SA needs an estimated $833.6bn (R12-trillion) in its transition to net-zero by 2060, an amount that would require a big increase in taxes as well as government borrowing and place a heavy burden on domestic consumption and the economy, a study by Standard Chartered reads.
Self-financing could see SA household spending fall $281.8bn over the period, but if the money is provided by developed markets, that could increase by $311.1bn, the study says, highlighting the crucial role of wealthy, developed economies in helping to finance the switch to renewable energy.
Emerging markets need to invest an additional $94.8-trillion — more than the current annual global GDP — on top of the capital already allocated by governments under their current climate policies to transition in time to meet long-term targets to limit global warming, it adds.
It was found in the study, which also included the cost of a just transition in other emerging markets, that if these countries all had to fund their own transition, household consumption in these markets could fall an average 5% annually to end-2060.
Developed markets’ financing of the transition in emerging economies could help unlock growth and boost their combined GDP by 3.1% annually over the same period.
The study also highlights the potential effect on emerging market communities of private investors failing to deliver on their COP26 pledges, said Bill Winters, Standard Chartered group CEO.
“Without help from developed markets, improvement in emerging market prosperity could be halted or reversed, which would not only be unjust but would have a hugely negative effect on the world economy,” he said.
Failure to deliver emerging market transition finance could mean climate goals are missed, “triggering an environmental catastrophe”, he added.
The latest scientific report on climate by the Intergovernmental Panel on Climate Change (IPCC) released last week says the world should cut global emissions by 45% before the end of the decade to keep global warming within the “manageable” 1.5˚C range, but current climate pledges would mean a 14% increase in emissions.
To get closer to the target of cutting emissions by almost half by 2030, an increase in the total financial flows for climate mitigation and adaptation is called for in the report.
According to the panel, financial flows from developed to developing countries are below the collective goal under the Paris Agreement to mobilise $100bn annually. Financial flows are three- to sixfold lower than levels needed by 2030 to limit warming to below 2˚C, it said.
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