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1、Decarbonizing South Africas Shipping and Trucking SectorsW H I T E P A P E RJ U N E 2 0 2 4Images:Getty Images,UnSplash 2024 World Economic Forum.All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means,including photocopying and recording,or by an

2、y information storage and retrieval system.Disclaimer This document is published by the World Economic Forum as a contribution to a project,insight area or interaction.The findings,interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by th

3、e World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum,nor the entirety of its Members,Partners or other stakeholders.ContentsDecarbonizing South Africas Shipping and Trucking Sectors2Preface 3Executive summary 41 Role of renewable energy and gree

4、n hydrogen in the transition 61.1 Renewable energy the key to hitting net zero 71.2 Green hydrogen a 7 million tonne/year opportunity by 2050 81.3 Financing challenges for renewables and green hydrogen projects 112 Shipping 122.1 Sector overview 132.2 Status of technologies,supply and demand 142.3 O

5、pportunities 142.4 Challenges 162.5 Solutions 183 Trucking 213.1 Sector overview 223.2 Status of technologies,supply and demand 233.3 Opportunities 233.4 Challenges 243.5 Solutions 254 Financial measures to accelerate the transition 274.1 Focus of FMCs Finance Pillar 284.2 Macro-economic risks 284.3

6、 Financial risks 294.4 Financial opportunities 314.5 Financial solutions 325 Policy measures to accelerate the transition 355.1 Overview of policy environment 365.2 Policy-related risks 385.3 Policy-related solutions 38Conclusion 41Contributors 42Endnotes 43PrefaceDecarbonizing South Africas Shippin

7、g and Trucking SectorsJune 2024Decarbonizing South Africas Shipping and Trucking Sectors3South Africas abundant natural resources provide it with the opportunity to become a global leader in renewable energy and green hydrogen production.Its unique geography,astride major shipping lanes connecting A

8、sia with the western hemisphere,positions it as an ideal hub for producing,bunkering and exporting zero-emission shipping fuels.These global opportunities could power the country away from fossil fuels,transform the nations economy,create employment opportunities in new sectors and improve the lives

9、 of its people.Decarbonizing energy production is a climate imperative for the planet and South Africas contribution is enshrined in its commitment to reach net zero by 2050.It would deliver the secure,reliable and affordable electricity supply that the country urgently needs.Last year,load-shedding

10、 broke new records,affecting all levels of society and industry.A clean energy and industrial mix would also protect South Africa from the near-term risk to its export economy posed by the carbon taxes of its largest trading partners.Looking to the future,an economy based on renewables and green hyd

11、rogen could provide the foundation for the country to produce and export zero-carbon molecules such as clean ammonia and methanol,essential for decarbonizing global transportation and heavy industrial processes.This transition could add close to 6%in GDP and 2 million new jobs,in a country where tac

12、kling unsustainable levels of joblessness,poverty and inequality dominate political discourse.These opportunities featured prominently in presentations and discussions during a three-day workshop organized by the First Movers Coalition in Cape Town in March 2024,which attracted 70 participants from

13、a wide range of public and private sector organizations.The coalition combined shipping and trucking into one workshop to spark cross-sector insights and highlight synergies given that both sectors face similar challenges and enablers around financing,infrastructure and competitiveness.There are enc

14、ouraging signs of progress.The government has enacted climate-forward policies aimed at decarbonizing transport,commercializing green hydrogen and developing the value chain for renewable energy.It has framed an investment plan for the just energy transition,targeting a budget of nearly ZAR 1.5 tril

15、lion.The World Bank has completed pre-feasibility studies into several major green hydrogen projects.Workshop participants agreed that combining forces across shipping and trucking could strengthen the demand and supply signals for the zero-emission technologies that hold the key to decarbonizing bo

16、th sectors.The transition of South Africas energy and transportation sectors is not in the hands of its government alone.The private sector,multilateral development banks and industrialized countries all have critical roles to play to aggregate demand for low-carbon solutions and de-risk the finance

17、 needed for huge investments in new infrastructure.It will take the collaboration of all these actors to connect global demand and financial resources with a domestic pipeline of projects ready to deliver the future fuels that South Africa is so well-poised to produce.Executive summaryDecarbonizing

18、South Africas Shipping and Trucking Sectors4ChallengesAs a major contributor to the global economy,South Africa faces increasing political and economic pressure to decarbonize.However,the country is already challenged by an energy crisis costing the country 2-3%of GDP growth.Balancing the need to de

19、carbonize with job security,community impact and social equity remains a complex challenge.As the countrys leading trade partners implement policies including carbon border taxes to achieve their net-zero targets,up to 35%of the countrys export value could be at risk if decarbonization is not pursue

20、d.Meanwhile,the state of the electricity grid operating at little more than 50%capacity as well as the need for infrastructure upgrades to road,rail and port networks limit the feasibility of low-carbon technology development.Financial barriers such as high interest rates,low internal rates of retur

21、n and insufficient capital structures create major barriers to projects getting financed.OpportunitiesSouth Africa has the opportunity to become a leader in clean technology and a role model for a just energy transition in emerging markets.With its high renewable energy potential and strategic posit

22、ion in global maritime trade,South Africa is poised to be a leader in green hydrogen(GH2)including:Transforming ports into green bunkering hubs for international shipping.Developing the infrastructure to utilize GH2 for domestic commercial road transport.Exporting GH2 derivative products to service

23、increasing global demand.Additionally,South Africa can leverage development finance and explore novel financial instruments to accelerate project development and make offtake bankable.Trucking decarbonizationTrucking is the backbone of commerce in South Africa:the auto-manufacturing sector provides

24、5%of the countrys GDP and employs more than 500,000 people,with over 50%of production exported.Key barriers:Lack of charging infrastructure needed for widespread adoption of zero-emission trucks(ZETs),as well as accompanying grid infrastructure and charging stations.Factors that limit demand for ZET

25、s,including:cost,lack of confidence in government action,import duties on finished trucks.Absence of policies to provide:incentives for production or adoption of ZETs,allowances for increased weight and dimensions of ZETs,common standards or a plan to deploy necessary infrastructure.Key solutions:Pu

26、blic-private partnerships to promote opportunities such as green corridor development,public procurement and other infrastructure.Support for a just transition through improving grid capacity and resilience,while providing incentives for and removing barriers to procuring ZETs.Shipping decarbonizati

27、onWith its favourable geography and immense potential for green hydrogen,South Africa has the opportunity not only to develop green bunkering hubs,but also to export green hydrogen and derivatives(e.g.e-ammonia and e-methanol)to supply a growing demand from global shipping for zero-emission fuels.Ke

28、y barriers:Global demand for zero-emission fuels and ongoing evolution of regulation.High cost of e-fuels preventing projects from securing offtake or reaching final investment decision,amplified by the high cost of project financing in South Africa.Existing port infrastructure issues(e.g.stability,

29、reliability,ease of bunkering)and the need to invest in new facilities to bunker future fuels.Key solutions:Development of port infrastructure,incentives to produce green hydrogen,and supportive international regulations(e.g.through International Maritime Organization).Decarbonizing South Africas Sh

30、ipping and Trucking Sectors5 Financing from institutional finance,multilateral development banks(MDBs)and private financiers,to accelerate project development of hydrogen production and derivatives.Continued collaboration on integrated green fuel value chains across clusters(e.g.Boegoebaai Port,Free

31、port Saldanha),along with efforts to scale-up global offtake.Finance as a vital enabler to accelerate low-carbon technologiesSecuring finance is critical for scaling-up and commercializing low-carbon technologies,especially in emerging markets where costs of capital and interest rates are notably hi

32、gh.South Africa will need to explore non-traditional and novel financing instruments to fund the transition,including project development for zero-emission fuels,manufacture of zero-emission trucks,upgrading port and road freight infrastructure,and improving and expanding the grid.Key barriers:High

33、interest rates and cost of capital in South Africa(as high as 18%)make energy projects less attractive to financiers.Traditional capital structures are inadequate,with no clear guidance on where concessionary capital can plug in.Typical offtake agreements are only 1-5 years,but new projects need lon

34、ger agreements to ensure bankability.Lack of transparency and standards make it challenging for financiers and buyers to assess projects.Key solutions:Governments can explore combined public-private funding with MDBs and private financiers to provide more early-stage financing mechanisms.Development

35、 banks and project developers can work together to clarify and streamline the deployment of concessionary capital.Private sector actors can continue to partner across the value chain to deploy strategic capital and accelerate project development.Role of renewable energy and green hydrogen in the tra

36、nsition1Domestic generation of renewables and green hydrogen could tackle the decarbonization challenge and turbocharge a just transition.Decarbonizing South Africas Shipping and Trucking Sectors6Decarbonizing South Africas Shipping and Trucking Sectors7Renewable energy the key to hitting net zero1.

37、1South Africas geography,space and abundance of wind,sun and water offer enormous potential for the country to become a global hub for clean,renewable energy.With an estimated 920 GW of wind and solar resources,1 South Africa has the opportunity to accelerate its rollout of renewables to deliver mor

38、e affordable,reliable power to its people while safeguarding the countrys recent commitment to achieving net zero by 2050.However,as the worlds 15th largest emitter globally,with over 80%of its electricity mix relying on an ageing fleet of coal-fired power stations,2 there are challenges to overcome

39、 to realize this opportunity.An energy system rooted in renewables would mitigate the trade risks posed by the transition of more industrialized nations.With South Africas leading trade partners moving to implement policies such as carbon border taxes to achieve their net-zero targets,up to 35%of th

40、e countrys export value could be at risk if decarbonization is not pursued.3 A thriving renewables sector could also fuel new opportunities such as green hydrogen production and the manufacture of zero-emission fuels(ZEF),which would not only support decarbonization of the countrys heavy industries

41、but also increase the competitiveness of its exports and its entire economy.The numbers are ambitious,yet achievable.South Africa can reach net zero by 2050 by installing 190 GW of renewable energy,leading to a reduction of approximately 60%in carbon emissions.This requires installing 6-7 GW of rene

42、wable capacity every year by 20304 a considerable challenge given the country has installed just 6.1 GW in total over the past decade.Nevertheless,roughly 20 GW of capacity is in the pipeline,amounting to about one-third of the 60-70 GW needed by 2030 to achieve the low end of the target in its 2030

43、 Nationally Determined Contribution(NDC).South Africas transition an overview in dataFIGURE 1:of South Africas export value will be at risk if carbon emissions are not reduced 35%reduction in carbon emissions can be enabled through renewable energy 60%of renewable energy must be installed in South A

44、frica by 2050190 GWinvestment needed to reach net zero by 2050ZAR 6+trnSources:South African Reserve Bank,5 National Business Initiative.6ZAR 3 trillion needed to decarbonize power sector The total investment needed for South Africa to hit net zero by 2050 runs to over ZAR 6 trillion,of which roughl

45、y half is needed in the power sector.The good news is that,of the ZAR 310 billion of investment in renewable energy needed by 2030,about 60%is sufficiently bankable and mature to be funded mainly from private sector sources,according to analysis by Boston Consulting Group(BCG).7 International develo

46、pment finance will be needed to fund“non-bankable”investments(e.g.social costs,reskilling)and to support the development of the green hydrogen industry.To accommodate this amount of new energy capacity,major investment is needed to expand,strengthen and modernize South Africas creaking electricity g

47、rid,which one workshop participant noted is“about the size of Western Europe”.Given the grids current capacity,only about 30 GW of renewables could be added8 well short of the 190 GW needed for the power system by 2050.By 2030,an extra 30 GW of capacity needs to be built,with coastal areas being the

48、 optimal sources for renewable energy.At least 14,000 km of new power lines will be required to transmit the additional renewable capacity.A renewable power system can result in net-positive job creation of 2.4 million cumulative job years by 2050 if elements of the renewable energy value chain are

49、localized.Boston Consulting Group9Decarbonizing South Africas Shipping and Trucking Sectors8Stabilizing energy security and reliability with decentralized renewablesIn the face of worsening load-shedding during 2023,workshop participants discussed the urgent need to stabilize energy security and rel

50、iability.One participant highlighted the“huge potential for decentralized solar generation”,particularly on the residential side,with an“absolute bonanza of solar power batteries”coming into the country,contributing to a total installed capacity in 2023 of 6.164 GW of solar power.10 He also noted th

51、e role of mining companies in generating their own renewable power locally.Key policies supporting renewables and green hydrogenBOX 1:July 2023:South African Renewable Energy Masterplan(SAREM)December 2022:Green Hydrogen(GH2)Commercialisation StrategyOctober 2021:Hydrogen Society Roadmap for South A

52、frica Green hydrogen a 7 million tonne/year opportunity by 20501.2Workshop participants highlighted that South Africas opportunity to power the transition reaches far beyond renewables.The real opportunity is to use the countrys solar,wind and hydro assets to develop green hydrogen and its derivativ

53、es a process which starts with renewable-powered electrolysis to split either freshwater or sea water into hydrogen and oxygen,and ends by compressing the gas for a wide range of commercial and industrial use-cases.Given that South Africa is already the biggest producer of grey hydrogen in the world

54、,a new green hydrogen masterplan could become a cornerstone of the countrys post-fossil economy.With major economies moving towards net zero,the global market for green hydrogen is expected to grow and South Africas existing export relationships with the EU,Japan and UK position it well to exploit t

55、his opportunity.Hydrogen use-casesThe FMCs in-country workshop heard from a variety of sources on South Africas opportunity to produce green hydrogen.The applications of hydrogen technology cover many different sectors of the transition,for example:Industry:Production of ammonia and methanol as feed

56、stocks(e.g.for chemicals,fertilizers,refrigeration).Direct reduction of iron for green steel.Direct combustion for high-temperature industrial processes.Mobility:Production of e-ammonia and e-methanol to power ocean-going shipping.Hydrogen fuel-cell technology offers the possibility of powering road

57、 vehicles and rail transport.Aviation and ocean-going shipping could,if technology matures,be powered by direct hydrogen combustion in the future.Power and heat:Hydrogen fuel cells can be used to store power and heat.Fuel cells or direct hydrogen combustion can be used to power turbines.Having produ

58、ced the hydrogen,one of the key challenges will be compression to 350-700 bar,to enable the gas to be transported for use in industry or used as a fuel for H2 internal combustion engines or fuel-cell electric vehicles.Another application is to use fuel-cell battery technology to provide electricity

59、to the grid a use-case known as “power to power”.Workshop participants also highlighted the opportunity of combining the twin needs of shipping and trucking for ZEF such as green methanol and ammonia into a single,powerful demand signal for South Africas nascent green hydrogen production sector.Deca

60、rbonizing South Africas Shipping and Trucking Sectors9Potential benefits to South AfricaDeveloping South Africas green hydrogen capability could bring huge benefits to the economy,the countrys quest to decarbonize,the employment market and the development of infrastructure:GDP boost of 5.9%The GH2 v

61、alue chain can drive the industrialization of South Africas heavy manufacturing(e.g.green steel)and petrochemicals sector(e.g.sustainable aviation fuel,green methanol,PtX)to drive economic growth.This could increase GDP by around 5.9%or ZAR 500 billion by 2050,according to the World Bank.11Decarboni

62、ze hard-to-abate industries GH2 can cost-effectively drive 10-15%emissions reductions in sectors where electrification is unfeasible(e.g.heavy manufacturing,long-distance aviation and shipping,petrochemicals)to ensure competitiveness in net-zero world.12Up to 1.8 million new jobs The GH2 value chain

63、 can drive long-term net job creation in new green jobs,as well as preserving jobs in at-risk industries(e.g.heavy manufacturing,petrochemicals).In scenarios with GH2 exports and associated industries,up to 1.8 million more jobs could be created economy-wide by 2050 than in scenarios without GH2 exp

64、orts and use.13Enable infrastructure investment GH2 projects will serve as anchor demand to justify shared infrastructure investment,including Boegoebaai port,the Northern Cape grid expansion,reskilling initiatives etc.Future green hydrogen production hubsThe South African governments green hydrogen

65、 programme includes 19 projects worth over ZAR 300 billion,14 of which the Department of Public Works and Infrastructure(DPWI)has selected nine“strategic integrated projects”(SIPs)for expedited approval processes(see Figure 2).Among these fast-tracked projects,the workshop focused on three major str

66、ategic opportunities to develop hydrogen production hubs Durban-Richards Bay,Saldanha Bay and Boegoebaai.Each project aims to support the just transition,by growing local green jobs and in some cases offering alternative employment to fossil jobs.Participants at the workshop were updated on these op

67、portunities in a presentation by the Global Maritime Forum,which with the World Economic Forum and Friends of Ocean Action has created the P4G Getting to Zero Coalition Partnership that recently published South Africa:fuelling the future of shipping:South Africas role in the transformation of global

68、 shipping through green hydrogen-derived fuels.15 Decarbonizing South Africas Shipping and Trucking Sectors10341612188211115961719157141013MogalakwenaSecundaEkurhuleniJohannesburgVanderbijlparkSasolburgPostmasburgUpingtonSiyathembaVictoria WestNelson Mandela BayAwaiting information for ISA registrat

69、ionHumansdorpCape TownSaldanha BayBoegoebaaiAmmoniaH2SAFMeOHGreen steelFuel cellsPrieska Power ReserveProduct:AmmoniaSize:70+kt NH3/yrExp.date:2026/302Ubuntu Green Energy H2 ProjectProduct:AmmoniaSize:73kt NH3/yrExp.date:N/A3Boegoebaai Green H2 ProgrammeProduct:H2Size:400kt H2/yrExp.date:20254Atlant

70、hia Green H2Product:H2Size:N/AExp.date:N/A5Upilanga Solar and GreenH2 ParkProduct:H2Size:N/AExp.date:N/A7SASOL HySHiFTProduct:SAFSize:15kt/yr(up to 2.5Mt/yr)Exp.date:2023/408HIVE AmmoniaProduct:AmmoniaSize:780kt NH3Exp.date:2025/269Anglo-AmericanMogalakwena MineProduct:H2Size:3.5MW electrolyserExp.d

71、ate:20226Sasolburg Green H2 ProgrammeProduct:H2Size:1.8kt H2/yrExp.date:202310Enertrag Indigen Methanol Project11Enertrag Postmasburg Ammonia Project12Mainstream Renewable Energy H213AMSA Saldanha Steel H2 project14HDF Energy,IPM 1,H2-to-power15Isondo Fuel Cell MEAs Mnfg.16Saldanha Bay Green H2 Proj

72、ect17Project Phoenix fuel cellsMitochondria18Cape Stack Fuel Cells19Bambili Hyplat Fuel Cell Mnfg.FIGURE 2:Note:H2=hydrogen,MeOH=methanol,SAF=sustainable aviation fuel.Source:BCGNine green hydrogen mega-projects fast-tracked Decarbonizing South Africas Shipping and Trucking Sectors11Durban-Richards

73、Bay hydrogen valleyThis project aims to develop a“hydrogen valley”along South Africas northeast coastline,based on a hub from Durban to Richards Bay.It seeks to aggregate demand to kickstart hydrogen production and leverage economies of scale in South Africa.Saldanha Bay Saldanha Bay Industrial Deve

74、lopment Zone(IDZ)is being promoted as a hub to produce zero-and low-carbon fuels and goods for domestic use,to refuel vessels that call at the port and for export to the global market.Synergies with local industry could lead to economic growth and new jobs in the production of green steel and zero-c

75、arbon shipping routes for bulkers carrying iron ore.The project could produce 50,000 tonnes of GH2 per annum,generating around 280,000 tonnes of green ammonia(see Box 4).16BoegoebaaiBoegoebaai,located in Northern Cape Province,has the potential to become a deep-sea commercial hub that exports zero-c

76、arbon bunker fuels and commodities.This port,rail and infrastructure project would transport mining,agricultural and other products while generating jobs and economic development through the production of green hydrogen and ammonia.Regional opportunities between South Africa and NamibiaAnalysis by t

77、he World Bank and Hyphen (a$10 billion solar,wind and green ammonia project in Namibia)points to the possibility of a green corridor between the two countries to promote zero-emission fuels.According to the Bank,Namibia has at least nine green hydrogen projects in preparation,with applications inclu

78、ding green steel,hydrogen trains and hydrogen storage,as well as ammonia for shipping fuel,fertilizers and other industrial applications.A workshop participant noted that the future of hydrogen supply is decentralized,with many production points serving many demand centres,especially for maritime ap

79、plications.A green corridor linking Southern Africas coastal ports would therefore enhance the connectivity of supply and demand.Collaboration between regional governments could be a key enabler.Financing challenges for renewables and green hydrogen projects1.3The workshop heard that,during 2023,the

80、 World Bank had approved$1.65 billion in concessional financing to ramp-up the deployment of clean hydrogen projects in emerging markets.17 The current pipeline exceeds$5 billion and other multilateral development banks are ramping up their hydrogen financing.For example,the International Finance Co

