2025: A key moment for South Africa's climate change response

Adaptation interventions seek to build climate resilience against extreme weather events and longer-term changing weather patterns. Mitigation measures seek to reduce South Africa’s greenhouse gas emissions in line with our global and science-backed commitments i.e. the Paris Agreement. These three foundational pillars support building resilience against the changing climate, decreasing our contribution towards global warming, protecting South Africa against the economic implications of transitioning from a carbon-dependent economy to a low-carbon economy including export carbon taxes, and creating inclusive economic growth.    

2024 was an important year for South Africa’s climate change response with significant policies and measures that we expect to see components of operationalised over the course of the 2025/26 fiscal year. Examples include signing the Climate Change Act, publishing the Draft Sectoral Emissions Targets, announcing the Climate Change Response Fund, and Phase Two of the Carbon Tax (2026-2030) discussion paper. South Africa is a heavily carbon-dependent economy with existing and challenging socio-economic issues and it is also vulnerable to the impact of a changing climate. With this in mind, a coordinated approach that supports inclusive growth and an equitable just transition requires multi-stakeholder buy-in and collaboration across all levels of society, business and the government for implementation of the interventions. Dialogues, commentary, consultations and symposiums around various elements of the climate change response were held. With differing viewpoints and vastly different impacts of the climate change response, there is convergence on some matters with the need for future work to be done. As such, progress has been delayed to some of the expected deadlines which were initially indicated as the end of the 2024/25 fiscal year.

The Climate Change Act (CCA) is a step in the right direction towards an environmentally sustainable future for the country by laying out the legislative foundation to achieve its climate commitments. It also provides a framework to build resilience against the impact of climate change and drive an equitable just transition. Whilst the Act was signed in July 2024, it is yet to be operationalised. The CCA gives significant responsibilities to the respective government departments and municipalities for implementation and the question of financing and/or funding remains. Although it is not expected that the CCA will be mentioned in the Budget 2025/26 it is expected that the CCA will play a role in future Budgets.

During the State of the Nation Address 2024, the President announced the National Climate Change Response Fund (CCRF) to support adaptation measures to respond to and build resilience against disruptive weather events. Research and various public dialogues have been held to finalise operational recommendations e.g., replenishment mechanisms, disbursement, and governance structures. National Treasury has highlighted the necessity to leverage reforms from the Disaster Relief Financing Strategy, the innovative role of the insurance sector in scaling up and speeding up disbursement and designing types of products for specific climate risks. In a tax-revenue and fiscal-constrained environment for Budget 2025/26, the ability for tax allowances on private sector contributions to the CCRF is limited but may be a consideration in future budgets.

The proposed Phase Two of the Carbon Tax (2026-2030) provides further motivation to reduce emissions and invest in new green industries and low-carbon technologies to avoid a higher punitive carbon pricing that will impact the relative price of high-emission goods. Public commentary and multistakeholder consultation show that there are some areas of alignment. It is expected that aspects of phase two will be announced in Budget 2025/26 and areas will be identified where more research and stakeholder engagement should take place. One area where more stakeholder engagement is expected is in carbon markets. COP29 saw considerable movement towards operationalising the international carbon market through the Paris Agreement Crediting Mechanism and Internationally Transferred Mitigation Outcomes in operation and therefore measures to stimulate South Africa’s carbon offset market.  How the carbon markets should operate in South Africa may require more consultation given the wide variety of views expressed by stakeholders when commenting on National Treasury’s wish to develop carbon markets in South Africa as part of the proposed Phase Two of the Carbon Tax. Major amendments giving effect to the phase two proposal are likely to be announced in Budget 2026/27 for the 2026/27 fiscal year and Budget 2025/26 should provide clear indications of which phase two proposals will be implemented. 

The South African government is focused on increasing investment attractiveness and sustainable infrastructure development to support medium-term economic growth and a Just Energy Transition. We expect that over the G20 Presidency structural reforms and advocacy will also increase investment thus unlocking new industries, e.g. green metals mining, new energy vehicles and batteries manufacturing, as well as green hydrogen and ammonia production, including expanding existing industries, such as renewable energy, to stimulate economic growth. There will be a deliberate intention to commence development for financing and/or funding already secured to advance carbon mitigation and adaptation plans.  

While there remains work to be done, the government has set out policies and measures that provide the bedrock for a coordinated response to transform into a low-carbon economy. In 2025, there will be further multistakeholder engagements to refine existing policies and measures, which will strengthen partnership and collaboration, to accelerate a coordinated climate change response.