Among the more significant topics at this year’s UN climate meeting is how to wean the developing world off of fossil fuels. The meeting, known as COP27, is currently taking place in Egypt.
Ahead of the meeting, South Africa released details of an $8.5 billion plan to transition to clean energy, paid for by the US and other wealthy countries.
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In announcing those details, South African president Cyril Ramaphosa called the plan a down payment on what the country will ultimately need to get itself off of coal, which powers 90 percent of its electric grid.
“While the initial funding committed by partner countries will play an important, catalytic role, it is not sufficient to meet the scale of our ambition,” Ramaphosa said, in announcing the Just Energy Transition Partnership.
The $8.5 billion deal includes donors, including the US, UK, France, Germany, and the EU. For the past year, the countries have been trying to hash out the details of the plan.
South Africa has reportedly clashed with the donor countries over its preference to spend money on electric vehicles and renewable hydrogen, not just on replacing coal with wind and solar power. And South Africa wants more of the funding to come in grants, not loans, which can saddle developing countries with debt.
Bella Tonkonogy, US director of the nonprofit Climate Policy Initiative, said these kinds of disagreements are to be expected.
“I think it’s always going to be messy,” Tonkonogy said. “Anytime there’s a lot of money on the table, it’s messy, it’s public.”
Still, Tonkonogy thinks the agreement could be a template for other developing countries – like Indonesia, Vietnam, and India.
This begins to fulfill a key element of the Paris climate agreement to create partnerships between donor countries responsible for much of the planet’s warming, and developing countries that are more likely to experience the consequences of climate change.
“Partnership is a really critical word there,” Tonkonogy said. “It’s not donor-recipient, its partners.”
The aid would mostly be in the form of loans. But many of these would be subsidized, meaning they could still be a good deal for South Africa, says Todd Moss, head of the Energy for Growth Hub, a Washington, D.C.-based nonprofit.
“By getting the United States government or the European partners involved in loans, you can make those loans much longer than they would be,” Moss said. “You can make the interest rate lower because the borrowing cost in the United States and Europe is lower than it would be in South Africa on its own.”
The aid package also contains loan guarantees that make investments less risky for private companies.
Benefits to South Africa
“The importance of climate cannot be overstated on the continent because it’s a very vulnerable continent, largely because it is subject to extreme weather,” said Saliem Fakir, executive director of the African Climate Foundation.
Getting the country off of coal could boost the economy. The country has rolling blackouts because its aging coal plants often have to shut down, a problem many hope clean energy will remedy.
“It’s not something that we’re doing purely because we need to meet climate goals,” said Leanne Govindsamy, a lawyer for the South African Centre for Environmental Rights. “We have such bad coal-fired power infrastructure that we have to transition.”
By one measure, South Africa has the most inequality in the world. Govindsamy says the aid plan should include more in grants for social programs for the quarter of a million workers in South Africa’s coal industry.
“This has to involve projects that are beyond what the private sector would see as important, because they would have a very limited return on investment,” Govindsamy said. “So the US needs to think very carefully about the types of financing it’s providing to South Africa.”
The plan is moving into place. South Africa’s state-owned utility closed a coal-fired power plant and will replace it with wind and solar. None of the plant’s workers got laid off–they all got jobs elsewhere in the company.
-Michael Copley contributed reporting