81、rporation(IFC)has become involved in nearly a dozen green hydrogen projects worldwide,totalling over$10 billion in potential investments.18 However,despite the huge potential of both renewable energy and green hydrogen,such clean energy projects face challenges across the world in reaching final inv

82、estment decision,often through lack of demonstrable demand.This is also true in South Africa,where the cost of capital for energy projects can be as high as 18%.19One workshop participant noted that the need to compete with the cost of capital globally is“a big issue in South Africa and on the conti

83、nent,especially regarding hydrogen.”Project developers face challenges from foreign exchange risk and the high cost of debt,currently up to 12%in South Africa.The green premium is still too high without greater incentives,said the participant.At some stage governments and offtakers will have to thin

84、k carefully about incentives to industry unless they do this,there will be no traction.Workshop participantShipping2South Africa has great potential as a production and bunkering hub for zero-emission shipping fuels but it needs global demand to get the ball rolling.Decarbonizing South Africas Shipp

85、ing and Trucking Sectors12Decarbonizing South Africas Shipping and Trucking Sectors13Sector overview2.1Shipping serves a critical role in transportingover 80%of world trade20 and global demand for sea freight is forecast to triple by mid-century.21 As the low-carbon transition gathers pace,consumer

86、goods companies,mindful of their scope 3 emissions targets,are shifting their freight from planes to ships.However,while shipping may be a less polluting way to move goods around the planet compared to the alternatives,it still emitted 1.1 billion tonnes of greenhouse gases(GHG)in 2018,accounting fo

87、r nearly 3%of all GHG emissions.22 In July 2023,the International Maritime Organization(IMO)23 adopted a historic ambition of achieving net-zero GHG emissions for international shipping by or around 2050.This was a game-changing moment for the industrys decarbonization journey,especially given inter

88、national shipping was omitted from the Kyoto Protocol and the Paris Agreement.To achieve net zero,the industry needs to abandon the fossil-based bunker fuel that powers 99%of commercial shipping24 and chart a course towards full decarbonization.Two low-carbon fuels that can power big vessels25 stand

89、 out:methanol offers a viable short-term pathway,while ammonia could become commercially viable later this decade.For these breakthrough fuels to be zero-emissions,production technologies and feedstocks such as renewable energy and green hydrogen are required.Hydrogen as a direct shipping fuel is ye

90、t to be fully explored it may prove viable for specific situations(e.g.short-haul ferry routes),though this would not be relevant for international shipping.South Africa sees the highest volume of maritime traffic in Sub-Saharan Africa.Its strategic location,abundant natural resources and export eco

91、nomy have made the country a long-standing hub of international trade.26 Maritime imports and exports accounted for 90%of all South African trade volume in 2023.27 The FMCs in-country workshop explored opportunities for South Africa to become a production and bunkering hub for fuels that can decarbo

92、nize the shipping sector.This is a key objective of the FMCs“surfacing supply workstream”and complements demand-side commitments made by shipping sector members to shift to zero-emission fuels(ZEF),as either carriers or cargo owners,in line with the criteria in Box 2.South Africas shipping sector cr

93、eates over 300,000 jobs,with the potential to reach more than 1 million jobs by 2033.28This chapter analyses the status of technologies,opportunities,challenges and solutions in relation to decarbonizing shipping in South Africa and globally For more detail on finance and policy measures necessary t

94、o support the low-carbon transition of the countrys heavy industries,see Chapters 4 and 5.FMCs targets for zero-emission shippingBOX 2:Carriers:“At least 5%(on an energy basis)of our deep-sea shipping will be powered by zero-emission fuels*by 2030”*FMC definition:Zero-emission fuels are those that r

95、educe well-to-wake GHG emissions by 80%or more compared to fossil heavy fuel oil29 Current list of fuels includes:ammonia,methanol,hydrogen,battery These commitments do not include biofuels,liquid natural gas,carbon offsets or efficiency improvementsFull details of the commitment can be found here.C

96、argo owners:“At least 10%of the volume of our goods shipped via deep-sea shipping will be on ships using zero-emission fuels by 2030,reaching 100%by 2040”Decarbonizing South Africas Shipping and Trucking Sectors14Status of technologies,supply and demand 2.22.3South Africa is strategically positioned

97、 astride major global shipping lanes from Asia around the Cape of Good Hope to Europe and the continents of North and South America.As the transition to a low-carbon economy gathers pace,vessels will need to refuel more often,given that zero-emission fuels are about half the energy density of fossil

98、 fuels.This makes South Africas location midway between eastern and western hemispheres a potentially ideal bunkering stop-off.The countrys plan to develop a hydrogen economy positions it at the centre of global efforts to decarbonize shipping.The two leading ZEF(e-methanol and e-ammonia)are both de

99、rived from green hydrogen,so South Africa has the potential to become both a shipping fuel producer and exporter.For more detail on the countrys green hydrogen ambitions,see Chapter 1.Workshop participants discussed the relative merits of e-methanol and e-ammonia.Due to the technological readiness o

100、f methanol,green methanol is considered the most viable near-term ZEF for shipping.Its added advantage is that vessels can be and are being fitted with dual-fuel engines that run on either green methanol or conventional bunker fuel,reducing the capital risks of investing in new technology.Ammonia is

101、 also being tested as a shipping fuel in various demonstration projects.The market has seen a strong uptick,especially over the past year,in orders for ammonia-powered dual-fuel vessels.Recent breakthroughs in testing and commercializing ammonia-powered engines mean that ammonia-based fuels could be

102、 market-ready by the second half of this decade.Concerns still exists around the safety of handling ammonia,but these are being addressed and tested.Opportunities South Africas great opportunity lies in the countrys potential supply landscape of domestic ZEF production enabled by a wind-and solar-po

103、wered hydrogen economy combined with the global shipping industrys demand for ZEF.However,this will only materialize if the country can address a range of domestic challenges.The opportunity is not simply to produce future fuels for global supply chains,but to create a win-win situation in which Sou

104、th Africas global role enables it to grow its domestic economy,decarbonize its industries and generate jobs through a just transition.Mette Asmussen,who leads Maritime Sector Initiatives for theWorld Economic Forum,explains the close relationship between international and local markets:“What is happ

105、ening globally will also impact whether the opportunity in South Africa can be realized.”While global policy certainty can make up for local uncertainty,if there is no global switch to green fuels,there will be no domestic switch either.Mette Asmussen,Lead,Maritime Sector Initiatives,World Economic

106、ForumWorkshop participants highlighted some key opportunities in the South African context that could help accelerate the adoption of zero-emission shipping,outlined below.These revolve around the possibility of manufacturing green hydrogen to produce e-methanol or e-ammonia,which in turn create new

107、 opportunities for the country,such as bunkering,green corridors and shipping offtake through fuel exports.Green hydrogen for e-methanol and e-ammoniaGreen hydrogen production offers South Africa numerous opportunities,both for domestic production of zero-emission shipping fuels and for the export o

108、f green hydrogen and its derivatives to other markets.Given its volume and volatility,hydrogen is a notoriously challenging element to transport,requiring either high pressure or cryogenic storage.Consequently,hydrogen export would need to find different carrier molecules or energy vectors,such as e

109、-methanol and e-ammonia.These synthetic molecules are made using clean hydrogen,combined with sustainable carbon or nitrogen.The World Bank has estimated international shippings demand for South African hydrogen could total 182,000 tonnes a year by 2030 and 2 million tonnes(Mt)a year by 2050(includi

110、ng demand in ports and from by-pass traffic).This opportunity may be particularly attractive in the near-term as shipping operators search for ZEF and green hydrogen producers look for reliable and significant volumes of offtake to make projects bankable.Decarbonizing South Africas Shipping and Truc

111、king Sectors15International shippings demand for South African hydrogen could total 182,000 tonnes a year by 2030 and 2 million tonnes a year by 2050.The World BankShipping offtake bringing global demand to local supplyGlobally,more than 200 dual-fuel methanol vessels have been ordered,requiring ove

112、r 20 Mt of e-methanol fuel per annum to achieve 100%zero-emission operability.30 However,fuel availability at that scale is expected to be challenged until at least 2030-35.31 This demand creates an opportunity for South African producers to secure early customers and sign advance offtake agreements

113、,providing certainty for new projects and improving investment prospects.Ammonia also brings advantages as a ZEF,such as high carbon-emission savings,unlimited feedstock(nitrogen)availability and existing logistical infrastructure around the globe.While ammonia engines will reach the market from 202

114、5 at the earliest,major carriers like Trafigura and BHP are already placing orders for dual-fuel ammonia vessels.It is clear that ammonia is projected to grow as one of the top fuel choices to achieve net zero.The World Bank has conducted a pre-feasibility study on establishing green shipping fuel v

115、alue chains at the ports of Boegoebaai and Saldanha Bay.32 The study identifies ammonia as the preferred ZEF production choice for South Africa,due to the scarcity of biogenic carbon dioxide to produce methanol.Most of the fuels cost comes from hydrogen feedstock but by leveraging abundant wind and

116、solar supply,the two ports will be able to generate renewable electricity at scale to produce competitive green hydrogen for local industry use(e.g.green steel)and to produce green ammonia for export to the global shipping industry.Geographically well-positioned bunkering hub and green corridors Pol

117、itical disturbance and security risks in the Red Sea during 2023-24 forced many shipping operators to abandon the Suez Canal and re-route their cargo around the Cape of Good Hope.Even without those risks,operators shipping lower-value or less time-critical cargo may use the Cape route rather than th

118、e more expensive Suez Canal,adding two weeks to a ships voyage time from Asia to Europe.This extra travel time plus the lower density of zero-emission fuels could compel vessels running on ZEF to bunker in South Africa before reaching Europe.Access to zero-emission fuels therefore opens up the possi

119、bility of South African ports positioning themselves as bunkering hubs to supply passing shipping traffic.Furthermore,the potential for South Africa to produce e-methanol and e-ammonia has triggered plans to develop“green corridors”effectively routes connecting ports for vessels to sail on ZEF.A con

120、sortium convened by the Global Maritime Forum including Anglo American,Tata Steel,CMB,VUKA Marine,Freeport Saldanha and Engie is exploring the development of a green corridor between South Africa and Europe.33 The consortium has identified four South African locations as potential facilitators:Boego

121、ebaai,Saldanha Bay,Ngqura Port and a hydrogen valley corridor stretching from Durban to Richards Bay.National engine for growth and employmentHigh priority must also be given to ensuring that decarbonization brings a just transition.South Africa,as an emerging economy,has seen unemployment rise to o

