Assertive fiscal policy in an equitable and worker-centric climate response

This research paper by the Institute for Economic Justice argues for a state-led, assertive fiscal approach to South Africa's climate response, critiquing the current reliance on the blended finance model. The author proposes the creation of a Climate Response Fund, financed through a combination of carbon tax reforms, earmarked levies, and public sector efficiency savings, to ensure a worker-centric and equitable transition.

• The paper critiques the blended finance model (BFM), arguing that relying on private sector de-risking creates risks regarding insufficient finance volumes, unfair distribution of costs and benefits, and a lack of transparency and democratic accountability.
• The author proposes a carbon tax trajectory leading to an effective rate of R500 per tonne of CO2 by 2040, which could generate approximately R50bn annually. It is recommended that half of this revenue be allocated to green industrial policy and half to a climate response fund.
• The paper recommends earmarking specific existing revenues for a climate response fund: 30% of the General Fuel Levy (estimated at R93bn for 2023/24) and 100% of the Mineral and Petroleum Resource Royalty (estimated at a minimum of R15bn per year).
• To finance renewable energy grid infrastructure, the author suggests the South African government issue sovereign green bonds, proposing R100bn in issuance for both 2026/27 and 2027/28, even if this slightly increases the gross borrowing requirement to 6.3%.
• The paper identifies potential fiscal savings of R26.4bn through public spend efficiency reforms, including merging national departments, simplifying provincial legislatures, and reducing spending on consultants and ICT services. Half of these savings (R13.2bn) should be allocated to climate responses.
• The author argues that the current retirement contribution deduction framework is regressive and proposes a cap of R100,000 on deductions, which could yield approximately R20bn in fiscal savings for the climate response.
• The paper discusses the potential for a net wealth tax targeting the richest 1% of the population, noting that a moderate tax (rates of 3% to 7%) could generate between R60bn and R70bn per year, though it acknowledges significant administrative and behavioral challenges.
• The author proposes a Climate Response Fund to pool these domestic resources to address adaptation shortages, support displaced workers in Mpumalanga, and mitigate inequity in climate impacts.
• Combined, the proposed domestic resource mobilisation (DRM) measures—including carbon tax, fuel levy, royalties, restructuring savings, and retirement reform—could generate over R100bn annually for climate priorities starting in 2026.

APA

Verwey, L. (2025). Assertive fiscal policy in an equitable and worker-centric climate response. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2025/02/IEJ-ClimateWorkingPaper-FiscalPolicy2025.pdf

Chicago

Verwey, Len. Assertive fiscal policy in an equitable and worker-centric climate response. Institute for Economic Justice, 2025. https://iej.org.za/wp-content/uploads/2025/02/IEJ-ClimateWorkingPaper-FiscalPolicy2025.pdf.

Wikipedia

{{cite report |last1=Verwey |first1=Len |title=Assertive fiscal policy in an equitable and worker-centric climate response |publisher=Institute for Economic Justice |date=February 2025 |url=https://iej.org.za/wp-content/uploads/2025/02/IEJ-ClimateWorkingPaper-FiscalPolicy2025.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{verwey2025assertive, author = {Verwey, Len}, title = {{Assertive fiscal policy in an equitable and worker-centric climate response}}, institution = {Institute for Economic Justice}, year = {2025}, month = feb, url = {https://iej.org.za/wp-content/uploads/2025/02/IEJ-ClimateWorkingPaper-FiscalPolicy2025.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }