South Africa Carbon Pricing and Climate Mitigation Policy

Selected Issues Papers, June 26, 2023

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Meeting South Africa’s ambitious climate objectives will require a comprehensive strategy that includes:
- a more effective use of carbon pricing policy,
- reducing inefficient government subsidies that have delayed the green transition,
- well-targeted support to affected industries and households,
- and other green financial and sectoral measures.
Implemented well, the mitigation policy package would promote low-carbon investments, raise government revenues, and support economic growth.

Carbon pricing should be used more effectively as part of a comprehensive mitigation strategy.
Inefficient government subsidies have delayed the green transition and should be reduced.
Well-targeted support is needed for affected industries and households to manage the transition.
Complementary green financial and sectoral measures are necessary to achieve climate objectives.
The mitigation policy package can simultaneously:
- promote low-carbon investments,
- raise government revenues,
- support economic growth.

Implement a comprehensive mitigation policy package combining:
- stronger carbon pricing measures,
- subsidy reform to remove delays to the green transition,
- targeted support for industries and households affected by decarbonization,
- green financial instruments and sectoral policies to mobilize investment.
Ensure policy design balances revenue generation, distributional considerations, and incentives for low-carbon investment.