By Mathew Carr
June 27, 2022: One euro of public money can leverage as much as 50 euros of private emerging markets climate action finance, so the 55 million euro contribution can leverage 2.75 billion euros: Germany’s Chancellor Olaf Scholz.
(See also President Joe Biden’s statement below.)
While this leveraging of public finance into private is great in theory, it’s slow to get going.
I wonder if this is more empty promising. Postering.
G7 really is short for Greenwash 7.
Private companies are reluctant to put money into risky emerging countries, even with some rich-country public capital to reduce risk.
There is a lack of transparency and corruption in rich and poor nations, making investors hesitate and unnecessarily boosting risks for long-suffering taxpayers.
Look at the bad and delayed disclosure even on the g7germany.de website, for instance.
There is hardly any information / data about contributions of rich countries over time.
While the private sector can make money out of energy projects, it’s much more difficult to make profit from adaptation finance, for instance — or building climate-resilient, EV friendly roads and bridges in poorer nations where tolls won’t work.
Is this the G7 showing the world how to be transparent?
To me, it’s looking more like a yet another cover up of failings and irresponsibility — more heightened complexity designed to muddy waters and reduce accountability.
The poster child of this new type of finance is the Just Energy Transition Partnership (JETP) to support the Republic of South Africa’s (RSA) decarbonization effort in the context of domestic climate policy, announced with fanfare at the Glasgow climate talks last November.
Here are some of the achivements listed for the first seven months or so.
Let’s look at a few of them:
On new clean power generation in South Africa, “the raising of the licensing threshold for new generation capacity from 1MW to 100MW has opened the way for the private sector to invest in renewable-energy projects, with approximately 4.5 GW of projects currently in development, and for the domestic banking sector to allocate substantial capital to this. The work to eliminate administrative and regulatory inefficiencies in this regard is progressing. The first two 100MW projects had their registration approved in May 2022 and will soon commence construction.”
So in seven months or so 200MW of 4,500MW approved. That’s 4%. That is no where near fast enough.
I’m not seeking to downplay this program, but the progress isn’t ambitious enough.
These JETPs need to be happening simultaneously in emerging countries across the world, not in one test country.
On carbon pricing: The South Africa National Treasury has “indicated that the carbon tax rate will progressively increase every year to reach US$20 per tonne of carbon dioxide equivalent by 2026. In the second phase after 2025, the medium-term to long-term path will include more rapid and aggressive annual increases thereafter, to at least US$30 by 2030, accelerating to higher levels by 2035, 2040 and up to US$120 beyond 2050.“
These prices seem to be too low to attract the capital needed for clean energy, because coal and gas can be profitable against clean energy at these low carbon prices. Denmark is going for $159 by 2030.
The current price in Europe is 84 euros ($89) a metric ton: ICE.
I’m not saying carbon prices should be as high in emerging countries (I’m not sure), but unless they are higher than this, there’s a big risk investors will continue to choose to invest in fossil fuels, and continue to invest in rich countries.
CarrZee: Having high carbon prices in South Africa won’t deter investment there. It will just deter fossil-fuel investment there. That’s what’s needed.
That is a good thing.
Higher carbon prices will also provide the South African government with a bigger pot of revenue from selling carbon allowances, which it can use to protect the poor from the higher fossil-fuel prices.
At these low projected carbon prices, I’d be worried that new clean energy projects might suffer unfair competition from existing coal plants.
(There is a chance grid reforms that South Africa is also implementing may help with this risk. ie rules on the power grid that favor clean energy)
Overall, I would argue regional carbon prices need to quickly become global, where possible. Otherwise, for instance, investors may continue to choose Denmark over South Africa, because there’s a chance the Danish clean investment will be more sustainable and more profitable, because it is more protected by a higher carbon price.
And it’s climate risks in 2040 and 2050 that long-term investors like pension funds are particularly worried about. They want investments made today to be making big money in 2040.
Having low carbon prices today will hurt a country’s abililty to attract capital.
US Treasury Secretary Janet Yellen on President Biden’s announcement of the Partnership for Global Infrastructure and Investment:
“The South Africa JETP, announced last year at COP26, supports South Africa’s climate commitments, estimated to result in over a gigaton of emissions reduction over the next 20 years. The JETP model is emblematic of the PGII’s and Treasury’s commitments to transformative projects, ambitious emissions reductions, innovative financing strategies, and multilateral cooperation.”
CarrZee: A billion tons a year would be some progress, because that’s 2% of the global total of 50 billion tons or so. One billion tons over 20 years is simply nowhere near ambitious enough when the world needs to cut about 25 billion tons PER YEAR by 2030.
