In 2020 South Africa was expected to spend ZAR 172 billion on energy subsidies, primarily through bailouts of carbon-intensive enterprises, support for the oil and gas industries, and exemptions from carbon taxes.
Energy subsidies and taxes, when used strategically, could indeed help the nation decarbonize its economic system and intensify the transition to renewable energy; however, handouts for fossil energy motivate the use of hydrocarbons, oil, and gas, giving rise to air pollution, climate change, contamination of land and water, and habitat destruction.
The billions spent to establish the existing petroleum product system have such a huge impact on the environment and people’s well-being, with non-renewable energy source contamination costing South Africans ZAR 550 billion each year.
The government’s energy requirements strategies must be revised to reflect the social and environmental consequences of fossil fuels. It should, in contrast, connect subsidies to the energy revolution and scale down carbon tax breaks, notably in the electricity sector.
South Africa should likewise boost fossil taxes on fuel, with the proceeds going towards targeted assistance for underprivileged households and accelerating the transition to sustainable energy. And, in order to keep up with rising energy demand, the government must increase investments in renewable energy and investigate new economic models for a major scale of renewables.
Fiscal policies (subsidies, levies, and grants) can assist countries to achieve their energy and climate goals if they are planned correctly.
Existing fossil fuel subsidies are much too expensive and must be modified to assist underprivileged households while also accelerating the transition to sustainable energy. Currently, the subsidies have a significant impact on people’s health and the environment, with pollution from fossil fuel consumption costing South Africans ZAR 550 billion per year in environmental degradation and public health damage. To stimulate the expansion of renewable power capacity and assist the country to fulfill its climate targets, the government must increase the openness of its energy economic plans.