For now, the particulars of the climate finance deal in which the US and countries in Europe will make available $8.5bn towards the funding of energy reform in SA remain a bit of a mystery.
However, the Presidential Climate Finance Task Team said it expects to publish a draft of an investment plan for SA’s transition to a low-carbon economy by the end of July as part of the country’s commitment to the Paris Agreement on climate change.
The final investment plan, which will identify the projects and activities required to achieve a just transition and guide the use of $8.5bn in funding offered under the Just Energy Transition Partnership, is scheduled to be approved the government and published by the end of October in time for the COP27 climate conference in November.
These details are contained in a progress report on SA’s Just Energy Transition Partnership (JETP), an initiative between SA and global partners that is aimed at supporting the country’s transition to a low carbon economy.
The report was published on Tuesday after meetings between government ministers and COP president Alok Sharma, as well as engagements with the climate finance task team led by former Absa boss Daniel Mminele.
The JETP was launched at COP26 in Glasgow, Scotland, in November last year when the UK, the US and EU members undertook to mobilise an initial $8.5bn over the next three to five years to support SA’s commitments, or nationally determined contribution, to the Paris Agreement on climate change.
Protecting workers
According to the revised NDC that was submitted in Glasgow, SA has pledged to reduce domestic carbon emissions within a target range of between 350-million tonnes and 420-million tonnes of CO² equivalent — a reduction of about 20%-33% from current emissions — by 2030.
According to the finance task team, the investment plan will further outline the JETP’s priorities, which include decarbonising SA’s energy sector and protecting vulnerable workers and communities affected by the move away from fossil fuels.
It will also outline how the partnership will support the rehabilitation and repurposing of coal mines, and the creation of “green and quality jobs” through the development of the green hydrogen and electric vehicle sectors.
Mminele’s team and National Treasury are analysing financing instruments that may be offered to ensure they “meet SA’s investment needs and fiscal realities”.
He told Business Day that the funding mix is still under discussion and as such he cannot comment on how much of the money will be in the form of grants, loans, guarantees and other financial instruments.
Possible conditions
“Our key focus at the moment is on two priorities. First, to develop a comprehensive SA-led investment plan that maps out investments required to achieve a just transition and help guide the use of funds. Second, to reach agreement on the financing package that both meets our investment needs and that is SA’s fiscal framework,” Mminele said at a media briefing in Pretoria on Wednesday.
The nature of the funding being offered and possible conditions attached has been a major concern about the JETP.
At previous meetings of the Presidential Climate Commission, public enterprises minister Pravin Gordhan and mineral resources & energy minister Gwede Mantashe have expressed doubts whether the funds on offer are worth it and have said that SA needs to better understand the cost implications before accepting any offers.
However, according to Mminele, there is a “shared recognition of the needs to ensure that the financing package is appropriately structured to support SA’s climate, ambitions and priorities” among all the partners.
Expanding fleet
“We have made it clear that the funding and financing instruments should reflect SA’s unique needs and fiscal challenges. This includes ensuring that the terms of any loan finance should be significantly attractive than we could normally secure in the capital markets,” he said.
Mantashe has also expressed concern about the insistence by some of the partner countries that any funding provided would be subject to SA not further expanding its coal-fired generation fleet.
At a conference in Cape Town earlier this month, John Morton, the US Treasury’s climate counsellor, said that any new investment by SA in coal-fired power generation would be “inconsistent with the spirit and intent” of the $8.5bn funding package.
According to the Integrated Resource Plan (IRP) of 2019, SA plans to add 1,500MW of coal-fired power generation to the energy mix by 2030.
Mminele said there is no reason to speculate about whether the US or any of the other partners might choose to exit the partnership should a revised IRP still include plans for further investment in new coal-fired plants.
Update: June 22 2022
This article has been updated with additional information.
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