The G7 is seeking to present an alternative to China’s belt and road initiative.
Yellen had this to say (I’m thinking an apparent dig at China, but it might not be):
This spring, Secretary Yellen brought together the presidents of the multilateral development banks (MDBs)—including the World Bank, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and the Inter-American Development Bank—and fellow G7 shareholders of the MDBs, to affirm our commitment to quality infrastructure investment. The Treasury Department has been a leading voice in advancing the adoption of Quality Infrastructure Investment (QII) principles by countries around the world to enable ourselves and our partners to deliver on PGII’s commitment to quality. Infrastructure investment that adheres to QII principles will deliver value for money, sustainability, resilience, social inclusion, and sound governance, providing a valuable alternative to low-quality, exploitative infrastructure development.
CarrZee: It does seem to be progress if the rich and emerging nations are competing to provide investment and finance to emerging countries for the climate transition. The race to the top may have replaced the race to the bottom (but I’m not yet convinced it has).
The program does have some good things going for it.
It’s trying to adjust markets in favor of the climate.
Here’s another way to adjust the markets:
Senegal is one of the guests at the G7 meeting this week.
Dipak Dasgupta and Jean-Charles Hourcade reckon progress at the G7 is possible. See this and read more at:
FACT SHEET: President Biden and G7 Leaders Formally Launch the Partnership for Global Infrastructure and Investment
JUNE 26, 2022•STATEMENTS AND RELEASES
(UNEDITED) The Partnership for Global Infrastructure and Investment will deliver game-changing projects to close the infrastructure gap in developing countries, strengthen the global economy and supply chains, and advance U.S. national security
President Biden will announce new flagship projects and lay out the Administration’s comprehensive effort to execute the Partnership for Global Infrastructure and Investment.
At the 2021 G7 Summit, President Biden and G7 leaders announced their intent to develop a values-driven, high-impact, and transparent infrastructure partnership to meet the enormous infrastructure needs of low- and middle-income countries and support the United States’ and its allies’ economic and national security interests. Over the past year, members of the Administration have traveled to hear directly from countries on how we can meet their infrastructure needs, deepened our coordination across the U.S Government and with the G7, honed our infrastructure investment tools, and closed game-changing deals.
At the G7 Leaders’ Summit in Schloss Elmau, Leaders will formally launch the Partnership for Global Infrastructure (PGII) to mobilize hundreds of billions of dollars and deliver quality, sustainable infrastructure that makes a difference in people’s lives around the world, strengthens and diversifies our supply chains, creates new opportunities for American workers and businesses, and advances our national security.
Today, President Biden will announce that the U.S. aims to mobilize $200 billion for PGII over the next 5 years through grants, Federal financing, and leveraging private sector investments. Together with G7 partners, we aim to mobilize $600 billion by 2027 in global infrastructure investments. And this will only be the beginning. The United States and its G7 partners will seek to mobilize additional capital from other like-minded partners, multilateral development banks, development finance institutions, sovereign wealth funds, and more.
President Biden will release a Presidential Memorandum to execute the PGII across four priority pillars that will define the second half of the 21st century.
- Tackling the climate crisis and bolstering global energy security through investments in climate resilient infrastructure, transformational energy technologies, and developing clean energy supply chains across the full integrated lifecycle, from the responsible mining of metals and critical minerals; to low-emissions transportation and hard infrastructure; to investing in new global refining, processing, and battery manufacturing sites; to deploying proven, as well as innovative, scalable technologies in places that do not yet have access to clean energy.
- Developing, expanding, and deploying secure information and communications technology (ICT) networks and infrastructure to power economic growth and facilitate open digital societies—from working with trusted vendors to provide 5G and 6G digital connectivity, to supporting access to platforms and services that depend upon an open, interoperable, secure, and reliable internet and mobile networks with sound cybersecurity.
- Advancing gender equality and equity—from care infrastructure that increases opportunities for economic participation by women, to improved water and sanitation infrastructure that addresses gender gaps in unpaid work and time use – in order to boost the global economic recovery by ensuring that half the population is not forced to sit on the sidelines.
- Developing and upgrading the infrastructure of health systems and contributing to global health security through investments in patient-centered health services and the health workforce; vaccine and other essential medical product manufacturing; and disease surveillance and early warning systems, including safe and secure labs. Addressing the current pandemic and preventing and preparing for the next one is crucial to U.S. economic and national security.
