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Beyond $8.5bn: Rich countries commit more money for SA's energy transition

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Beyond $8.5bn: Rich countries commit more money for SA's energy transition

US Special Presidential Envoy for Climate John Kerry; UK PM Rishi Sunak; European Commission President Ursula von der Leyen; South African President Cyril Ramaphosa
Photo by US Embassy Cairo
US Special Presidential Envoy for Climate John Kerry; UK PM Rishi Sunak; European Commission President Ursula von der Leyen; South African President Cyril Ramaphosa

8th November 2022

By: News24Wire

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South Africa's R1.5-trillion just energy transition investment plan has been endorsed by the International Partners Group (IPG), which includes UK, US, Germany, France and the EU. The countries which initially pledged $8.5-billion to aid South Africa's shift from coal, also plan to make available an additional R10-billion, according to a joint statement. 

The investment plan - R1.5-trillion over five years - was formally handed over by President Cyril Ramaphosa to the IPG at COP27, in Sharm El-Sheikh, Egypt on Monday. 

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It builds on the $8.5-billion pledge by the IPG at COP26 last year, to assist South Africa’s efforts to decarbonise the economy in order to meet its climate commitments. 

"I congratulate President Ramaphosa for the great progress that has been made on the South Africa Just Energy Transition Partnership. In one year since COP, South Africa, along with the UK and our friends in the International Partners Group, have shown how serious we are about making the changes we need to halt climate change," said new UK prime minister Rishi Sunak, who is also chair of the IPG. 

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"South Africa's JET Investment Plan paves the way for a sustainable and fair transition away from coal and towards cleaner forms of energy, building the foundations for a strong green economy,” he said.

European Commission President, Ursula von der Leyen described the JET investment plan as a "first of its kind global initiative". "It is a flagship of EU-supported multilateral cooperation to limit global warming to 1.5°C."

French President Emmanuel Macron described the just energy transition partnership as a benchmark for other countries.

US President Joe Biden welcomed the plan, and US secretary of the Treasury Janet Yellen said the just energy transition partnership is "groundreaking" in that it creates a new model for tackling the climate crisis. 

German Chancellor Olaf Scholz said that more funding needs to follow from the $8.5-billion, particularly from the private sector.

"This is an ambitious start. More needs to follow, particularly in collaboration with the private sector."

South Africa is the world's 13th-biggest source of greenhouse gases, with almost half of its emissions coming from coal-fired electricity generation.

Key to the transition is ensuring it is just -  in that workers and communities are not disadvantaged by the shift. For this reason, while the funding will support the decommissioning of coal-fired power plants it will also be used to fund alternative employment in coal mining areas, a joint statement from the IPG indicated. It will also go towards the rapid deployment of renewable energy. The funding will be made available through a combination of concessional loans, grants, investments and risk sharing instruments, the IPG said.

The $8.5-billion is composed of $1-billion from France, Germany, the US and EU. The UK has pledged $1.8-billion and $2.6-billion of the funds will be accessed from the Climate Investment Funds Accelerating Coal Transition (CIF ACT) Investment Plan.The CIF ACT monies include $500-million, or R9-billion, to accelerate the decommissioning of coal-fired power stations. Germany, the UK and US provide about 65% of the funds for the whole CIF ACT programme which will support the decommissioning and repurposing of coal power stations, community development and energy efficiency projects in Mpumalanga. 

France and Germany, are providing a $600-million (about R10-billion) concessional loan which will be formally signed at COP27.

Separate to the $8.5-billion, the IPG also noted that the World Bank has approved a R9-billion loan to repurpose Komati, which is a coal-fired power station. 

A number of other deals, related to the $8.5-billion, are still in the works. This includes $2.2-billion in sovereign loans from Germany's development bank KfW, France's Agence Française de Développement and the EU’s European Investment Bank.

The US and UK will make $1.5-billion available through development finance institutions, which would crowd in private sector investments. These details will also be announced when finalised.

The UK will provide $1.3-billion of guarantees linked to funding from the African Development Bank (AfDB).

"Details of the related loans will be announced once they have been agreed between the AfDB and the South Africa Government."

Additional funding

The IPG is also making additional funds of about R10-billion available, beyond the initial $8.5-billion pledge. This includes $45-million (about R800-million) in concessional funding from the US through Power Africa (which works to improve energy access). The European Investment Bank is making a €200-million (about R3.6-billion) loan to a South African bank - which will be used for loans for onshore wind and solar PV projects in South Africa. Earlier this year, Germany also provided €395-million, or R6.2-billion, to support the just energy transition. It includes a mix of concessional loans and grants.

Last week Ramaphosa noted that the grant component of the $8.5-billion was not enough and had to be "upgraded".

In their statement the IPG highlight their grant funding initiatives. This includes support from the UK for the development of a just transition plan for affected communities in coal-dependent municipalities in Mpumalanga- eMalahleni and Steve Tshwete.

Germany has also supported the integration of solar power to the grid and other efforts to increase energy efficiency. 

The US Trade and Development Agency funded a Clean Energy and Climate Infrastructure Event Series, that has workshops on green hydrogen. The agency plans to support projects to strengthen the grid for more renewables. 

The EU also provided grants to increase the participation of South Africa’s civil society in reducing emissions and adapting to climate change, the statement indicated. It also aims to promote gender equality and boost the participation of the youth in the economy by "strengthening skills".

France has also funded work for the development of a climate finance mapping and tracking tool, a study focusing on the localisation potential for solar PV and storage value chains in South Africa. It has also supported Eskom in the "refinement" of its own just energy transition strategy and implementation plan.

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