Green ambitions: SA targets EU market with clean aviation fuel and electric vehicle exports

South Africa is seeking to boost its green energy ambitions with plans to export clean aviation fuel and electric and hybrid vehicles to the European Union (EU).

The issues were discussed at the EU-SA summit in Cape Town last week where it was announced that the two sides would start negotiating a Clean Trade and Investment Partnership (CTIP).

This would support the development of clean energy, critical minerals and green hydrogen value chains and improve the conditions for mutually beneficial investments.

This would, in turn, help to leverage public and private financing towards developing cleaner supply chains in South Africa, according to the summit declaration. The CTIP would serve as a forum for regulatory cooperation between the European Union and South Africa on clean supply chains.

At the summit, the EU also announced a €4.7-billion (R94-billion) Global Gateway Investment Package for South Africa, focusing on supporting SA’s just energy transition and strengthening connectivity infrastructure and the pharmaceutical industry.

The package will provide €303-million in EU grants and leverage a further €4.4-billion in loans from European financial institutions.

Read more: EU and SA announce R94bn package for new investments in clean energy, vaccine manufacturing

The green aviation and electric and hybrid vehicle export plans are linked to the CTIP. SA has sought approval from the EU for SA’s energy giant Sasol to export green aviation fuel to the EU. However, it has run into EU rules which prevent the organisation from certifying any Sasol exports to the EU as green because other products of Sasol are not.

EU Commission President Ursula von der Leyen said after the summit she hoped the CTIP negotiations would be complete by November so she could sign the agreement when she visited SA for the G20 summit.

The summit declaration said the CTIP “must deliver short and long-term solutions without delay to enable Sasol to export sustainable fuel, especially aviation fuel to the EU including addressing compliance and regulatory issues.

“The EU commits to also support the long-term decarbonisation of Sasol, in particular in Secunda, thus contributing to facilitating a Just Energy Transition,” said the declaration.

Read more: Sasol bids to fill growing demand for ‘sustainable’ jet fuel

Officials explained that although the EU had accepted that Sasol’s green aviation fuel met EU environmental standards, it could not approve the export of that fuel into the EU because other Sasol products were not green.

The technology used by Sasol for its products (the Fischer-Tropsch process) mixes into a single reactor both green and fossil-fuel energy for the production of multiple outputs such as diesel, petrol, chemicals and aviation fuel. Current EU legislation allocates CO2 to all outputs equally, with the result that Sasol’s sustainable aviation fuel does not meet EU requirements to be considered green.

The officials said that to allow Sasol to export its green aviation fuel to the EU, the EU would have to change its legislation to allow for a flexible allocation of CO2 emissions to specific products. This was being discussed by both sides.

SA feels that the EU should make an exception for Sasol under the accepted principle that all nations have “common but differentiated” responsibilities for combating climate change.

The principle implies that developed countries bear greater responsibility than developing countries for combating climate change.

Exporting EVs to Europe

SA is also seeking another important concession from the EU to help it meet its climate targets. Pretoria wants the EU to allow it to source batteries from South Korea to incorporate into the electric and hybrid vehicles it proposes to manufacture. It wants the EU to allow these vehicles into the EU market duty-free under the SADC Economic Partnership Agreement (EPA), the free trade agreement which SA is part of.

This would require the EU to ease its rules of origin. They now stipulate that a product should be produced in a SADC-EPA state to qualify for lower or zero tariffs in the EU.

The rules allow SADC-EPA states to incorporate products made in other SADC-EPA states or the EU and allow some flexibility for products made elsewhere as long as sufficient work is done on those products within the SADC-EPA area.

However, the EU has not accepted that batteries sourced from South Korea would comply with its rules of origin.

The declaration from the summit noted that South Africa and the EU had “committed to work together in the coming months to find a sustainable solution without delay to facilitate South African exports of EVs and Hybrid vehicles to the EU market under the provisions of the EU – SADC Economic Partnership Agreement (EPA), while supporting battery manufacturing in South Africa and the EU”.

Read more: BMW producing plug-in electric cars locally flags need for SA to adapt to the EV transition

At the press conference after the summit,  Von der Leyen said the Global Gateway investment package would invest along the full value chain of green energies “including electric vehicles and battery production”.

Officials told Daily Maverick that at the summit Von der Leyen had said the EU would prefer to help SA manufacture its own batteries for its electric and hybrid vehicles, rather than SA incorporating batteries imported from elsewhere. But she had also agreed: “In the meantime, we need a solution.”

SA is gearing up to launch an electric and hybrid vehicle industry with an announcement recently that it would offer 150% tax rebates to investors.

Amarula and chicken

The summit discussed other trade issues and paved the way for exports of SA’s Amarula liqueur to the EU, following the EU’s positive technical assessment of the Residue Monitoring Plan for Amarula which addressed some health concerns.

Officials said the EU Commission had accepted SA’s plan for ensuring the exports were healthy but that the EU member states had to accept the plan before exports could resume. They noted that the giant Dutch beverage company Heineken was interested in producing Amarula in South Africa so this should accelerate approval by EU member states.

Meanwhile, the EU asked SA to accept regionalisation, which would allow imports of poultry from disease-free areas in the EU.

Regionalisation would mean that instead of banning the import of poultry from an entire EU country if there was an outbreak of disease, SA would ban imports only from the area affected by the disease.

The summit declaration said SA had “committed to find a solution to facilitate the imports of poultry from disease-free areas in the European Union into South Africa without delay…”

It said that the EU and South Africa had agreed to work together to address existing challenges to trading in animal and plant products.

Officials said the chronic dispute over exports of SA citrus to the EU had not arisen at the summit. In 2022, the EU demanded that SA citrus producers maintain a cold-chain for their citrus exports to control the false codling moth pest.

SA disputed the need for this measure, which it said was costing it large amounts in exports and filed a request at the World Trade Organization (WTO) for consultations with the EU. However, officials said SA had not appointed a scientist to the WTO panel which was supposed to adjudicate the dispute.

Daily Maverick sought comment from the Department of Trade and Industry but was told officials were unavailable because of G20 trade working group meetings this week. DM