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Current global challenges and alternative energy futures for South Africa

Executive Summary of an 83-page report available online as PDF from ASPO-South Africa.

Introduction

  • The combined effect of depletion of global oil and natural gas reserves, climate change and global monetary imbalances and financial instability is likely to have significant impacts on the global and South African economies throughout the 21st Century.
  • These impacts are likely to include far reaching consequences for energy, food security, settlement patterns and social stability.
  • The risk of ignoring these impacts is far greater than the costs of attending to them now.
  • But to attend to them coherently we need to critique the assumption of exponential growth which underlies our economic growth strategies, GEAR and ASGISA.
    • If we grow our economy at a constant rate of six per cent per annum, after 11 years its size will have doubled and we will have consumed more energy and other resources than we have in our entire history (assuming no structural change).
  • There is an inherent clash between exponential growth and the finiteness of resources.
    • Our quantum of physical resources is limited by the planet's finite size.
    • Our consumption of these resources is accelerating.
  • To sustain our societies will require a paradigm shift from exponential growth to sustainable development through the utilisation of renewable resources and a change in consumption patterns.

Key Global Challenges

Peaking of World Oil Production

  • Oil is a finite, non-renewable resource that must be discovered before it can be produced.
  • Discoveries of oil have been on a declining trend since the 1960's.
  • The evidence from real oil wells (eg. in the US South and the North Sea) provide empirical evidence that oil production roughly follows a bell shaped curve, rising to a peak and then falling.
  • Approximately two thirds of the oil producing nations have passed their individual peaks.
  • While it is uncertain precisely when global oil production will peak, and what the post-peak rate of depletion will be, available evidence suggests that global oil production will probably decline between 2007 and 2020, with significant risk of rapid decline and price spikes.
  • Given oil's high energy density, portability and versatility, it appears unlikely that energy substitutes and conservation measures will be sufficient to avert damaging shortages.
  • Because oil is an input into most products (including food) and, in the form of fuel, the basis of the modern transport system, shortages of oil will have significant impacts on the following sectors:
    • Economy and financial markets - impact would be price spikes, inflation, recession or depression
    • Transport and mobility - likely to be greatly reduced for most people
    • Agriculture, food and population - declining food production, and rising food prices causing heightened food insecurity.
    • Geopolitics and conflict - international competition for dwindling oil supplies could spark wars

To mitigate the effects of oil depletion will require:

  • Energy efficient transport systems
  • Switching to renewable sources of energy
  • Changing consumption patterns - lifestyle changes
  • Organic and localised urban agriculture - to enhance food security
  • Eco-village type of residential development
  • Energy efficient buildings - construction methods and materials.

Climate Change

  • The Intergovernmental Panel on Climate Change (IPCC) has identified human activities as the main contributors to climate change, through global warming.

  • These activities are:
    • Burning fossil fuels for power generation
    • Transport
    • Industry
    • Changing land use patterns, especially deforestation
    • Agriculture
    • Generation of waste
  • Indicators of global warming:
    • Icecaps/glaciers melting
    • Air/sea temperatures rising
    • Increasing frequency and severity of heat waves, droughts, storms
    • Rising sea levels
    • Thermal expansion of oceans

Impacts of climate Change:

  • Threat to food and water security
  • Spreading epidemic diseases
  • Destruction of coastal settlements
  • Displacement of peoples
  • Africa and South Africa liable to suffer extreme food and water shortages.

To mitigate the effects of climate change will require:

  • Reducing fossil fuel consumption
  • Sequestering carbon dioxide emissions
  • Reducing deforestation; planting more trees
  • Enhancing energy, transport and economic efficiency; reducing waste
  • Improving agricultural practices (to increase oil conservation)
  • Changing lifestyle and behaviour patterns

Global Financial Imbalances

  • The global financial system is characterised by severe imbalances between:
    • US debt (debtor nation)
    • Over-savings of (mainly) under-developed economies (creditor nations)
    • Where the creditor nations are funding the debtor nation
  • These balances are seen by most economists as unsustainable
  • Economists differ as to whether the adjustment will be orderly or disorderly
  • The risk of disorderly adjustment is high because of the likelihood of:
    • Highly indebted US households reducing their consumption expenditure
    • A sharp fall in the value of the US dollar
    • The imposition by the US of protectionist trade control on imports

Potential outcomes of a disorderly adjustment:

  • Drop in global real incomes and output
  • Volatility in financial markets
  • An oil or climate induced shock could precipitate a recession/ depression

To mitigate the effects of adjusting global financial imbalances will require

  • A concerted and co-ordinated multi-lateral policy response involving:
  • A package of expenditure reducing/increasing policies
  • Expenditure switching via exchange rate adjustments

South Africa's Strengths and Vulnerabilities

South Africa's response to the global challenges referred to above needs to be based on a thorough consideration of our strengths and weaknesses, which are as follows

Energy security

  • Critical strengths: relatively low oil dependence, well established synthetic fuels; abundant solar energy, substantial wind, uranium and coal resources.
  • Critical weaknesses: high dependency on imported oil, and liquid fuels for transport; energy intensive industry.

Macro -economy

  • Critical strengths: strong growth, low inflation and government debt, funds for infrastructure development.
  • Critical weaknesses: relatively large current account deficit, household indebtedness; floating exchange rate and liquid capital market.

Transport

  • Critical strengths: existing rail network and potential for bicycles.
  • Critical weaknesses: inadequate public transport; high dependence on petroleum fuels.

Food security

  • Critical strengths: net food exporter, some subsistence agriculture.
  • Critical weaknesses: commercial farming is oil intensive, little organic agriculture, only 13% of land is arable, recurring droughts.

Settlement patterns and geography

  • Critical strengths: major ports facilitate cheaper transport and trade for coastal settlements.
  • Critical weaknesses: large distance from trading partners; urban areas liquid fuel dependent for transport; large distances between major cities.

Social and political stability

  • Critical strengths: successful political transition; 13 years of democracy.
  • Critical weaknesses: poverty, unemployment, inequality, prevalence of HIV/Aids and crime.

Future South African Liquid Fuel Scenarios

The following are two plausible alternative futures that provide reasonable and consistent answers to the "what if?" questions relevant to government and society as a whole.

Scenario One - Fragmentation

  • The world and South Africa continue on a Business As Usual path until interrupted by a major shock.
  • Economy: Inflation spikes driven by rising oil prices; interest rates rise to quell inflation, but depress consumer spending further; the US economy, and the world economy slide into recession; unemployment rises rapidly.
  • Transport: : massive price rises for air flights, road transportation; South Africa's inadequate public transport infrastructure provides no viable alternative; demand for motor cycles and bicycles increase, and also for people to work from home; road maintenance costs soar and road infrastructure deteriorates.
  • Food: rising prices and fuel shortages place commercial farmers under pressure; food prices rise significantly and severe food shortages increase; government intervenes in the pricing and supply of food.
  • Conflict and security: competition to control global oil supply results in conflict in Middle East, Central Asia and West Coast of Africa.
  • Governance: local town administration breaks down, local conflict over scare resources intensifies and the country is increasingly fragmented into small units controlled by uncoordinated militias.
  • Climate and environment: governments abandon negotiations to lower carbon emissions and CO2 concentrations increase to dangerous levels setting the course for a 2 degree increase in temperatures and catastrophic, irreversible climatic conditions later in the century.

Scenario Two - Renaissance

  • Leadership from top: a sustainable development strategy is put inplace, initiated by the Presidency, and communicated effectively to the nation and the world.
  • The government takes the lead through:
  • Energy saving quotas for government departments
  • New building regulations to achieve energy efficient building
  • Declareing coal a national asset
  • Economy: more business conducted by internet/telecommunication as transportation shrinks; incentivisation (subsidies) results in existing industries being re-tooled in favour of technologies using renewable energy sources.
  • Agriculture: becomes more localised, small-scale, labour-intensive, with bio-diesel as fuel.
  • Population: South Africa adopts a population policy to further limit population growth.
  • Energy: South Africans reduce our usage of fossil fuels and compliment existing nuclear power with renewable energy sources; there is also usage of highly energy efficient appliances.
  • Transport: Transnet develops a sustainable transport system powered by electricity generated from renewable resources; cycling and walking replace cars for short journeys; light electrical rail systems are installed in South African cities.
  • Urban (and rural) planning: new planning approaches enable the creation self-sustaining urban communities where living and work spaces are integrated, including eco-villages; food supply is re-structured.

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