122、ver 30%.So the role of the green economy in delivering more jobs is a key concern for the government.34 South Africas shipping sector and its ports in conjunction with the development of the hydrogen economy can make a meaningful contribution to the countrys economic growth,creating employment oppor

123、tunities in new sectors and skilled jobs in export industries.However,concerted efforts are required to engage key stakeholders in the development of zero-emission shipping fuels.Decarbonizing South Africas Shipping and Trucking Sectors16Challenges 2.4Several challenges are big enough to delay or di

124、minish the opportunities described above.Leading up to the workshop,BCG analysed two possible“failure cases”and associated barriers:insufficient hydrogen production and a failure to develop ZEF(see Box 3).Potential failure cases and associated barriersBOX 3:Failure caseSpecific barriersHydrogen prod

125、uction projects stall development before final investment decision(FID)Lack of renewable power supply for green hydrogen production Uncertainty on government support and regulation to develop market Insufficient and unprepared project pipeline to attract investment Lack of downstream offtakers preve

126、nts project financing Technology risk prevents financing even with offtakers Lack of capacity and skills for production beyond feasibilityZero-emissions fuels(ZEF)not developed for shipping in South Africa Lack of green hydrogen feedstock due to factors above Shipping operators unwilling to pay pric

127、e premiums for ZEF E-ammonia stays 2030+fuel due to near-term adoption barriers E-methanol projects fail to develop due to lack of shipping offtake and challenging sustainable CO2 availability Relevant ports not engaged to build out bunkering infrastructureSource:BCGWorkshop participants reflected o

128、n these challenges and others,as detailed below.Lack of renewable power supply for green hydrogen productionLack of green hydrogen feedstock is a challenge,because it depends on a secure supply of renewable energy.South Africas power outages are well-known,with its unstable grid operating at little

129、over 50%capacity.Available power must be prioritized to maintain the business-as-usual economy.So a lack of renewable power will undermine the countrys capacity to produce green hydrogen feedstock.Put simply,the country needs to fix and decarbonize its electricity grid before surplus renewables can

130、spill into producing green hydrogen and other zero-carbon fuels.Looked at it from a perspective of opportunity,global demand for green hydrogen and ZEF could be a positive catalyst to transform South Africas grid,if synergies between stabilizing the grid for multiple purposes are realized.Low domest

131、ic demand for ZEF due to high green premiumShipping companies tend to purchase conventional fuel through the market based on short-term demand,so they consider long-term commitments(e.g.offtake agreements)to be a risky proposition.In South Africa,there is little evidence of domestic demand for ZEF,p

132、artly due to the limited willingness of buyers to pay the green premiums for future fuels.This increases the dependence of future domestic ZEF production on global demand.The workshop heard from industry participants that offtake agreements signed to date put the price of e-methanol at three or four

133、 times higher than conventional fuels.Additionally,it can take four times longer to finalize these new agreements,because they are longer duration than deals for conventional fuel and are consequently more strategic buying options than traditional procurement based on volume and price.The green prem

134、ium and who is going to pay is a challenge.Everyone in the supply chain thinks it shouldnt be themselves.Workshop participantDecarbonizing South Africas Shipping and Trucking Sectors17Port infrastructure needs investment in world-class bunkering South Africa is not a preferred bunkering hub for the

135、global shipping industry.Operators lack confidence in the countrys ports,facilities and infrastructure to deliver as consistent or reliable a service as other ports,even for conventional fuels.The World Bank ranked South African ports at the bottom of global container port performance in 2021,lower

136、than all other countries in Africa.35 Given the high cost of chartering vessels,time in port costs money.So it is critical that ships are guaranteed rapid and efficient refuelling within a short time-window.South Africas port infrastructure needs major investment to upgrade facilities,ensure reliabl

137、e and stable fuel supplies,and build new bunkering infrastructure for ZEF.Moreover,the South African ports used today for conventional refuelling are not involved in projects shifting to green fuels.Similarly the ports looking to advance green fuels do not have much bunkering infrastructure today.Sh

138、ipping-related policy challenges Support and regulation will be needed from the government to develop the countrys ZEF economy.The opportunity presented by producing future fuels is balanced by an equal risk of falling behind in the global transition.With leading trade partners moving towards polici

139、es such as carbon border taxes to achieve net-zero targets,up to 35%of South Africas export value could be at risk if decarbonization is not pursued.36 While decarbonizing shipping can increase the costs of transport and trade in the short term,it is important to remain focused on the opportunities

140、to South Africas shipping sector and wider economy provided by the transition,particularly in the context of tightening global regulation.Shipping-related finance challengesAn insufficient and unprepared project pipeline,combined with technology risk,deters investment in the countrys nascent ZEF sec

141、tor.These challenges are not unique to South Africa they are seen across the supply-side landscape globally.However,financial risks are amplified when the cost of financing is as high as in South Africa and other emerging markets.Workshop participants heard from FMC Shipping Sector Project Fellow Ta

142、kahiro Furusaki,who presented the findings of the Coalitions recent Insight Report,Fuelling the Future of Shipping:Key Barriers to Scaling Zero-Emission Fuel Supply,which identifies the top 10 barriers limiting ZEF projects from securing final investment decisions(see Figure 3).Customer and consumer

143、 demand1.Lack of clear demand signals with sufficient willingness to pay:Methanol uptake volumes in dual-fuel ships remain uncertain.Companies struggle to absorb green premiums alone.2.Expectations gap between fuel producers and carriers on terms of offtake agreements:Friction on length(long term vs

144、.spot),volume(how much)and price(what premiums are acceptable).Economics and finance3.Lack of credible third-party cost estimates:Makes it difficult for financiers and offtakers to assess investments and contract options for different zero-emission fuel pathways.4.Lack of fit-for-purpose financing i

145、nstruments:Time horizons and risk appetite of existing options not suitable,e.g.PE fund life too short,infrastructure funds come in late,gaps in pre-FID funding.Regulatory5.Lack of strong near-to mid-term mandates or a global price on carbon:Policies emerging(e.g.EU,IMO)but need geographically recip

146、rocal regulations to set a demand-side price and volume floor.6.Lack of standard definitions,methods and certifications:Hinders contracting terms,e.g.what defines“green”,how to measure,track and report emissions,how to assure quality.Supply chain and infrastructure enablers7.Methanol-and ammonia-spe

147、cific risks:Access to biogenic CO2 for methanol is getting tougher.Safety,especially for use as a marine fuel and handling at ports is the biggest barrier for ammonia.8.The competition and(lack of)alignment with other sectors:Shipping is competing against chemicals for methanol,fertilizers for ammon

148、ia,and more broadly across sectors for H2 and CO2.9.The zero-emission fuels infrastructure gap:Uncertainties on responsibility for last-mile logistics.Physical gap between promising e-fuel locations and major ports.Organizational10.Decision-making and risk appetite limited by gaps in expertise:Decar

149、bonization decision and P&L dont always sit with the same team,creating friction and requiring new ways of working together.10 barriers limiting ZEF projects from securing final investment decisionDecarbonizing South Africas Shipping and Trucking Sectors18FIGURE 3:Solutions 2.5Potential solutions an

150、d innovative ideas identified by workshop participants for pathways to accelerate South Africas role in decarbonizing both domestic and global shipping are outlined below.Global demand as a catalyst for domestic supply and bunkering of ZEF A clear demand signal for bunkering ZEF in selected South Af

151、rican ports will be needed to realize the countrys opportunity to become a global hotspot for zero-emission shipping.As local demand may take some years to build up,certainty from global demand will play a key role.It is also important to assess different uses for hydrogen beyond maritime fuel,to de

152、termine how multi-sectoral offtake can improve the business case for potential project developers.Major private sector players and organizations such as FMC have a key role to play in surfacing global demand for ZEF to build a case for investing in South Africas domestic green hydrogen production.As

153、 well as demonstrating demand for ZEF,shipping companies need to clarify where that demand will arise,given the need to produce and bunker it at specific locations.The idea of piloting and scaling-up green corridors could provide“geography-specific demand signals”,which combined with corporate deman

154、d signals of Source:BCGDecarbonizing South Africas Shipping and Trucking Sectors19major companies,including FMC members,could create the market conditions needed to make domestic ZEF production a reality.South Africa is already active in developing green corridors and could benefit from collaboratin

155、g with global shipping actors and governments in export markets to identify the countrys role in such ventures.Based around key South African ports,green corridors could link the global demand signal for ZEF with the local geography of domestic ZEF production,supply and bunkering.There is already a

156、bunkering market in South Africa how can we leverage this opportunity further?Takahiro Furusaki,Project Fellow,Shipping Sector,First Movers Coalition Procurement of fuels will be undergoing a significant shift from spontaneous buying towards more strategic long-term agreements.This means that domest

157、ic sellers or suppliers need to collaborate with buyers and carriers so they can be reassured of reliable last-mile fuel delivery to their vessels.In the South African context,there are no offtake agreements for ZEF from global operators at all yet,so the supply side needs building out first.Investm

158、ent in port facilities to create stable,reliable,modern ZEF bunkeringThe World Banks low ranking of South African ports is a hard challenge to ignore.Considerable investment is needed by the private sector,government or other combination of financing mechanisms to boost the efficiency of port infras

159、tructure,before the countrys ports are ready as hubs for ZEF bunkering and supply to global shipping.Electrification of ports is also a priority.There is already movement by public-private collaborations to develop port infrastructure and operations,for example at Freeport Saldanha(see Box 4).The ai

160、m is to create an attractive bunkering solution for ship operators,so that refuelling in South Africa is considered not out of necessity,but as a preferred or regular stop-off.To that end,the country could consider whether certain segments of the shipping sector would be more suitable for refuelling

161、 in South African ports,given that container ships,bulk carriers and tankers may require different kinds of infrastructure.With the above in mind,a national port strategy could help prioritize and coordinate efforts in the coming years.Export of ZEF production to global hubsBeyond domestic bunkering

162、,South Africa could address the limitations around its ports by exporting its ZEF production to bunkering hubs in Asia or Europe.High bunker-demand ports(e.g.Singapore,Rotterdam),which will be among the first to accommodate ZEF,will rely on importing green fuels from competitive renewable energy cou

163、ntries like South Africa.There will be synergies between exporting and bunkering hub infrastructure such as storage and jetties that make investments more feasible and provide clarity to last-mile logistics,as well as potentially reducing bunkering costs for shipping companies considering future off

