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

The policy brief contends that South Africa must move beyond the blended finance model for its just energy transition due to market failures and risks of insufficient or unpredictable private capital. It proposes a suite of domestic resource mobilisation (DRM) measures—including sovereign green bonds, carbon tax reforms, and earmarking existing revenues—to generate approximately R100bn annually for climate priorities. These funds would be pooled into a central climate response fund dedicated to adaptation, equity, and supporting displaced workers, particularly in Mpumalanga. The author argues that this assertive domestic commitment is essential for maintaining state control over infrastructure and for unlocking larger-scale international finance between 2030 and 2050.

• The blended finance model (BFM) used for South Africa's just energy transition carries significant risks, including insufficient volume of finance, lack of predictability for public goals, potential for unfair distribution of costs and benefits, and a lack of transparency and accountability because it typically operates outside the national budgeting system.
• Market failure is likely in key climate response areas, as green infrastructure in energy and transport often exhibits natural monopoly attributes, leading to potential over-pricing and under-provision. Additionally, adaptation spending is expected to be insufficient due to coordination failures, myopia, and information gaps.
• To ensure state-led control and democratic accountability over renewable energy grids, South Africa should issue green infrastructure bonds of R100bn annually for 2026/27 and 2027/28, which would result in a gross borrowing requirement of approximately 6.3% for those years.
• The document 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. This revenue should be split equally between green industrial policy and a climate response fund.
• Specific existing revenue streams should be earmarked for climate priorities: 30% of the General Fuel Levy (approximately R28 billion annually) and 100% of Mineral and Petroleum Resource Royalty revenues (at least R15 billion annually).
• Fiscal savings of R20bn could be generated by reducing the cap on permissible retirement contribution deductions to R100,000, addressing the regressive nature of the current system.
• Rationalising government structures to reduce inefficiencies could save R26.4bn annually, with 50% (R13.2bn) of these savings recommended for allocation to climate responses.
• The proposed domestic resource mobilisation measures would collectively generate around R100bn per year, which would be pooled into a climate response fund focused on adaptation, equity, and worker transitions, specifically for those affected in Mpumalanga.

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} }