South Africa’s $8.5 billion Just Energy Transition Partnership addresses vital questions about how African countries can best use international climate finance. In doing so, it provides a framework for negotiating support for other economies in the region through flexible fora like the G7.
BERLIN/WASHINGTON, DC – One of the more concrete outcomes of last November’s United Nations Climate Change Conference (COP26) is South Africa’s Just Energy Transition Partnership (JETP). Under this plan, South Africa will receive $8.5 billion in grants and loans from the United States, Germany, France, the United Kingdom, and the European Union to support its transition from coal-fired power plants to cleaner energy sources.
Details of the JETP’s implementation are still scant. But the agreement already promises to be a template for how wealthy countries, the world’s largest historical emitters of greenhouse gases, can support the climate agenda of the lowest emitters, most of which are in Africa and are bearing the brunt of the climate emergency. That makes the JETP worthy of close attention as June’s G7 leaders’ summit in Germany approaches.
There are two main reasons why the JETP can provide a roadmap for negotiating other mutually beneficial climate-finance partnerships for Africa. First, South Africa designed the deal to reflect its own needs and priorities – especially concerning the political economy of a green transition that is likely to affect more than 90,000 coal miners, as well as mining communities and influential trade unions. South African politicians and policymakers were therefore careful to negotiate a package that can respond to those realities, framed around an equitable and inclusive “just transition.” Local ownership is crucial.
Second, the JETP adopts a whole-economy approach, connecting the industries that South Africa seeks to develop in the future to those it already has or is building up. For example, as part of the agreement, the country aims to develop an electric-vehicles industry that builds on its thriving automotive sector. South Africa also wants to produce green hydrogen, for which it already has a plan and a feasibility study. The fact that the JETP is connected to existing plans and ambitions makes it much more likely to succeed.
Other African countries can adapt this agreement to devise their own concrete aims when negotiating with rich countries on climate action. But governments and their partners must consider several factors.
For starters, African climate-financing deals must specify an issue or area of focus. The JETP concentrates on a just energy transition, with a particular emphasis on the power utility Eskom, technology development, and socioeconomic issues. Some African countries may instead choose to address agricultural resilience and food security. Those with excess power-generation capacity, such as Ghana, could focus on building regional transmission and distribution infrastructure to export the surplus to neighboring countries.
Furthermore, just-transition deals must build on African countries’ resource endowments, in the same way that the JETP builds in part on the presence of hydrogen in South Africa. Countries that possess or can access natural gas are incorporating it into their transition plans for power generation, industrialization, and clean cooking – just as Europe and North America regard it as a vital component of their own energy transitions.
African governments must co-design the terms of such climate-finance agreements – and link them to existing priorities and initiatives. Countries’ nationally determined contributions under the 2015 Paris climate agreement, as well as the African Union’s recently announced ten-year climate action plan, should help to shape any feasible international climate-finance deal.
Whether the focus is climate-smart agriculture in Kenya or battery manufacturing in the mineral-rich Democratic Republic of the Congo, it must advance other national priorities like industrialization and job creation. A just transition deal with the G7 could also support existing regional initiatives, such as the African Development Bank’s Desert to Power solar-energy project in the Sahel.
African climate-finance deals must also address the huge scale of the challenge facing the continent, which needs $30-50 billion per year to 2030 for climate adaptation. Partnership agreements must be comprehensive in supporting structural transformations of African economies that boost resilience, sustainability, and prosperity while addressing the damage already caused by global warming.
The structure of the financing package matters, too. To avoid aggravating the fiscal pressures on African governments already overburdened by COVID-19 economic shocks, any climate-finance deal must lead with grants and be accompanied where necessary by concessional loans. Such a structure will help rebalance the current composition of international climate finance.
Finally, a feasible climate-finance deal must be clear about its goals, how long it will take to achieve them, the relevant milestones to reach, and the funds to be committed within the specified period. The JETP regards $8.5 billion as an initial amount to be disbursed within five years, with the potential to unlock more funding in the future. Other African countries can adapt this template and ensure that their goals include clear milestones to be achieved within the timeframe.
The JETP identifies concrete areas to support during South Africa’s energy transition. More crucially still, the agreement addresses vital questions about how African countries can best use international climate finance. In doing so, it provides a framework for negotiating support for African and other developing countries through flexible fora like the G7.
Olumide Abimbola is Executive Director of APRI – Africa Policy Research Institute in Berlin.
Zainab Usman is Director of the Africa Program at the Carnegie Endowment for International Peace.
The text has been adapted from Project Syndicate website