Decarbonisation and Competitiveness: Why Going Green is Essential in a Shifting Global Landscape

In 2015, many countries, including South Africa, committed to the Paris Agreement, pledging to decarbonise at their own pace.

This commitment has led to new laws aimed at reducing carbon emissions, with South Africa introducing a climate change bill that includes carbon budgets and a carbon tax. As consumer and shareholder demands for corporate responsibility rise, the European Union is spearheading regulatory frameworks like the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive, which require companies to report on ESG metrics and address supply chain issues.

These regulations will challenge the competitiveness of high-carbon products, significantly impacting South African exports. To remain an attractive investment destination, especially for exports to the EU, South Africa must ensure access to clean energy at competitive prices and comply with reporting standards.

The Carbon Border Adjustment Mechanism (CBAM) adds complexity to this landscape, facing pushback from Global South countries, including South Africa and India, over concerns about its fairness and WTO compatibility.

As developed nations implement their own CBAMs, they may raise carbon prices, which could further disadvantage South Africa due to its lower carbon tax and higher production carbon intensity.

Overall, industries must enhance their sustainability efforts to remain competitive in the evolving global market.