# **I. Introduction**

For at least three reasons, Sub-Saharan Africa’s response to climate change has concentrated on adapting to its adverse effects rather than mitigating further increase in greenhouse gases. First, all of Africa contributes less than 4 percent of global greenhouse gas emissions, so mitigation will not have major effects on climate change. Second, the stock of greenhouse gases in the atmosphere today is the result of emissions by rich countries. There is little reason why the world’s poorest continent should now curtail its greenhouse gas emissions to compensate for these past excesses. Third, mitigation policies are costly and difficult to implement. Not only will they impose a cost on industries such as energy and transport that emit CO2, the major greenhouse gas, but also, levying a carbon tax or limiting carbon emissions will require credible and effective institutions, which are arguably in short supply in Sub-Saharan Africa.

A possible exception may be South Africa. A middle-income country that produces 65 percent of Africa’s and 1.5 percent of the world’s carbon dioxide emissions<sup>3</sup> as a by-product of its extensive energy production and usage, South Africa has both higher levels of emissions and the capacity to tackle emissions of greenhouse gases. As an active participant in the Kyoto and Poznam processes, South Africa is also committed to mitigating climate change and has recently developed a Long-term Mitigation Scenario (see, for example, Winkler (2008)). Although all countries have the right to exploit their own natural resources, international environmental law and global citizenship require that countries contribute to alleviating climate change. Moreover, there is a policy risk associated with avoiding mitigation—when a carbon price does emerge from climate negotiations, there is a risk that South Africa will end up with stranded assets in the form of dirty coal-burning generators. Nevertheless, there are some questions about possible mitigation measures. The debate between a carbon tax and a cap-and-trade program will need to compare alternative taxes not only in terms of the welfare and economic impact, but also the capacity to recycle tax revenue to achieve further reform, and the impact on equity and the poor. To economize on institutions, the consensus seems to be in favor of a carbon tax rather than more complex cap-and-trade programs (Aldy et al. (2008), Summers (2007), Zedillo (2008)). But in the absence of a worldwide agreement, how high should the tax be? In principle, the tax should be set so that the marginal cost of carbon emissions equals the marginal benefit of the reduced greenhouse gases. Since the latter is still the subject of debate and analysis, there is little guidance on the appropriate level of the tax and very little information about its possible economic and welfare impact. Furthermore, South Africa currently has no carbon tax.<sup>4</sup> It may instead have to tax carbon-intensive products such as energy and transport, which would impose costs on the economy. Finally, even a pure carbon tax would be passed forward into the various

> 3 World Development Indicators (WDI), 2008. The primary sources of information are the International Energy Agency (IEA)’s annual publications, _Energy Statistics and Balances of Non-OECD Countries_ on energy use _;_ and the U.S. Department of Energy’s Carbon Dioxide Information Analysis Center (CDIAC) on CO2 emissions.  See also footnote 5.

> 4 However, South Africa is one of the first developing countries to announce a partial carbon tax--2 cent/kWh on electricity from fossil fuels.

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