stakeholders (including
business, government and civil society) in their quest to reduce GHG
emissions and adapt to climate change through relevant and cutting edge
research, education and advocacy-oriented community engagement
programmes. T e Chair is mandated to operate in three thematic areas
namely: (1) research; (2) academic programme development (including
training and capacity building); and (3) advocacy oriented community
engagement.
Green Economy and Climate Mitigation xiii