Biodiversity: Powering the Green Economy. 18 October 2011 Green Industries, Department of Trade and Industry

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1 Biodiversity: Powering the Green Economy 18 October 2011 Green Industries, Department of Trade and Industry Content What does the green economy mean for the Department of Trade and Industry? How is the dti looking to develop its vision of the green economy? Do you see a role for biodiversity and ecosystem services in the green economy, particularly in the context of a changing climate? What are the opportunities and challenges for integrating biodiversity based economy activities into the green economy in South Africa's developmental reality? What do you see are the major challenges in transitioning to a green economy, and what are the ways of addressing these challenges?

2 What does the green economy mean for the Department of Trade and Industry? Official unemployment is ,7% of labour force There are discouraged work seekers New Growth Path target to create 5 million jobs by 2020 Both the new growth path and IPAP identified the Green Industries and the Green Economy as a future pillar to support job creation and industrialisation World population was 370 million in 1350, 6 billion in 1999 and by the end of this month 7 billion 3 important shortages on earth water, food and energy Green Revolution similar to industrial revolution will be the most probable outcome Job creation is a key priority for South Africa and one where green industry offers a clear value proposition. Where green industries replace brown industries, nett job creation is almost always positive. Manufacturing since 2008 crisis Manufacturing employment remains well below 2008 levels Manufacturing employment Q Q Q Q Q Q Q32009 Q42009 Q12010 Q2010 Q32010 Q42010 Q12011 Q Source: Quantec: SARB

3 Drivers of the Green Economy This Green Wave is not only a matter of making the world a cleaner, more liveable place, it is also about ensuring the survival of our species over the long term. The awareness or realisation that green is good is obviously an important driver of the Green Wave, but economics has become the main driver of the Green Wave. The complex interaction between the rising cost of existing energy in the world (mainly derived from fossil fuels), the current and future demand for energy, the need to find a reliable supply of energy and the decreasing costs of alternative green energy can be seen as the main drivers of Green and Energy Efficient sectors, globally and in South Africa. The issue of climate change and cost to society associated with global warming is also a big part of the economics driving the green energy wave Ethiopia In many parts of the world people are realising that green is good and this means that consumers are more and more choosing goods and services based on the green characteristics. Globally a tremendous amount of investment and venture capital is flowing into the green industries in search of big returns. New technologies that were previously destined to stay on the drawing board now have the opportunity to be commercialised and achieve success in the market place. Potential focus areas in the Green Economy Biodiversity?? Energy Solar, wind, geothermal, wave, bio gas, fuel cells. Water Recycling, grey & rainwater systems, low water landscaping, water purification, storm water planning Waste Management Recycling and municipal waste, salvage, toxic remediation, brownfield cleanup, sustainable products (packaging) Buildings Residential & Commercial assessment, energy efficiency retrofits, water efficiency retrofits, green products and materials Transportation Future fuels, electric & hybrid vehicles, public transport Land Management Organic agriculture, habitat conservation and restoration, urban forestry, reforestation, soil stabilsation

4 Example: Renewable Energy Priority for Jobs New Growth Path for manufacturing led growth aim to reverse declining share of manufacturing in GDP and low level of investment in fixed capital. Growing energy demand Climate change commitment 50 GW new capacity needed in next 20 years. Renewables would be more jobintensive than coal potential for up to 40,000 jobs if an ambitious level of renewables developed. Copenhagen Accord commitment to enable a 34% deviation below BAU by 2020 and 42% deviation by 2025, depending on the provision of finance, technology and support by developed countries. Renewables opportunity World class solar and wind resources industrial policy to leverage public procurement for industrial growth. Recognition that large scale steady ramp up needed to build local industry. The vision: unlocking South Africa s virtuous green growth cycle Citizens, labour, consumers Catalyses green growth in South Africa, with minimal burden. Commitment to ambitious renewables procurement backed by modest domestic funding South African Government Domestic industry Localisation and economic development criteria Incentives Tax rebates Creates industrial and economic benefits localisation, export competitiveness energy security Enables development of a critical mass of renewables projects Unlocks innovative financial instruments to reduce the cost burden International investors International co operation Longer term and/or cheaper finance

5 Wind Localisation Potential Scenario Assumptions % value Local spend/mw 1. Low-industrial Content 2. Medium-low industrial content 3. Medium-high industrial content 4. High industrial Content Grid connection, civil works, other capital costs, fully imported wind turbines Grid connection, civil works, other capital costs, tower locally made, rest of turbine imported Grid connection, civil work, other capital costs, tower, blades, generator and nacelle made locally, rest imported Grid connection, civil works, other capital costs, most of turbine made locally, except for specialised items such as gearbox, rotor bearings 29 R4.64million 47 R7.52million 66 R10.6million 87 R13,9million Developing an industrial strategy for renewables Vision: The large scale roll out of solar and wind power in South Africa is leveraged to establish new and support existing manufacturing and related services capacity, so that, South Africa is a leading provider of cost effective components and services for new solar and wind power solutions within the country, while growing its market share in the global solar and wind power sector supply and value chains through exports, particularly to the region.

6 Major Challenges and critical issues not comprehensive Ensuring policy certainty and coherence across all spheres of Government to drive green agenda otherwise no action Policy uncertainty adds cost Providing investor certainty Government leadership is crucial in a Green Economy Developing and maintaining a local skills base We must move at a good pace Governments balance sheets are under pressure we need new models Innovative early funding to get cost curves down Many solutions and lobbying need to measure and be able to express as a value No problem to reach initial targets but to go beyond certain targets requires complete system change Securing economic opportunity across the supply chain Transition to green economy must become the norm people want to know what is in it for them Summary New Green Industries present significant opportunities for hundreds of billions of rand of private sector investment aligned with the New Growth Path Co benefits: food, energy and water security, job creation and industrial opportunity Domestic demand will often be driven by policy instruments and supported by finance Currently the development of local industry is driven by local content requirements and manufacturing incentives Many policies already in place. Additional policy development to required we are only starting now

7 Thank you Gerhard Fourie Chief Director: Green Industries