President Biden will announce flagship projects of PGII, along with additional projects that have been undertaken over the past year. PGII will demonstrate how millions of dollars can mobilize tens or hundreds of millions in further investments and tens or hundreds of millionscan mobilize billions.
With support from the U.S. Department of Commerce and the Export-Import Bank of the United States (EXIM), U.S. firm AfricaGlobal Schaffer (Washington, DC), in collaboration with U.S. project developer Sun Africa (Miami, FL), signed a contract with the Government of Angola to develop a $2 billion solar project in four southern Angola provinces. The project will include solar mini-grids, solar cabins with telecommunications capabilities, and home power kits. In addition to supporting up to $1.3 million in U.S. exports, the project will help Angola meet their climate commitments, including generating 70% carbon-free power by 2025.
In collaboration with G7 members as well as the European Union and multilateral organizations, the U.S. International Development Finance Corporation (DFC) is disbursing a $3.3 million technical assistance grant to Institut Pasteur de Dakar (IPD) for early-stage project development for an industrial-scale flexible multi-vaccine manufacturing facility in Senegal with potential annual capacity of millions of doses of COVID-19 and other vaccines, potentially using both viral vector and mRNA technologies. DFC’s grant is part of a $14 million grant financing package that also includes $3.3 million from the International Finance Corporation, $2 million from the Agence Française de Développement, and $5.2 million from the European Investment Bank (EIB). DFC, along with other development finance institutions, is currently evaluating a loan to support IPD’s expansion to supplement EIB’s recent announcement of a nearly $80 million sovereign loan financing package.
U.S. telecommunications company SubCom (Eatontown, NJ), awarded a $600 million contract, to build the Southeast Asia–Middle East–Western Europe 6 submarine telecommunications cable that will connect Singapore to France through Egypt and the Horn of Africa. The submarine cable will stretch over 17,000 km and connect countries across the region with high-speed, reliable connectivity. The U.S. Government, including through the U.S. Department of State, Commerce’s Advocacy Center, EXIM, and the U.S. Trade and Development Agency’s (USTDA) commitment of nearly $4 million in additional capacity building to support five countries using SubCom’s technology, collectively helped secure the award of the construction and deployment of the undersea fiber optic cable for SubCom.
The U.S. Government with U.S. firm NuScale Power LLC (Tigard, OR) will provide $14 million in support for the Front-End Engineering and Design study for Romania’s deployment of a first-of-its-kind small modular reactor (SMR) plant. Building on U.S. Government efforts, including advocacy support from Commerce and technical assistance from State and USTDA, this investment is meant to mobilize a multi-billion-dollar effort and showcase U.S. ingenuity in the advanced nuclear sector, accelerate the clean energy transition, create thousands of jobs, and strengthen European energy security while upholding the highest standards for nuclear safety, security, and nonproliferation.
The U.S. Agency for International Development (USAID) will aim to commit up to $50 million over five years to the World Bank’s new global Childcare Incentive Fund – $200 million public-private partnership to address the gap in suitable childcare infrastructure; boost women’s employment opportunities, productivity and income, and broader economic growth; and promote human capital and early learning for children. Other partners include the Governments of Canada and Australia, the Bill & Melinda Gates Foundation, the Conrad N. Hilton Foundation, Echidna Giving, the Ford Foundation, the William and Flora Hewlett Foundation, and the LEGO Foundation.
DFC will invest up to $25 million in the Uhuru Growth Fund I-A, which will provide needed growth capital to small-and medium-sized enterprises in West Africa – including women-led businesses. Some of the largest economies in Africa, including Nigeria, Ghana, and Cote d’Ivoire, are facing a shortage of growth capital. Uhuru has committed to investing at least 30 percent of capital in eligible portfolio companies that support DFC’s 2X women’s economic empowerment initiative, and over 40 percent of the Uhuru team members are women. In addition to U.S. support, like-minded partners are investing including $35 million from the German Development Finance Institution, $30 million from the European Investment Bank, and $15 million from British International Investment, among others. Through this investment, DFC expects to mobilize $78 million in private capital.
The Digital Invest program will leverage $3.45 million in State and USAID funding to mobilize up to $335 million in investment capital for internet service providers and financial technology companies in Africa, Asia, and Latin America that use secure network equipment and advance competition and choice in emerging markets. This new blended finance program for fund managers and project developers through the Digital Connectivity and Cybersecurity Partnership will promote the growth of resilient, secure digital ecosystems in developing countries.
