M van Schalkwyk: Seminar on international climate and investment
policy

14 January 2009

Introduction

Chairperson

I would like to express my appreciation to the Natural Resources Defence
Council (NRDC) and Climate Change Capital for hosting this event at such an
historic moment in United States (US) history. The election of President Obama
signals a much anticipated fresh start in our efforts to negotiate a fair,
inclusive and effective international climate regime for the future. We look
forward to the unlocking of a new dynamic in international climate negotiations
as the United States assumes an international leadership role which is
underpinned by ambitious domestic action and solidarity with developing
countries. We are indeed encouraged by the new voices of reason emerging with
the transformation of leadership in the US.

Before I address our expectations for the Copenhagen agreement at the end of
2009, let me refer to what we are doing in the developing world, and in South
Africa in particular, to address this urgent challenge.

South Africa's long term mitigation scenarios and policy framework

Increasingly, developing countries are making substantive proposals to move
us forward. During 2008 the G77 and China produced detailed proposals on
financing and technology. Africa adopted a roadmap for climate negotiations.
China published their climate White Paper. Brazil tabled their Climate Bill,
and India published their national plan. During the G8 Summit the G5 developing
countries made proposals for an ambitious long term climate policy consistent
with the most ambitious stabilisation scenario assessed by Intergovernmental
Panel on Climate Change (IPCC).

As a developing country, South Africa has stepped up its efforts. In July
2008, our cabinet agreed on an ambitious national climate framework. This
framework is motivated by climate change concerns, but very importantly also by
our energy access, energy security, sustainable development and poverty
eradication imperatives.

In South Africa, the climate question is both an energy question and a
development question. On the one hand, some 30 percent of households do not yet
have access to modern energy services. On the other, the energy sector is
responsible for some 80 percent of our greenhouse gas emissions, with
electricity generation responsible for some 40 percent. Coal is the fuel used
for 90 percent of our electricity supply. Needless to say, we have built
economic competitiveness around coal, which is similar to the United States'
reliance on fossil fuels. If we continue with a business as usual growth path,
our emissions will almost quadruple from 446 megatons CO2 equivalent in 2003 to
some 1600 megatons by 2050. Continuing along this path will be a high risk
approach. We are clear that it would be socially, economically, politically and
environmentally unsustainable. We cannot continue to grow without a carbon
constraint.

We find ourselves at the southern tip of the continent most vulnerable to
climate change. In a "do nothing" scenario, the IPCC tells us that global
average temperatures will increase far beyond two Degrees Celsius above
pre-industrial levels.

The projected impacts of this level of temperature increase for South Africa
are alarming, with deep social and economic implications. Up to 55 percent of
our current biomes will be detrimentally affected in the next 50 years with
unmitigated climate change. Infrastructure, industrial production,
income-generating activities and human livelihood strategies will be
significantly affected. The number of people exposed to water stress will
multiply, and productive land area will decrease. If no action is taken, vector
borne diseases such as malaria will spread into disease-free areas with
considerable associated costs.

In terms of food security we face a significant decrease in agricultural
crop yields such as corn, which could decrease by as much as 20 percent in the
drier western regions within decades, while heat stress is already having
impacts on productivity in the deciduous export fruit sector. In the face of
these risks, the debate on climate change in our country is one on national,
economic and environmental security. Those least able to adapt are the poor,
and thus this is also a poverty issue. We have therefore decided to take
decisive action.

We are not willing to compromise our long term development, competitiveness
and survival by not taking action in the short and medium term. We understand
that all nations would have to do more, albeit in a differentiated way. As a
country that relies heavily on fossil fuels, like the US, we have therefore
conducted an evidence-based process to determine what the risk threshold should
be and to determine what South Africa's contribution to global efforts could be
to keep the climate at safe levels. We have asked how we can simultaneously
avoid the risks, and seize the opportunities of the global transition to a low
carbon economy. We have also done extensive economic modelling which has shown
that taking early action is affordable, and that in the long term "green
growth" is the best option for welfare, job creation and poverty
eradication.

Based on this two year process and considering the fact the climate change
solution must be global, the South African Government has committed to our
emissions peaking between 2020/25, then stabilising for a decade, before
declining in absolute terms towards mid-century. The political commitment to a
"peak, plateau and decline" path is highly ambitious for a developing country.
We have achieved something remarkable by building a national consensus on a
climate change framework that brings together government, business, labour and
civil society. In the context of the global nature of the climate challenge, we
could only justify this domestically if all developed countries, including the
US, committed to absolute emission reductions: a commitment to a peak and
decline path with a near-term peak.

In government's decision, three areas i.e. technology, investment and policy
are brought together into a coherent vision. State led regulation will play a
key role, complemented by getting the economic incentive and investment
structure right and increasing long-term research and development spending.
Government has also made clear its intent to put an escalating price on carbon,
be that through market mechanisms, a carbon tax, or a combination of these
instruments.

We will also continue to set ambitious and mandatory domestic targets for
energy efficiency and the transport sector. We will continue to diversify the
energy mix away from coal whilst shifting to cleaner coal, by for example
introducing more stringent thermal efficiency and emission standards for coal
fired power stations. Incentivising renewable energy through feed-in tariffs
and user charges is on the cards, and we have already set a requirement that
all new coal fired power stations and coal-to-liquid plants must be carbon
capture ready.

Chair, we are putting our best efforts into making a fair contribution to
this global challenge - but the extent to which South Africa will be able to
realise its ambitious vision will depend on the support that the international
community gives through finance, technology transfer and the building of human
and institutional capacity.

By implementing existing development plans we are already deviating from
baseline. By implementing additional policies and measures, we can deviate even
further from baseline, but we need predictable international support.

Reflections on climate negotiations in Poznan

Let me now turn to the recent climate negotiations in Poland.

In Poznan, we agreed to move into full negotiating mode in order to conclude
negotiations in Copenhagen at the end of 2009. Yet, when reflecting on Poznan,
we have to acknowledge that although the process is now in place, the politics
are not.

We are in particular concerned about the trust deficit, the widening gap in
trust between developed and developing countries, and generally, we are
disappointed by the lack of leadership by some developed countries. This
includes the following:

* the inability of some developed countries to come forward with credible
and ambitious mid-term targets

* the deafening silence from developed countries in response to detailed G77
and China proposals on technology and finance

* adaptation funding taking a back seat.

Yet, we are as determined as ever to reach an ambitious agreement in
Copenhagen. What will be required is a transformation away from the politics of
distrust. It will require bold leadership from all sides. In particular, we
need clear signals on mid-term targets from all developed countries, including
the United States of America (USA), as well as credible proposals on financing
and technology in support of developing countries. Developed countries will
have to make good on their promises, dating back to the signing of the Climate
Convention in 1992.

Our expectations for the Copenhagen agreement

Turning to our expectations for Copenhagen, the agreement in Copenhagen must
balance climate and development imperatives, and adaptation and mitigation, and
it must be supported by adequate means of implementation.

On adaptation, the Copenhagen agreement must provide massively scaled-up and
predictable support for implementation and consolidate an international
programme of work on implementation of adaptation, established within a binding
legal instrument under the United Nation Framework Convention. New sources of
funding could come from both market and non-market sources, including National
Treasuries and the proceeds of the international auctioning of emission
allowances.

Whilst recognising our shared responsibility for the future, we cannot wish
away historical responsibility for the problem. The fact of the matter is that
the carbon space is finite and 70 percent of the "safe" carbon space has
already been used up, largely by industrialised countries. Any attempt to place
an absolute cap on the access of developing countries to the remaining "safe"
carbon space will therefore be counter-productive. An equitable burden-sharing
paradigm requires that developed countries take leadership by committing to
absolute and legally-binding emission reductions, whilst developing countries
take meaningful actions, supported by effective means of implementation, to
ensure a substantial deviation from business-as-usual.

On mitigation, there are three strands that have to be woven into a
multilateral framework. Firstly, more ambitious, quantified and legally binding
emission reduction commitments for developed countries under the Kyoto
protocol. Secondly, re-engagement of the USA in the full multilateral process.
And thirdly, recognition of, and incentives for enhanced mitigation action by
developing countries.

The science tells us that greenhouse gas emissions must peak and decline
within the next 10 to 15 years. Therefore, commitments by some developed
countries which focus on voluntary "pledge and review", or emissions intensity,
will not be adequate.

In Copenhagen, we expect Kyoto Parties in the developed world to adopt, in
aggregate, targets towards the upper end of the range of minus 25 percent to 40
percent below 1990 levels by 2020, and 80% to 95 percent domestically below
1990 levels by 2050.

From the United States we expect comparability of effort. By that we
understand comparability of targets and compliance, captured in a legally
binding manner under the Convention, working in harmony with the Kyoto Protocol
during the second commitment period. We cannot accept anything that suggests
that, because the US has done so little for so long, we must allow them to do
less than required-by-science in future.

Chair, we understand that it is critical that these commitments are encoded
in United States domestic legislation. It would be our hope that a
cap-and-trade Bill can be passed as early as possible, and that it is given top
priority by the incoming US Administration. Equally important is that the US
brings its action into the multilateral process and negotiates its commitment
together with all nations. This would provide highly significant impetus for
Copenhagen. For the global problem of climate change, the message can only be
that together, we can.

In this respect the signals from President-elect Obama has been encouraging,
even though in substance the incoming Administration is still on a zero
reduction below 1990 levels by 2020. We do however recognise that this is an
opening bid and a much improved one. But what we need is a meaningful negative
percentage compared to 1990 levels by 2020.

For developing countries the Copenhagen agreement could set the framework
for a "toolbox" approach to mitigation, dependent on means of implementation
that is also measurable, reportable and verifiable. This could be facilitated
by a register of nationally-appropriate mitigation actions under the United
Nations Framework Convention on Climate Change (UNFCCC).

The message from a developing country perspective is clear: We take our
responsibilities seriously. We are already making a meaningful contribution
within our respective capabilities. We are willing to do more. But the trigger
must come from the North.

Besides broadening participation to include the US, creating a more
empowering technology and financing framework will be a precondition. I am
quite certain that binding support to developing countries could trigger
matching mitigation commitments to act. A serious discussion is therefore
needed in the US on scaling up support for climate change action including what
share the US is willing to devote to support action in developing
countries.

Conclusion

Chair, in conclusion, South Africa has signalled that it is serious about
negotiating on climate change. We can do so on the basis of having done our
homework at the national level. South Africa, along with other developing
countries, is saying that it is willing to face up to its responsibility for
the future. It will be critical that all developed countries respond by showing
leadership and taking on their responsibility.

I thank you.

Issued by: Department of Environmental Affairs and Tourism

14 January 2009