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

The research paper advocates for South Africa to move away from a market-led 'blended finance model' (BFM) for its just energy transition, arguing that market failures necessitate a state-led approach. The author proposes a 'climate response fund' to be financed by a combination of carbon tax increases, earmarking the General Fuel Levy and Mineral and Petroleum Resource Royalty, and implementing public sector efficiency reforms and retirement tax deduction caps. Together, these measures could generate over R100 billion annually for adaptation and equity. The paper also suggests the issuance of sovereign green bonds to fund renewable energy grid infrastructure, arguing for a gentler fiscal deficit glide path to accommodate this strategic investment.

• The author critiques the blended finance model (BFM), stating it carries risks including insufficient finance volumes, unfair distribution of costs and benefits, and a lack of transparency that hinders democratic accountability.
• To address the R250 billion financing shortfall for transmission infrastructure, the paper recommends the South African government issue sovereign green bonds, suggesting R100 billion in issuance for 2026/27 and 2027/28.
• The paper proposes a carbon tax trajectory leading to an effective rate of R500 per tonne of CO2 by 2040, which could generate approximately R50 billion in annual revenue to be split between green industrial policy and a climate response fund.
• The author recommends earmarking 30% of the General Fuel Levy (GFL) and 100% of the Mineral and Petroleum Resource Royalty (MPRR) for the climate response fund, potentially adding at least R15 billion annually from the MPRR alone.
• Public sector restructuring, including departmental mergers and reducing provincial legislature and premier office costs, could generate R26.4 billion in savings, with half (R13.2 billion) proposed for climate responses.
• The current retirement contribution deduction framework is described as highly regressive; implementing a cap of R100,000 on these deductions could yield approximately R20 billion in fiscal savings for the climate response.
• A proposed 'climate response fund' would pool these domestic resources to address adaptation shortages, support displaced workers in Mpumalanga, and mitigate inequity in climate impacts.
• The combined impact of the proposed fiscal re-allocations—including carbon tax, GFL, MPRR, restructuring savings, and retirement reform—would generate over R100 billion 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} }