South Africa’s Energy Fiscal Policies

The report finds that South Africa's energy fiscal policies are largely misaligned with its climate goals, with fossil fuel subsidies totaling ZAR 172 billion in FY 2020/21. These subsidies, particularly Eskom bailouts and carbon tax exemptions, outweigh the ZAR 100.5 billion in fossil fuel revenues. The social costs of fossil fuel combustion—estimated at a minimum of ZAR 550 billion annually—far exceed both revenues and subsidies. While the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has successfully lowered renewable energy costs, investment has been hindered by political opposition and Eskom's financial instability. The report recommends tying bailouts to transition reforms, phasing out carbon tax exemptions, and using fossil fuel tax revenues to support vulnerable households and a just transition.

• Energy subsidies in South Africa increased significantly between FY 2017/18 and FY 2020/21, rising from ZAR 58 billion to ZAR 172 billion (USD 10.4 billion).
• The largest single quantified subsidy in FY 2020/21 was the ZAR 56 billion (USD 3.4 billion) bailout for the state-owned utility Eskom, which represents approximately 10% of the utility's total accumulated debt of ZAR 488 billion.
• Carbon tax exemptions constitute a major subsidy, with tax-free emission allowances estimated to have resulted in ZAR 47 billion (USD 2.9 billion) of foregone revenue in FY 2020/21. Total tax-free allowances during the first phase can reach up to 95%.
• The highest-value quantified oil and gas subsidy is the VAT exemption for gasoline, diesel, and illuminating paraffin, which grew from ZAR 23.89 billion in FY 2017/18 to ZAR 34.67 billion in FY 2019/20.
• The social costs of fossil fuel combustion, specifically related to air pollution and greenhouse gas emissions, are estimated at a minimum of ZAR 550 billion (USD 33 billion) per year, which is five times higher than the revenues generated from fossil fuels.
• Total revenue from fossil fuels in 2019–2020 was ZAR 100.5 billion (USD 6.95 billion), representing 2% of GDP and 7.4% of general revenue. The General Fuel Levy was the primary source, generating nearly ZAR 83 billion.
• The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has significantly reduced costs; solar PV average prices in the fifth round were ZAR 0.429 per kWh (a 75% drop from 2011) and wind prices were ZAR 0.495 per kWh (a 90% reduction from 2011).
• Renewable energy investment was stalled between 2016 and 2018 due to Eskom's reluctance to sign new power purchase agreements, influenced by political factors and the coal lobby.
• South Africa's carbon pricing is low compared to global benchmarks; its 2018 Carbon Pricing Score was 13% of a EUR 60/tCO2 benchmark, and its official carbon price in 2021 was ZAR 134 (USD 9.2)/tCO2-e.

APA

Bridle, R., Muzondo, C., Schmidt, M., Laan, T., Viswamohanan, A., & Geddes, A. (2022). South Africa’s Energy Fiscal Policies. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-01/south-africa-energy-subsidies.pdf

Chicago

Bridle, Richard, Chido Muzondo, Max Schmidt, Tara Laan, Anjali Viswamohanan, and Anna Geddes. South Africa’s Energy Fiscal Policies. International Institute for Sustainable Development, 2022. https://www.iisd.org/system/files/2022-01/south-africa-energy-subsidies.pdf.

Wikipedia

{{cite report |last1=Bridle |first1=Richard |last2=Muzondo |first2=Chido |last3=Schmidt |first3=Max |last4=Laan |first4=Tara |last5=Viswamohanan |first5=Anjali |last6=Geddes |first6=Anna |title=South Africa’s Energy Fiscal Policies |publisher=International Institute for Sustainable Development |date=January 2022 |url=https://www.iisd.org/system/files/2022-01/south-africa-energy-subsidies.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bridle2022south, author = {Bridle, Richard and Muzondo, Chido and Schmidt, Max and Laan, Tara and Viswamohanan, Anjali and Geddes, Anna}, title = {{South Africa’s Energy Fiscal Policies}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = jan, url = {https://www.iisd.org/system/files/2022-01/south-africa-energy-subsidies.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }