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Sustainability Watch
A bi-monthly electronic briefing for the business community on developments in the field of sustainability
Compiled by Tanja Hichert
Institute for
Futures Research
Instituut vir
Toekomsnavorsing
Issue 38 Jan 2010
Economic issues
The South African branch of the WWF has raised questions about the integrity of the National
Energy Regulator of South Africa's (Nersa) public hearings into Eskom's proposed electricity
price hikes. According to Richard Worthington, manager of WWF's climate change programme,
Eskom originally asked for a 45% increase, but then, after deciding to delay the building of
Kusile power station to reduce costs and putting renewable energy projects on hold, Eskom
reduced this to a 35% increase. ‘In the meantime, the Government Gazette published a decree
on 31 December stating that Kusile will be built according to original plans and schedules.’ WWF
recognised that building more energy supply would increase electricity costs, but said that if this
new energy came from independent, green power producers, it would result in a significantly
smaller tariff increase than Eskom is currently requesting. A combination of industrial processes,
wind and solar power generation, which would provide the equivalent amount of energy of
Medupi and Kusile combined, would raise the price of electricity from 33c/kWh to 58c/kWh,
instead of the 82c/kWh that Eskom is asking for by 2012, WWF said in a statement. These costs
would be fixed through power purchase agreements for 20 years, while Eskom has warned that
it may still come back to the regulator in later years to request more tariff increases, the
statement said. Medupi and Kusile, which will cost a total of R262bn, will each emit as much
carbon as all of New Zealand, or the 30 lowest-emitting African nations combined, ‘rubbishing
South Africa's commitment at the Copenhagen climate change negotiations to reduce its
emissions by 34% compared to business-as-usual scenarios’.
Meanwhile opposition parties are calling for the ANC to disinvest its 25% stake in the
company (Hitachi South Africa) contracted to help build the two new Eskom power stations.
Social issues
The declining snow cover and receding glaciers in the Himalayan state of Jammu and Kashmir
could trigger renewed hostilities between India and Pakistan, experts warn. The two countries
share the Indus River, one of the longest rivers in the world. Pakistan and India have long
been embroiled in a territorial dispute over Kashmir, but have so far managed to uphold a
World Bank-mediated Indus Water Treaty (IWT) that provides mechanisms for resolving
disputes over water sharing. Any drastic reduction in the availability of water in the region has
the potential of causing a war between the hostile south Asian neighbours, according to an
article published in Journal of Earth System Sciences, a bimonthly science publication in India.
‘The Indus water system is the lifeline of Pakistan, as 75% to 80% of water flows to Pakistan
as melt from the Himalayan glaciers. This glacier melt forms the backbone of the irrigation
network in Pakistan, one of the largest in the world, with 90% of agricultural land dependent
on it.’
Meanwhile the UN’s climate science body has admitted that a claim made in its 2007 report –
that Himalayan glaciers could melt away by 2035 – was unfounded. The admission followed a
recent New Scientist article that revealed the source of the claim made in the 2007 report by
the Intergovernmental Panel on Climate Change (IPCC) was not peer-reviewed scientific
literature – but a media interview with a scientist conducted in 1999. In a statement the IPCC
says ‘it regrets the poor application of well-established IPCC procedures in this instance, but
says the broader conclusion of the report is unaffected: that glaciers have melted
significantly, that this will accelerate and affect the supply of water from major mountain
ranges where more than one-sixth of the world population currently lives’.
Corporate developments as background to sustainable development
The chief executive of Glaxo-SmithKline (GSK), the world's second biggest pharmaceutical
company, recently announced that the company will put thousands of potential drugs that
might cure malaria into the public domain. According to GSK CEO, Andrew Witty, multination© 2010 Institute for Futures Research
University of Stellenbosch
email: [email protected]
http://www.ifr.sun.ac.za
2
al drug companies have to balance social responsibility alongside the need to make profits for
their shareholders. There is, he said an ‘imperative to earn the trust of society, not just by
meeting expectations but by exceeding them’. GSK will publish details of 13 500 chemical
compounds from its own library that have potential to act against the parasite that causes
malaria in sub-Saharan Africa, killing at least one million children every year. According to
Witty only a handful of big companies focus on malaria, therefore this is a chance to involve
thousands of researchers – ‘just like software companies encourage thousands of people to
contribute their new ideas for software’. Witty also promised to cut the price of all GSK drugs
in the world's poorest countries and to reinvest 20% of all profits it made there in projects to
help local people.
A coalition of investors successfully filed a resolution addressing the financial, environmental,
and reputational risks of Shell's oil extraction from Canadian tar sands. The 142 institutional
and individual investors filed a shareowner resolution with Royal Dutch Shell, requesting that
the company report to its shareowners on the investment risks associated with its tar sands
projects in Canada. The resolution, which will be voted on at Shell's Annual General Meeting in
May, is led by FairPensions, a UK-based organisation that promotes sustainable investment in
the pensions and investment industry. (The extraction of oil from Canadian tar sands requires
environmentally damaging strip mining of large tracts of land, and produces three times the
greenhouse gas (GHG) emissions of conventional oil extraction.)
Legislative, regulatory and governance background to sustainable development
Accounting bodies around the world have agreed that a single set of global reporting
standards on climate change was needed. Thirteen accounting bodies, including the South
African Institute of Chartered Accountants (Saica), as well as The Prince's Accounting for
Sustainability Project and the Climate Disclosure Standards Board, co-signed an open letter to
political leaders attending the Copenhagen climate change meetings. The signatories believe
that an 80% reduction in GHG emissions by 2050 (as supported by the G8 summit in July
2009) could only be achieved by aligning the actions of governments and businesses so that
they were mutually reinforcing. To facilitate this alignment, they urged political leaders to
encourage disclosure of climate change-related information in mainstream financial reporting
according to a single set of universally accepted standards.
South Africa could play a key role in 2010 in terms of finding a way to unite divergent climate
change approaches. This is despite some critics expressing concerns that the Copenhagen
accord is a betrayal of the ‘strong negotiating position’ the South African team insisted on. The
accord’s major drawback is that it stipulates no targets for nations to cap their emissions to
counter climate change. There are also fears that the strong G77 coalition of mostly developing
nations has been split by the accord. A legally binding agreement was expected to come out
of Copenhagen by the end of last year, but all that participating nations managed to achieve
was a controversial political agreement. It is now hoped that the full agreement will be
delivered in Mexico at the end of this year.
The first step for South Africa is to meet its partner countries from the influential so-called
Basic – Brazil, South Africa, India and China – states in Delhi at the end of the month. The
alliance has been described as the most powerful to emerge from the Copenhagen talks and a
major development in the realignment of world power. In Copenhagen the nations held daily
meetings to firm up their position against rich nations such as the US, Canada, Australia and
Japan, which were pressurising them to take on emissions caps. On the last day, heads of
state, including Zuma, were in constant talks, which ended with a critical meeting between the
Basic nations and Obama, in which the US president used his political muscle. There was also
huge pressure to ditch the Kyoto Protocol, which the Basic nations countered.
Despite the criticism of the accord South Africa still believes it contains many positive features
that could lead to a legally binding contract. Joanne Yawitch, one of South Africa's top
negotiators at Copenhagen, said the accord’s provisions on finance and technology, and in
particular the agreement on new mechanisms, were encouraging. Other features, particularly
the agreement about the way all developed countries will reflect their targets, also showed
progress.
© 2010 Institute for Futures Research
University of Stellenbosch
email: [email protected]
http://www.ifr.sun.ac.za