164、take in South Africa.For this to be a true opportunity,and one that brings broader socio-economic benefits to South Africa,it will be important to export value-added maritime fuel and not lower-value hydrogen or feedstock.Relationships with export partnersTrade and shipping will always be closely in

165、terlinked and policies for trade will have an impact on shipping.Trade policies and bilateral agreements between South Africa and key trade partners could be used as policy tools to support the transition and lower the green premium.South Africa can leverage existing relationships with top export ma

166、rkets that are leading the way in green technology(for example,though not exclusively,the EU,United Kingdom and Japan).This is already an area being explored,such as South Africas declaration with Germany pledging to create a taskforce to meet international demand for green hydrogen,while exploring

167、available funding mechanisms.Standards and certificationsThe role of standards and certifications is important.The nascent stage of ZEF means the product is yet to be fully defined and this is hampering uptake.As ZEF becomes a standardized product or even commodity,its definition will need to keep p

168、ace with new policies and regulations.The development of a fuel standard by the IMO is an important enabler in this regard.Decarbonizing South Africas Shipping and Trucking Sectors20Freeport Saldanha Industrial Development ZoneBOX 4:The workshop heard from Freeport Saldanha Industrial Development Zo

169、ne(IDZ),which aims to create South Africas first duty-free special economic zone located in a port.The aim of the IDZ is to build a maritime green hydrogen production,bunkering and export hub on 356 hectares of industrial land around the deep-water port of Saldanha Bay in the Western Cape,approximat

170、ely 110km from Cape Town and one of the largest ore-exporting ports in Africa.In its pre-feasibility study,the World Bank modelled the Freeports potential production and supply of green marine fuel as follows:50,000 tonnes of green hydrogen per annum 280,000 tonnes of green ammonia(energy to fuel 40

171、 Handysize bulk carriers)1.6 GW renewables(40/60 wind/solar),500 MW electrolyser capacity Estimated capital investments$2 billionPolicy measuresPolicy measures discussed by participants during the workshop include the following priorities for the government to consider:Legislation and regulation:Sup

172、port the transport and bunkering of ZEF in ports,as well as ensuring laws are updated to keep pace with future requirements.Safety is particularly important and South Africa could benefit from partnerships with pioneering ports with experience on other continents.Such initiatives could play a role i

173、n connecting green corridors and could also be national partnerships with a strong bunkering location.National port strategy:Create a national strategy to plan for and coordinate port readiness for green bunkering in ways that utilize current strengths and close gaps.This strategy could be a cross-d

174、epartment effort that takes into account infrastructure,electrification,trade regulation,energy and collaboration with other demand sectors.International regulation:Progress at the global policy level will have an impact on South Africas capacity to benefit from opportunities presented by the IMOs e

175、merging rules and regulations for the global shipping industry.Participants raised the issue of a“guarantee of origin”scheme and“green requirements”for green hydrogen and derivatives for international trade.Incentives and finance:Incentives are needed to keep sustainable sources of CO2 for e-methano

176、l within the country.Blended combinations of government and non-governmental finance could help get feasibility studies for the green hydrogen value chain off the ground.Global pricing mechanism for carbon:Negotiations for an economic mechanism within the IMO include a potential“polluter pays”elemen

177、t that would see tax levied on emissions.The money raised could capitalize a fund that finances the development and production of zero-emission fuels,especially in emerging markets.It could therefore be to South Africas benefit to work proactively towards realizing such an opportunity.If done in the

178、 right way,global carbon pricing can unlock massive industries locally,like green hydrogen.Workshop participantTrucking3Trucks account for 63%of South Africas transport emissions.Tackling this means reimagining the whole sustainable logistics supply chain.Decarbonizing South Africas Shipping and Tru

179、cking Sectors21Decarbonizing South Africas Shipping and Trucking Sectors22Sector overview3.1Eighty-nine percent of all freight in South Africa travels by road.37 One workshop participant put it like this:“Trucks are the backbone of our commerce and the lifeline for our economies.”As a crucial logist

180、ic entry point for the region,South Africa has the opportunity to attract the growing capital allocated to decarbonize scope 3 emissions from global actors by transitioning its trucking fleet to zero-emission alternatives.The country has a thriving domestic automotive manufacturing sector that provi

181、ded 5.7%of GDP and employed over 500,000 people in 2020.While it produces around half a million vehicles each year,fewer than 6%are medium-and heavy-duty vehicles,38 yet they account for 63%of the countrys transport emissions and 7%of total emissions.39Heavy reliance on the export of internal combus

182、tion engine(ICE)vehicles puts South Africas automotive industry at risk of emerging climate-related bans in key export markets,such as the EUs Carbon Border Adjustment Mechanism(CBAM),due to enter into force by 2026,and the EUs CO2 emissions targets for trucks.Decarbonizing trucking is therefore a h

183、igh priority for South Africa.The government has set a goal in its National Determined Contribution(NDC)of shifting up to 800,000 passenger vehicles and 190,000 commercial vehicles from ICE to zero-emission vehicles.40 Given its abundant mineral resources crucial for local or global battery producti

184、on,coupled with its extensive green energy potential,South Africa is well-positioned to engage in and reap the benefits of the zero-emission truck transition.However,challenges such as high total cost of ownership and limited charging infrastructure hinder widespread adoption.Significant support fro

185、m public and private sectors will be needed to build charging stations and provide financial support,including subsidies,for purchasing battery-electric vehicles(BEVs).Additionally,commitments to purchase zero-emission technologies and services can play a role in incentivizing manufacturers to inves

186、t in production and innovation,as well as encouraging logistic services to operate zero-emission trucks(ZETs),thereby fostering confidence among other demand players.This chapter analyses the status of technologies,opportunities,challenges and solutions in relation to decarbonizing trucking in South

187、 Africa,drawing on insights from participants at the FMCs in-country workshop in March 2024.For more detail on finance and policy measures necessary to support the low-carbon transition of the countrys heavy industries,see Chapters 4 and 5.Decarbonizing trucking is not just about swapping diesel for

188、 batteries but about re-imagining sustainable logistics.Workshop participantFMCs targets for near-zero emission truckingBOX 5:Trucking owners&operators:“At least 30%of our heavy-duty and 100%of our medium-duty new truck purchases are zero-emission trucks*by 2030.”Retailers&manufacturers:“We require

189、our trucking service providers to meet the commitment that at least 30%of heavy-duty and 100%of medium-duty new truck purchases will be zero-emission trucks*by 2030.”*In-scope vehicles include:battery electric vehicles(BEVs),fuel-cell electric vehicles(hydrogen FCEVs)and zero tail-pipe emissions tec

190、hnologies.Full details of the commitment can be found here.Decarbonizing South Africas Shipping and Trucking Sectors23Status of technologies,supply and demand 3.23.3Transitional solutionsThe current emissions standards for heavy-duty vehicles in South Africa are equivalent to Euro II,a level that fa

191、lls behind the more stringent standards adopted by all other G20 members.Many of these nations have transitioned to or are in the process of adopting Euro VI standards.41 Diesel engines lacking modern emission control systems emit significant quantities of PM2.5,soot,nitrogen oxides(NOX)and other po

192、llutants.In 2015,it was estimated that transportation activities accounted for approximately 7%of deaths related to exposure to PM2.5 and ozone in South Africa.Of these fatalities,48%are attributed to on-road diesel vehicles.42 Both truck manufacturers and logistics services are taking steps to addr

193、ess emissions,introducing Euro V technologies and embarking on various biodiesel projects aimed at reducing CO2 emissions while improving air quality.Battery-electric vehicles(BEVs)Globally,trucking logistics providers are increasingly betting on BEVs,despite energy density challenges for the heavy-

194、duty trucking segment.This is driven primarily by the availability of BEVs as an option today,as well as the increasingly favourable total cost of ownership(TCO)for these vehicles.In South Africa,several pioneers are piloting BEVs:Shoprite Group,South Africas largest retailer,is testing Scanias refr

195、igerated electric truck equipped with solar panels for local deliveries,while KDG Logistics has procured two Volvo electric truck tractors for port-to-factory operations.43 Fuel-cell electric vehicles(FCEVs)FCEVs are typically powered by hydrogen.However,they remain more nascent than BEVs,due to the

196、 availability and cost of fuel-cell technology and green hydrogen.Despite this,South Africa is actively investing in hydrogen fuel cells.The government has piloted the operationalization of FCEVs in pre-determined corridors and through investments in companies such as Isondo,Mitochondria Energy and

197、CHEM Energy to support the development of fuel cells for stationary and mobility applications.44 The private sector is also investing in FCEV technologies,for example Anglo Americans deployment of a 510-tonne FCEV truck at one of its platinum mines,45 and Toyota and Sasols partnership to build a hyd

198、rogen mobility ecosystem.46 Opportunities South Africa abounds with opportunities to decarbonize its transport sector.The production and deployment of BEVs and FCEVs presents a unique chance to address environmental and air quality concerns,while advancing a just transition that generates jobs for l

199、ocal communities,supports upskilling and fosters economic growth.Additionally,investing in green truck infrastructure and technology development could position South Africa as a leader in sustainable transportation,attracting investment and driving innovation.In light of the increasing number of ori

200、ginal equipment manufacturers(OEMs)committed to transitioning exclusively to ZETs by 2040,alongside the tightening of global regulations like the EUs CBAM,exporting countries such as South Africa may hasten their shift towards embracing zero-emission technologies instead of transitional ones.While t

201、his could lead to economic and environmental benefits,careful planning and investment are essential to mitigate risks and ensure long-term success for local producers.The country benefits from having many of the key actors including mining,logistics and transport sectors necessary to transform the e

202、ntire supply chain for the production of ZETs and the energy required to fuel them.Global players,whose international decarbonization commitments need to be realized regionally,are also present in South Africa.Green hydrogen,which can power both zero-emission trucks and ships,presents a significant

203、opportunity for South Africa.With the publication in November 2022 of its Green Hydrogen Commercialization Strategy,47 the government declared its ambition to be a leader in this technology.For more information,see Chapter 1.The country has plentiful supplies of some of the rare earth metals(e.g.man

204、ganese)needed in batteries48 and is already making advances in domestic battery manufacturing,such as Afrivolts planned 1.5 GWh lithium-ion cell factory in Cape Town.49 South Africa is also the worlds largest producer of platinum group metals(PGMs),50 an Decarbonizing South Africas Shipping and Truc

205、king Sectors24important catalyst used in the production of certain fuel cell technologies.However there is some uncertainty around which technologies will become most widely adopted and how relevant PGMs will remain.51 These opportunities are recognized by both public and private sectors and are beg

206、inning to materialize through pilot projects for green trucking corridors and green industrial clusters around major ports and mines.Africa is in a pivotal position to take advantage of its opportunities but its only an advantage if we seize it.Workshop participantChallenges 3.4In terms of the chall

207、enges that the decarbonization of trucking in South Africa is facing,BCG analysed two possible“failure cases”and associated barriers in the lead-up to the workshop.These relate to insufficient renewable energy and a lack of market penetration for zero-emission trucks (see Box 6).Workshop participant

208、s reflected on these challenges and others in greater detail,as captured below.Potential failure cases and associated barriersBOX 6:Failure caseSpecific barriersRenewable energy(RE)capacity and grid infrastructure not scaled sufficiently rapidly Insufficient grid capacity to build out required renew

209、ables Lack of alignment between strategy and enacted policy Insufficient capital focused on renewables and grid infrastructure Inability to secure supply chain for renewables components Lack of capacity among developers to scale operationsZero-emission trucks(ZETs)fail to penetrate meaningfully in S

210、outh Africa Trucking operators unwilling to pay total cost of ownership(TCO)premium for ZETs Lack of clarity on infrastructure prevents ZET purchases Trucking operators lack financing tools to defray high initial cost ZET production and supply chain fails to materialize due to lack of supportive pol

211、icies and know-how Import levies and weight limitations increase cost difference in landed South African cost of EVs vs.ICESource:BCGDemand and confidenceThere are numerous pilot projects underway with local and global actors in the ZET sector that show promise and the establishment of green corrido

212、rs demonstrates progress.However,many initiatives remain at an experimental stage and do not yet represent a significant demand signal which could effectively drive the transition.The lack of demand for ZETs remains a major challenge.One workshop participant noted:“When you interact with OEMs,they a

213、re reluctant to bring these products into the market because demand is close to zero.”Several factors explain this,including the cost of these technologies,inadequate infrastructure and power instability.There is also market scepticism around the capacity of electric trucks to run the long distances

214、 that operators require.Total cost of ownership(TCO)The cost disparity between green and fossil fuel trucks poses a significant barrier to widespread adoption.ZETs generally come with higher initial expenses but boast lower operating costs compared to ICE trucks the upfront cost for BEVs is typicall

215、y two to three times higher than for ICE trucks.52 Those costs are exacerbated by import duties,which range from 12-20%on clean technology in South Africa.To achieve TCO parity with diesel vehicles and offset initial costs,the operational energy expenses for ZETs must be significantly lower than tho

216、se for diesel.However,while electricity costs are anticipated to remain low,uncertainties persist around the price of hydrogen.As one participant pointed out,“The pricing differential is significant:diesel is ZAR 26 per litre,grey Decarbonizing South Africas Shipping and Trucking Sectors25hydrogen i

217、s ZAR 110 and green hydrogen is ZAR 160 and the domestic market for green hydrogen in South Africa may not be large enough to drive down these prices.”The TCO is also influenced by the weight and dimensions of these vehicles,particularly since batteries tend to be voluminous and heavy.In the road tr

218、ansport sector,where profit margins are thin,maximizing payload capacity is essential for cost-effectiveness.Without allowances within the regulations for additional weight and dimensions,adopting ZETs could potentially limit payload capacity,impacting profitability.In road transport,the profit marg

219、in is maximum 5%,so if youre transporting 20 tonnes of cargo and you have to lose 1 tonne because of weight limits,that loss in profit can make or break the scalability of new technology vehicles.Workshop participantEnergy infrastructureNascent demand for ZETs is impeded by a lack of infrastructure

220、to deliver the power needed.Support for charging infrastructure will be an essential component in transitioning to zero-and low-emission vehicles.To instil confidence in the market,the government needs to roll out 30,000-45,000 new public charging units per annum,according to the latest analysis by

221、BCG.If hydrogen technologies are adopted,then appropriate refuelling infrastructure will be needed for long-distance freight routes.Significant private investments are required at owned-facilities and trucking depots,but owners and operators may be reluctant to invest until the government demonstrat

222、es credible plans for infrastructure build-out with clear processes,timelines and regulatory guidance.Moreover,load-shedding has been a major ongoing problem for South Africas energy sector in recent years.The energy availability factor plummeted from 100%in 2006 to around 50%last year,though there

223、are signs it is beginning to pick up again.53 Without progress in upgrading the capacity of the countrys national grid,it is unlikely the government will be able to provide the renewable power necessary to meet its EV targets to support the decarbonization of the transport sector.Solutions 3.5Creati

224、ng a market for emerging technologies is often likened to a“chicken and egg”situation,where demand and supply need to align simultaneously.In the trucking sector,investment in charging and refuelling infrastructure depends on the adoption of ZETs,but the uptake of ZETs relies on the availability of

225、adequate infrastructure.Addressing this challenge requires collaboration between stakeholders across sectors,as well as government intervention,to establish an enabling environment for the widespread adoption of green technologies.Workshop participants discussed and identified many solutions to deca

226、rbonize the sector,while ensuring its prosperity,detailed below.National infrastructure rollout planTo support the installation of new public charging units and hydrogen refuelling stations along key long-distance freight routes,South Africa could greatly benefit from establishing a national rollout

227、 plan in consultation with private operators to ensure the strategic placement of these facilities.However,with the electricity grid operating at little more than half capacity,several participants described plans to generate their own power for EVs.Shoprite has invested in a solar PV programme to a

228、ddress its energy security issues.54 The company recently deployed its first Scania BEV on a pilot basis with a rooftop solar system to recharge the trucks batteries.Given ongoing load-shedding,all available electricity is required for existing domestic and industrial applications.The trucking secto

229、r needs to be sensitive to the impact that BEVs could have on the countrys electricity grid and the availability of power for ordinary people.This can be managed by treating truck charging as an incremental load for which additional capacity needs to be built.Additionally,charging especially at loca

230、tions like depots,terminals and logistics hubs could be paired with behind-the-meter energy generation or localized grid reinforcement.One participant said:“The way you need to roll out these vehicles is a phased approach and over a number of years.Through that you have infrastructure following the

231、trucks and can solve the problem.”Decarbonizing South Africas Shipping and Trucking Sectors26Given the challenges in delivering a secure supply of renewable power,several participants highlighted the role of green hydrogen to fill the gap.The government,with industry stakeholders,is spearheading ini

232、tiatives to establish hydrogen valleys to jump-start the hydrogen economy and accelerate production.Three green hydrogen hubs have been identified in Johannesburg,Durban/Richards Bay and Mogalakwena/Limpopo.These hubs are poised to host fuel-cell electric mining trucks and heavy-duty trucks along th

233、e N3 corridor,showcasing South Africas commitment to embracing hydrogen technology.55 For a more detailed discussion of South Africas nascent green hydrogen industry,see Chapter 1.Fostering partnershipsPiloting is crucial for understanding cost-reduction opportunities,optimizing operations at scale

234、and identifying policy loopholes that hinder the transition.One participant argued that while it is important to learn lessons from other markets,it is also essential to learn by doing.“We are doing a lot of talking and planning,”they said,“but until we see assets on the ground and learn from that,w

235、e will never solve these problems.”However,the challenge lies in effectively scaling-up these projects.Many of the solutions mentioned above require collaboration between public and private sectors.Participants from both sectors at the workshop acknowledged the need for concerted efforts to develop

236、partnerships between the government,OEMs,utilities and financiers.Public-private partnerships play a critical role in facilitating blended finance a mix of public and private funding,grants,subsidies and innovative financing models essential to overcome financial barriers and incentivize investment

237、in ZETs.According to one participant,the problem is not the availability of de-risked capital,but the availability of bankable projects.He called on the private sector to collaborate more closely with the government on pilot projects to decarbonize trucking,adding that“infrastructure-led investment

238、is what leads to growth”.Policy measuresPolicy measures discussed by participants during the workshop include the following priorities for the government to consider:Government action plan:In December 2023,the government unveiled its Electric Vehicles White Paper,56 aimed at regulating the manufactu

239、ring,sale and utilization of EVs.Recognizing the global trend toward zero-emission vehicles as a potential challenge to the countrys automotive industry,the white paper introduced a comprehensive action plan to steer the sector towards EV and EV component production.Incentives and subsidies:The gove

240、rnment has incentivized domestic automobile production for several decades through,for example,the Automotive Production and Development Programme(APDP).57 As part of its EV white paper,the government acknowledged the need for higher levels of funding to catalyse EV investment in automotive assembly

241、 and component manufacturing.In February 2024,the Minister of Finance announced a new investment allowance,complementary to the APDP,that will enable businesses involved in EV production to claim 150%of qualifying investment spending in the first year.The new allowance will commence in March 2026.Th

242、e government has also reprioritized ZAR 964 million to support the transition to EVs.Trade policy reform:The government currently imposes up to 20%import duty on finished or CBU(completely built-up unit)trucks,including BEVs.Given South Africa does not manufacture BEVs,this duty will need to be reco

243、nsidered if the trucking sector is to decarbonize in the near term.In its EV white paper,the government acknowledges the need to temporarily reduce import duties for batteries in vehicles produced and sold in the domestic market.It also underlines the need for duty-free export market access for vehi

244、cles and components produced in South Africa to support the resilience of the industry.Combined,these measures could incentivize local manufacturing,potentially leading to export opportunities once domestic demand is established.Government procurement:In 2018,the government published its Green Trans

245、port Strategy up to 2050.58 The strategys EV industry roadmap planned to introduce a policy to ensure that 5%of total annual fleet requirements by both state and state-owned enterprises comprise EVs by 2025.Adjusting permitted gross vehicle weight:To offset the impact of battery weight and dimension

246、s on payload capacity and profitability,the government could adopt allowances similar to those in the EU,which would enhance the total cost of ownership(TCO)for these vehicles.Currently,such allowances are not included in the South African legislative framework.Getting import duty lifted is imperati

247、ve,as the impact of bringing one electric truck onto the road is the same as 100 electric cars.Workshop participantFinancial measures to accelerate the transition4The financing challenges facing South Africas low-carbon transition require public-private-philanthropic partnerships and greater commitm

248、ents from the Global North.Decarbonizing South Africas Shipping and Trucking Sectors27Decarbonizing South Africas Shipping and Trucking Sectors28Focus of FMCs Finance Pillar 4.14.2The Cape Town workshop included finance participants from banks,asset managers,development banks,government entities,sto

249、ck exchanges and project developers.The FMCs Finance Pillar aims to address the following questions:1.How can financial institutions(e.g.banks,asset owners,insurers)act upon their net-zero targets,enabling the transition for hard-to-abate sectors?2.How can effective de-risking solutions,incentives,p

