ASSERTIVE FISCAL POLICY IN AN EQUITABLE AND WORKER- CENTRIC CLIMATE RESPONSE

This policy brief by the Institute for Economic Justice argues that South Africa must adopt a more assertive domestic fiscal policy to address the climate crisis, rather than relying primarily on blended finance models. The author proposes a suite of domestic resource mobilisation (DRM) measures to generate approximately R100bn annually for climate priorities, focusing on state-led infrastructure, carbon pricing, and the creation of a dedicated climate response fund to ensure equity for workers and vulnerable households.

• The author argues that the blended finance model (BFM) used for South Africa's just energy transition (JET) is insufficient because it underestimates market failure. Risks associated with BFMs include unpredictable finance volumes, unfair distribution of costs and benefits, and a lack of transparency and accountability since they typically operate outside the national budgeting system.
• To ensure state control and democratic accountability over renewable energy (RE) grids, the document recommends issuing green infrastructure bonds. It suggests a slower fiscal glide path that allows for R100bn in annual bond issuance for the 2026/27 and 2027/28 periods, which would result in a gross borrowing requirement of approximately 6.3% for those years.
• The brief proposes a predictable carbon tax pathway targeting an effective rate of at least R500 per tonne of CO2 by 2040, which is estimated to generate R50bn annually. The author suggests splitting this revenue equally between green industrial policy interventions and a climate response fund.
• Several existing revenue streams should be earmarked for climate priorities: 30% of the General Fuel Levy (GFL) revenue (approximately R28 billion annually) and 100% of the Mineral and Petroleum Resource Royalty (MPRR) revenues (at least R15 billion annually).
• Fiscal savings can be generated through public spending reforms and retirement tax changes. Rationalising government structures is estimated to save R26.4bn annually, with 50% proposed for climate responses. Additionally, reducing the cap on retirement contribution deductions to R100,000 could generate R20bn in savings to be allocated fully to climate priorities.
• The document recommends pooling all earmarked revenues into a central climate response fund. This fund would specifically target adaptation and equity, including support for displaced workers in Mpumalanga and addressing the vulnerabilities of poorer South African households.
• The combined domestic resource mobilisation proposals are designed to generate around R100bn per year. This assertive domestic positioning is described as a necessary signal to unlock larger-scale commercial and concessional finance between 2030 and 2050.

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-policybrief-FiscalPolicy.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-policybrief-FiscalPolicy.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-policybrief-FiscalPolicy.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-policybrief-FiscalPolicy.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }