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This paper offers a quantitative assessment of the impacts of the COVID-19 pandemic-induced lockdown and government fiscal plan, containing ‘green’ elements on the economy and the environment of South Africa. The analysis uses a dynamic computable general equilibrium model operationalised using a social accounting matrix coupled with a greenhouse gas balance and emissions data. We find that while the economy is harshly impacted by the pandemic in the short term, the government fiscal package ameliorates and cushions the negative effects on poor households. Importantly, an adaptation of the fiscal package towards a ‘greener’ policy achieves the same economic outcome and reduces unemployment. Carbon dioxide emissions decrease in the short run due to economic slowdown. This improvement persists until 2030. These results can be used as decision support for policy makers on how to orient the post COVID-19 policies to be pro-poor and pro-environment, and thus, ‘build back better and fairer’.
The purpose of this chapter is to show how double dividends could be obtained from using market instruments to tax water use in a developing country. The double dividends are namely environmental (water conservation) on the one hand, and poverty reduction dividends on the other. We apply a water tax on selected industries in South Africa to reduce demand for water, and then transfer the revenue from this tax to the poor to achieve reduction in absolute levels of poverty.
South Africa is classified as a semi-arid country. Precipitation has been fluctuating over the years with an average of 500 mm per annum, well below the world average of about 860 mm (DWAF 2002). The total flow of all the rivers in the country combined amounts to approximately 49 200 million m³ per year, while the National Water Resource Strategy estimated the total water requirement for the year 2000 at 13 280 million m3 per year, excluding environmental requirements. In addition, South Africa is poorly endowed in groundwater as most of the country is underlain by hard rock formations that do not contain any major groundwater aquifers (DWAF 2002).
While currently only about 24% of rural people have access to water on site, additional sources of water supply are environmentally, financially and politically hard to develop. At the same time, unemployment in rural areas of South Africa is extremely high, which results in severe poverty conditions in these areas.
An energy-focused macro-micro approach is used to assess the poverty implications of government policy response to increases in international oil prices in South Africa. The first scenario assumes that increases in international oil prices are passed on to end users with no changes in government policy instruments. In this scenario, poverty indicators increase. The second scenario assumes that the world price increases are nullified by a price subsidy by the government. This scenario still leads to an increase in poverty as the beneficial price effect is cancelled out by a decline in households’ income induced by the financing method used. While revenue generated from a 50 per cent tax on windfall profit of the petroleum industry helps to minimize the loss in government revenue, it does not contribute to mitigating the increasing poverty trend, since the decline in saving and investment under this scenario restricts the country's growth, employment and income distribution perspectives.
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