250、ublic-private-philanthropic partnerships and innovative financing mechanisms be replicated at scale,including in emerging economies?3.What systemic change and new financial architecture interventions are needed across private financial institutions,development finance institutions and policy-makers

251、to scale-up financing for the transition?Finance lead Eneida Licaj highlighted the work of the FMCs Finance Pillar in bringing together different sources of private and public capital into a“capital stack”that can help develop and scale-up breakthrough technologies during the pilot project and early

252、 deployment stage which sits between the R&D phase and commercial deployment.According to the pillars newly published report,Scaling Clean Technology Offtakes:A Corporate Playbook for Net Zero,59 the success of early-stage projects in reaching final investment decisions(FID)depends fundamentally on

253、sufficient demand.To amplify this demand,it is essential that middle-market companies as well as first movers pre-buy ZEF and green hydrogen to aggregate demand for project developers.It is essential to have first movers but also fast followers a surge of middle-market companies to engage in offtake

254、s and propel the demand for clean commodities.Eneida Licaj,Lead,Finance Pillar,First Movers CoalitionThis chapter addresses some of the key macro-economic risks,financial risks,opportunities and solutions in relation to funding South Africas industry and energy transition,proposed and discussed by w

255、orkshop participants during the three-day meeting.If there were one overall message to emerge from the workshop,it is that the challenge is far too large for one entity to take on.Only through a collaboration between governments(in Southern Africa and the Global North),private financial institutions

256、,development banks and philanthropic donors can the major infrastructure projects needed to drive the transition in the region get off the ground.Macro-economic risks Load-shedding energy crisis disrupts industrial operationsSouth Africas decarbonization goals face a significant challenge due to the

257、 recurring load-shedding noted in earlier chapters.Electricity cuts averaged eight hours per day in 2022,costing 2-3%of GDP growth.Industries reliant on continuous power face increased production costs and operational disruptions,hindering efforts to transition to cleaner energy.Load-shedding also u

258、ndermines investor confidence in the reliability of energy supply.Urgent investment is needed in renewable energy infrastructure,grid modernization and energy storage solutions to enhance energy security and stability.Port and rail infrastructure unable to meet increasing energy needsSouth Africas p

259、ort and rail infrastructure is critical for transporting energy resources and facilitating industrial activities.However,the existing infrastructure faces challenges in meeting growing energy demands of heavy industries and supporting the transition to cleaner energy sources.Insufficient capacity,ag

260、eing infrastructure and inefficiencies in logistics contribute to delays and bottlenecks,impeding decarbonization efforts.Closing the infrastructure gap requires significant investment in port expansions,rail upgrades and logistics optimization to ensure reliable and efficient energy supply chains.D

261、ecarbonizing South Africas Shipping and Trucking Sectors29The just transition is a sensitive issueAchieving a just energy transition poses a complex challenge,particularly in South Africa,where heavy industries such as the countrys 78 operating coal mines play a significant role in both employment a

262、nd the economy.Balancing the need for decarbonization with socio-economic considerations,such as job losses,community impacts and social equity,requires careful planning and stakeholder engagement.Implementing policies and programmes that prioritize workforce development,retraining and support for a

263、ffected communities can facilitate a smoother transition to a low-carbon economy,while ensuring social inclusivity and equity.We have seen the extractive nature of capital before,below ground,and we cannot let that happen on our continent when it comes to our above-ground capital.Workshop participan

264、tThere is also a risk that extraction is replaced by protectionism.Moves by key trading partners to boost their own domestic energy transitions such as the European Unions Green Deal and CBAM,or the US Governments Inflation Reduction Act(IRA)could be viewed as protectionist from the perspective of t

265、he Global South.This raises an important global question How can developed economies address the unintended consequences of positive policy initiatives designed to accelerate progress towards net zero?Financial risks 4.3High interest rates and capital costs,low returnsInterest rates of roughly 12%an

266、d the resultant high capital costs present hurdles for investing in the decarbonization of South Africas shipping and trucking sectors.These costs make capital-intensive projects,such as production facilities for green hydrogen and ammonia or upgrading infrastructure,financially burdensome.Given the

267、 extended payback periods(10-15 years)and smaller internal rates of return compared to traditional fossil fuel investments,participants voiced concern around the risk-return profile of green investments.Furthermore,the risk profile associated with first-of-kind technology projects may not align with

268、 state funding pools,such as tax revenue or pension funds.Inadequate capital structure throughout project developmentInfrastructure investors currently tend to overlook project finance and focus on large-scale platforms that can catalyse new investments.This creates a significant opportunity for dev

269、elopment finance institutions(DFIs)to step in.However,even DFIs lack clarity around the necessary level of concessionality to attract private investment.Moreover,as the technology advances,the optimal capital structure in projects as they approach FID remains unclear among developers who are champio

270、ning the first projects in-country.Financing decisions are made on a case-by-case basis,without a standardized playbook for leveraging upstream and downstream subsidies across the value chain.Discrepancy between timing and volume of commitmentsWhile the shipping industry,as an example from the trans

271、port sector,currently operates through short-term fuel purchases,developers of ZEF require long-term offtake agreements spanning more than 10 years to ensure bankability.However,depending on market dynamics,the minimum duration for these agreements could be significantly shorter,posing challenges fo

272、r fuel providers to confidently invest in markets with low liquidity.Simultaneously,offtakers face uncertainties regarding the availability,location,volume and cost of the desired fuel,as well as the willingness of their customers to cover these expenses.The acceptance of higher costs and risks asso

273、ciated with clean fuel largely depends on the nature of the customer involved.Decarbonizing South Africas Shipping and Trucking Sectors30Lack of consensus on“green”standards exposes investors to regulatory risksWhile FMC has made clear its own criteria for the ZEF that can deliver the deep decarboni

274、zation of shipping,the term“zero-emission fuel”lacks clear definition in the market.60 This lack of clarity and standardization poses challenges in determining what exactly is being bought and sold.This in turn can expose investors to regulatory risks and penalties if their investments are found non

275、-compliant with new or existing environmental regulations.Financing gap for South Africas just energy transition Forged at COP26 in November 2021,the Just Energy Transition Partnership(JETP)between South Africa and France,Germany,the United Kingdom,United States and European Union,saw the mobilizati

276、on of$8.5 billion of grants and concessional loans.Recently raised to$11.9 billion,this includes$700 million of grant funding.In November 2022,the South African government published its five-year Just Energy Transition Investment Plan(JET IP)from 2023-2027 that determines the funding required for th

277、e country to transition to a low-carbon,climate-resilient economy.JET IP requires approximately ZAR 1.5 billion for 20232027,with 70%needed for the electricity sector.Public sources alone cannot provide this financing,so a range of private,local and international sources must also be utilized.The fu

278、nding gap is estimated at around ZAR 700 billion for 2023-2027,according to analysis by BCG(see Figure 4).The government has chosen to prioritize the low-carbon transition of the electricity grid,where the need is greatest due to load-shedding.One of the first investment opportunities to follow is r

279、oad and rail.However,new energy vehicles(NEV)and green hydrogen have only been allocated a small fraction of this finance,leaving gaps of 78%and 89%respectively in projected funding needs.For more of a policy angle on JET IP,see section 5.3 in the Policy chapter.The JET Partnership has leveraged$11.

280、9 billion of concessional finance for South Africas transition including$700 million of grant funding.Decarbonizing South Africas Shipping and Trucking Sectors31Funding gap for JET IP projected finance needs and estimated availability,by source and sectorFIGURE 4:128500150700ZAR 1,480 billionTotalOu

281、tstanding funding to meet target(%)Financial target(ZAR billion)ElectricityNew energy vehicles(NEVs)Green hydrogen(GH2)ZAR 1,030 billionZAR 128 billionZAR 319 billion315100500115252531010028578%89%25%44%Outstanding vs.targetIDC and NDB pledged ZAR 163 billion for JETGerman BMZ pledged ZAR 4 billion

282、for GH2Local private sector cumulatively pledged ZAR 500 billionPublic(DFI/MDBs)Private sectorIPG OfferNotes:JET=Just Energy Transition;IPG=International Partners Group of the JET Partnership;IDC=Industrial Development Corporation of South Africa;NDB=New Development Bank,established by BRICS countri

283、es;BMZ is Germanys Federal Ministry for Economic Cooperation and Development.Source:BCGFinancial opportunities4.4South Africa is a green hydrogen frontrunnerSouth Africa is strategically positioned to emerge as a frontrunner in the green hydrogen economy.With its abundant renewable energy capacity a

284、nd unique geographic location,the nation stands poised to capitalize on international maritime decarbonization efforts.For more detail on potential GH2 projects,including Saldanha Bay,Boegoebaai and Durban/Richards Bay,as well as on the countrys potential as a major exporter of GH2 and ammonia,see C

285、hapter 1.Role of capital marketsCapital markets,as centralized pools of capital from various sources,are vital in advancing green projects.Initiatives such as green bond programmes and voluntary carbon markets(VCM)are gaining traction.The Johannesburg Stock Exchange(JSE)has been recognized for centr

286、alizing and pooling capital,through both its green bond programme and a new VCM initiative,where projects under development can sell credits using a national registry of carbon credits to create a marketplace for buyers.Decarbonizing South Africas Shipping and Trucking Sectors32The equity market has

287、 a value of ZAR 1 trillion and the bond market is worth ZAR 4 trillion,indicating there is ample money available.One speaker,who noted that South Africas savings industry is sitting on ZAR 17 trillion,said:“The funding is there but the framework needs to be welcoming to capital.”Nevertheless,private

288、 capital is conservative,so bringing blended capital into the early stages of major infrastructure projects remains crucial.Once financial close is reached,then private sector capital will flow in.Role of the Development Bank of South Africa(DBSA)DBSA is focused on creating intergenerational wealth

289、through developing infrastructure.The bank is positioned to promote climate-resilient projects with its expertise in project finance,guarantees and concessional loans.DBSA has increased its renewable energy investment exposure,which now stands at 42%of the banks energy portfolio and is expected to g

290、row to 50%of the banks total portfolio.The institution manages several green funds,further underscoring its commitment to sustainable development.Financial solutions 4.5Stack up demand across sectors to boost the investment caseSouth Africa has an opportunity to make its shipping and trucking indust

291、ries work better together.For example,they could exploit synergies by using ports as places where trucks fill up on ZEF.Unconventional solutions are already emerging.These include“integrators”organizations or platforms that coordinate and streamline activities across the supply chain to enable procu

292、rement-focused collaborations,public-private demand aggregation,and innovative contracting and finance mechanisms.Integrators help manage the flow of goods and information between different stages of the supply chain,from suppliers to manufacturers to retailers and finally consumers,in an effort to

293、drive efficiency by reducing redundancies and optimizing operations.Collaboration can extend across sectors,with potential demand for hydrogen-derived products spanning multiple industries and bringing many benefits.A prime example,explored further in earlier chapters,is the renewable energy sector

294、and the shipping industry coming together to support the production of green hydrogen,used to make zero-emission ammonia and methanol.Meanwhile,combining demand for ZEF from different industry sectors can facilitate large-scale investments in production.Breakthrough technology providers will be moti

295、vated to invest in more extensive facilities knowing they have a stable,ongoing demand from diverse offtakers.Mechanisms to address gap between producers and offtakersGiven the gap between offtakers,such as the shipping industry with its short-term fuel procurement,and fuel producers who need long-t

296、erm offtake,financial mechanisms are needed to help bridge the gap.Some solutions include:Better fuel demand forecasts by carriers and shipping lines,as the certainty this brings is a critical determinant for project bankability.Insurance products that protect fuel developers/producers from non-real

297、ization of commitments.Buyers agreements on future purchases,with flexible price points that do not lock in a fixed price ahead of time.De-risking role of industrialized nations to subsidize capex and support offtakeFinance sector participants called for greater public-private collaboration,not only

298、 to reduce the long-term risk of their investments but also to enable them to act before all risks have been eliminated.Risk-sharing mechanisms,such as guarantees,61 sovereign offtake support,grants,low-return equity and“contracts for difference”62 were all mentioned as important solutions.Infrastru

299、cture projects,like Hyphens gigawatt-scale green hydrogen and ammonia project in Namibia,are so big they need financing by global capital markets but first they need to be made bankable.One workshop participant said:“For this whole thing to work,someone needs to subsidize the capex because there is

300、not sufficient balance sheet strength in the Southern African market to make these projects bankable.Whos going to pay for that?The answer from this part of the world is the industrialized nations need to pay for it.”With the capex subsidized,the projects viability depends on not just its competitiv

301、eness,but also policy certainty in the producing country and long-Decarbonizing South Africas Shipping and Trucking Sectors33term offtake agreements with countries such as Germany or Japan committing them to buying the green ammonia at a fair price.“Sovereign offtake support is the key to bankabilit

302、y,”said one speaker.Another participant emphasised the responsibility of wealthier nations to respect social equity in their transactions:“The industrialized world needs to chart out a way that ensures producing countries such as South Africa fully benefit from projects with affordable power.Its imp

303、ossible for the Global North to support these projects in an extractive way with no benefit for host countries.”Developed nations and current net emitters should make a contribution its an affordability issue on the part of developing countries and an accountability issue on the part of developed na

304、tions.”Workshop participantPromote financial instruments for early-stage fundingIt is essential to establish a transparent and detailed project pipeline,including initiatives to upgrade the grid to support the development of green fuel projects.However,there is growing demand for more generous grant

305、s and early-stage financing to help such projects reach financial investment decision.South Africa lacks a venture capital sector,which makes it challenging to take projects from pilot phase through to commercialization.This funding gap needs to be filled with more innovative,risk-tolerant capital,a

306、ccording to one participant.The governments Department of Trade,Industry and Competition(DTIC)has a critical infrastructure fund which companies are applying to,but it does not currently cater to EV infrastructure,for example.In infrastructure finance the real gap is in the early phase pre-feasibili

307、ty to financial close.As we head towards net zero,it will be super important for the finance sector to unlock early stage,pre-financial-close and blended finance solutions.Workshop participantMechanisms are needed to support and incentivize first movers and fast followers during critical stages of p

308、roject development.These could include tax breaks,direct subsidies and priority in grant applications,aimed at reducing the financial risks and enhancing the attractiveness of first-of-kind projects.Richer countries can support Just Energy Transition(JET)initiatives through grant funding,to help de-

309、risk projects.Grants reduce financial risk by covering some upfront costs,making projects more attractive to additional investors.Grant funding can be part of larger blended finance solutions,as public and philanthropic funds can help attract more private capital by lowering the overall risk.Role fo

310、r philanthropic fundingThe workshop featured a session on philanthropic funding,moderated by Rob Johan Adriaan van Riet,Head of the First Movers Coalition.He highlighted a new World Economic Forum initiative,Giving to Amplify Earth Action(GAEA),which has secured$4 billion of committed capital from i

311、ts 100+philanthropic,public and private partners.GAEAs aim is to unlock catalytic funding at speed and scale to accelerate the shift towards climate and nature solutions.The kinds of breakthrough technology projects that will drive the transition require a much higher proportion of public and philan

312、thropic funding than other infrastructure projects.This led the workshop to highlight the need for“hyper-concessional financing”to crowd in finance from less risk-tolerant sources.Participants appealed to philanthropists to meet this need on a case-by-case basis.There is not just a need for concessi

313、onal financing,but a need for hyper-concessional financing.Rob Johan Adriaan van Riet,Head,First Movers CoalitionDecarbonizing South Africas Shipping and Trucking Sectors34Adopt a bias towards taking actionAt such a critical time for South Africa,participants called on all actors to adopt a default

314、bias towards taking action with speed and determination.The workshop had the following specific recommendations:The government should provide greater policy clarity to allow for capital flows into first-of-kind projects.Financiers must adopt a fresh perspective on risk assessment,while factoring in

315、the dynamics of rival shipping hubs such as Rotterdam and Singapore.Development finance institutions(DFIs)need to streamline application and approval processes to enable quicker and more efficient financing;they also need to relax some of their requirements to make concessional lending easier.Domest

316、ic stakeholders need to craft a value proposition that is not seen as protectionist,but positions South Africa as a formidable contender in the global race to realize its full potential as a hub for clean fuel and renewable energy.Recommendations from workshop participantsBOX 7:Focus on industries w

317、ith viable and sustainable investment opportunities.Enhance understanding of risk-return profiles for green investments.Address shortage of investment-ready projects through impact advisory and investment readiness capabilities.Provide guidance on project origination,structuring and execution,partic

318、ularly for investments in the African continent.Utilize local asset management capabilities when seeking investment from international sources.Ensure projects and products are not perceived as exploitative or extractive.Explore alternative mechanisms beyond National Treasury guarantees for project f

319、unding.Consider ring-fencing tariffs from high-energy users to support infrastructure financing.Encourage richer countries to provide grant funding to de-risk projects and enable blended finance solutions.Propose a financial mechanism whereby early-stage financing for developing ZEF and BEV producti

320、on would be provided by fossil fuel industry revenues.Policy measures to accelerate the transition5The government has a critical role to play in building the infrastructure to support the transition and framing climate-friendly regulations to incentivize business.Decarbonizing South Africas Shipping

321、 and Trucking Sectors35Decarbonizing South Africas Shipping and Trucking Sectors36Overview of policy environment5.1Given the high rates of unemployment and poverty in South Africa,the government is very focused on poverty alleviation and the just transition.Consequently,the framing of opportunities

322、for decarbonizing the countrys shipping and trucking sectors should be seen in terms of as one participant put it a broader agenda to re-industrialize South Africas economy using green solutions.The government has taken significant steps in the past decade or more to implement a range of key climate

323、 policies,including establishing a low-emission development strategy,carbon tax and just transition framework.Some highlights include the following:March 2024:Parliament is working on an amendment to the Electricity Regulation Act,which would create a multi-market power sector based on a transmissio

324、n system operator(TSO)model.This would allow competitive buying and selling of power via a market operator,which could provide a channel for the sale of excess power from green hydrogen facilities.63 December 2023:The Cabinet approved the countrys updated Integrated Resource Plan(IRP),which envisage

325、s 29.3 GW of new generation capacity by 2030,including over 7 GW of new gas projects,4.5 GW of wind,3.6 GW of solar PV and 6.3 GW of distributed generation.Until 2030,the government anticipates a supply-demand deficit,so load-shedding is likely to continue for now.64 October 2023:The National Assemb

326、ly passed the Climate Change Bill,a significant piece of legislation which,if enacted,would enshrine South Africas NDC into law and set the country on a low-carbon,climate-resilient pathway.The Bill requires the government to set sectoral emission targets and allocate carbon budgets to significant G

327、HG-emitting companies.65 July 2023:The draft South African Renewable Energy Masterplan(SAREM),which aims to develop value chains for renewable energy and storage technologies as well as creating inclusive jobs,was released for public comment.December 2022:The proposed Green Hydrogen(GH2)Commercialis

328、ation Strategy was released for public comment;it builds on the Hydrogen Society Roadmap for South Africa published in 2021.November 2022:The government published its Just Energy Transition Investment Plan(JET IP),which envisages ZAR 1.5 trillion of investment in the low-carbon economy over five yea

329、rs.For more detail see section 5.3 below and the Finance chapter,section 4.3.September 2021:The government published its revised Nationally Determined Contribution(NDC),which commits the country to a net-zero goal by 2050,as well as a near-term 2030 target compatible with a 2C world.66 2018:The gove

330、rnment published its Green Transport Strategy for South Africa(2018-2050),which aims to decarbonize the transport sector especially road transport,which accounts for 91%of the sectors emissions.Meanwhile,the Presidential Climate Commission(PCC)has called for a full phase-out of coal and recommends r

331、enewables and battery storage as least-cost alternatives,although the role of fossil gas remains an option.For significant policy initiatives dating back to 2011,see Figure 5.South African governments key policy milestonesFIGURE 5.Decarbonizing South Africas Shipping and Trucking Sectors372011201620

332、1820192020202120222023Mar 11Renewable Energy Independent Power Producer Procurement Programme(REIPPP)Dec 18Dept.of Transports Green Transport Strategy(GTS)May 21DTIC Green Paper on NEVs Oct 23Green Hydrogen Commercialisation Strategy(GHCS)approvedIn progressElectricity Regulation Amendment BillMay 2

333、2PCC Just Transition Framework Nov 22JET-IPSept 21Nationally Determined Contribution Oct 21Electricity Regulation Act Nov 21Updated Nationally Determined Contribution(NDC)Feb 22Climate Change Bill Oct 19Integrated Resource Plan(IRP)Sept 20Low Emission Development Strategy(LEDS)Oct 11National Climate Response PolicyNov 16Paris AgreementJune 19Carbon Tax ActAugust 20National Climate Change Adaptatio