USAID will invest $40 million in the Southeast Asia’s Smart Power Program to decarbonize and strengthen the region’s power system by increasing regional energy trade, accelerating the deployment of clean energy technologies, and actively engaging private sector leaders and key development partners in shared priorities. The program is expected to mobilize $2 billion in financing as a result of U.S. Government assistance, increase regional energy trade by five percent, and result in 2 gigawatts of advanced energy systems deployed.
DFC will invest up to $30 million in Omnivore Agritech and Climate Sustainability Fund 3, an impact venture capital fund that invests in entrepreneurs building the future of agriculture, food systems, climate, and the rural economy in India. The Fund seeks to invest in companies that increase food security and promote both climate resilience and climate adaptation in India, as well as improve the profitability and agricultural productivity of smallholder farms. The Fund is targeting a $65 million first close in September 2022 and a final close in 2023 to reach its target capitalization of $130 million. Through this investment, DFC expects to mobilize $30 million in private capital.
ABD group (Philadelphia, PA), a project development company, was awarded a $320 million healthcare infrastructure project to renovate or construct over 100 hospitals and clinics across Côte d’Ivoire and has already begun work on 10 locations. ABD Group credits the Memorandum of Understanding for commercial cooperation between the U.S. Government and the Government of Côte d’Ivoire with providing the necessary foundation of partnership for this deal to come to fruition. With the support of Commerce, the project has already received $160 million in closed financing with another $160 million nearing completion.
SIX-MONTH UPDATE ON PROGRESS IN ADVANCING THE JUST ENERGY TRANSITION PARTNERSHIP (JETP)
21 June 2022
At the UNFCCC COP26 in November 2021, the governments of South Africa, with France, Germany, the United Kingdom, the United States of America, and the European Union – together forming the International Partners Group (IPG) – announced a new ambitious, long-term Just Energy Transition Partnership (JETP) to support the Republic of South Africa’s (RSA) decarbonization effort in the context of domestic climate policy, including transitioning its economy towards cleaner energy sources. A distinguishing feature of the JETP is its emphasis on the centrality of a just transition in the structuring of the investment plan and financing package.
The JETP is a pathbreaking initiative and the first of its kind. It is long-term and ambitious in its aspiration to support South Africa’s pathway to a low carbon economy and climate resilient society; to accelerate the just transition and the decarbonization of the electricity system (including rehabilitation and repurposing of mines); and to support the development of new economic opportunities such as green hydrogen and electric vehicles amongst other interventions to support RSA’s shift towards a greener future.
In line with the political declaration issued in November 2021, the IPG undertook to mobilise an initial amount of $8.5 billion over the next 3-5 years to advance the Partnership. It was determined that the Partners would within six months provide a leader level progress update.
Given South Africa’s commitment to decarbonise its energy intensive economy as set out in its Nationally Determined Contribution (NDC), and the commitment of the IPG to support developing countries in achieving this in ways that are inclusive and equitable, the Partnership has the potential to provide a model that could be replicated across the globe. In particular it has the potential to practically demonstrate how a just transition could be achieved and financed and to serve as a catalyst for a new inclusive development path in which every effort is made to leave no-one behind.
In addition, given South Africa’s vulnerability to the impacts of climate change, as tragically demonstrated by the recent devastating floods and loss of life and property in KwaZulu-Natal, the urgency of investments in climate-resilient infrastructure is clear.
As such, the JETP opens the way for long-term, ambitious and systemic climate actions to be funded through a range of instruments that support flexible and rapid implementation in ways that build confidence in a just energy transition. Key to realising the finance and the implementation of the JETP will be the finalisation of a fully approved and actionable Investment Plan (JETP-IP), with the intention of achieving this by November 2022 and COP27. The investment plan will identify the projects and activities required to achieve a just transition, and guide the use of funds.
Key priorities of the Partnership include:
- Accelerating decarbonisation of South Africa’s electricity sector, including expanding renewable energy sources and strengthening the transmission network to accommodate new investments in renewables;
- Protecting vulnerable workers and communities affected by the move away from fossil fuels;
- Supporting the reform process underway and future reforms essential to strengthen the enabling environment for the just transition;
- Addressing environmental aspects of the transition, including mine rehabilitation;
- Supporting the repurposing of mine sites (e.g. for renewable energy and agriculture);
- Supporting opportunities for technological innovation and both public and private investment to drive the creation of green and quality jobs including in the Green Hydrogen and Electric Vehicles sectors; and In the design of the Partnership, ensuring that the programme gives due consideration to South Africa’s fiscal challenges.
Building an enabling environment
The JETP benefits from, and will be enabled by, policy reforms that have been implemented in South Africa since COP 26 and which affirm the relevance and focus of the JETP. These include, but are not limited to:
- An updated Climate Change Bill was tabled in Parliament in early 2022. The legislation would create a regulatory framework that enables the development of an effective climate change response and a long-term, just transition to a low-carbon economy and climate-resilient society.
- Similarly draft legislation has been published that proposes significant changes in the regulation of the electricity sector, including to establish an independent transmission operator to enable a competitive electricity market, alongside the restructuring of Eskom.
- The Presidential Climate Commission (PCC) has just concluded a wide consultation process on a Just Transition Framework released on 23 February 2022 which will be finalised and presented to Cabinet. This is supported by the release of a Just Energy Transition discussion document by the Department of Mineral Resources and Energy (DMRE) that gives further substance to South Africa’s approach to a just transition.
- A sixth round of bids for renewables under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is underway, consistent with the country’s Integrated Resource Plan.
- Notably, the raising of the licensing threshold for new generation capacity from 1MW to 100MW has opened the way for the private sector to invest in renewable energy projects, with approximately 4.5 GW of projects currently in development, and for the domestic banking sector to allocate substantial capital to this. The work to eliminate administrative and regulatory inefficiencies in this regard is progressing. The first two 100MW projects had their registration approved in May 2022 and will soon commence construction.
- Positive developments related to green hydrogen are in place, including the development of a Hydrogen Economy Roadmap led by the Department of Science and Innovation. The Industrial Development Corporation, working with KfW, is identifying early-stage project potential, and in the Northern Cape work is underway to develop a port at Boegoebaai that is critical to the development of an export market for green hydrogen.
- South Africa launched a South African Green finance taxonomy in April 2022 that outlines assets, projects, and sectors that are eligible to be defined as “green” in line with international best practice and national priorities. It is a voluntary market tool, with regulatory guidance expected later in 2022 followed by the development of a regulatory instrument from 2023.
- A Sustainability and Climate Change Disclosure Guidance, based on the recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD), was launched by the Johannesburg Stock Exchange 14 June 2022.
- The National Treasury has also indicated that the carbon tax rate will progressively increase every year to reach US$20 per tonne of carbon dioxide equivalent by 2026. In the second phase after 2025, the medium-term to long-term path will include more rapid and aggressive annual increases thereafter, to at least US$30 by 2030, accelerating to higher levels by 2035, 2040 and up to US$120 beyond 2050.
- The DMRE is working to finalise a National Mine Closure Strategy, which will bring policy clarity and provide operational guidance for mine closures.
- A South African Renewable Energy Master Plan is being developed that will outline a roadmap to support the expansion of renewable energy sources and supply chains in the country.
In addition, significant work on the just transition has been undertaken outside of government that the Partnership can draw from, including:
- The Congress of South African Trade Unions’ (COSATU) Just Transition Blueprint, which reflects the active engagement of organised labour in developing policy responses for affected workers;
- The Life After Coal Campaign’s Just Transition Open Agenda, which is one of several inputs that civil society have made on the just transition;
- The sustainability and climate disclosure guidance as well as guidance related to sustainable bonds and transition securities listings issued by Johannesburg Stock Exchange; and
- Work undertaken by organised business such as the National Business Initiative and Business Unity SA, as well as academic and policy research institutions such as Mistra, the CSIR and TIPS, on the trajectory that South Africa could take to meet the lower end of the NDC target range and move towards a net zero pathway.
Taken cumulatively, these developments have placed the just energy transition, in all its elements, at the centre of the national policy agenda and action by stakeholders across society. Likewise, the JETP is being debated widely across South African society and is seen as a potential catalyst to enable key interventions in support of more rapid decarbonisation. Specifically, its potential to support the resolution of South Africa’s electricity supply shortfall, contribute to economic recovery and avenues for sustaining and improving the quality of livelihoods affected by the transition through alternative employment opportunities is well recognised, as is the potential for the Programme to leverage significant new private sector investment.
Following the announcement of the Partnership at COP26, the IPG was set up to coordinate amongst its members and with the government of the Republic of South Africa. It is currently chaired by the United Kingdom and co-ordination takes place between respective capitals as well as amongst their Missions in South Africa. The IPG has worked to ensure a common approach to the Partnership from IPG members, engaged with the DFIs and MDBs that are the key entities involved in the delivery of the JETP and had multiple engagements with the South African government.
In February, President Cyril Ramaphosa appointed Mr Daniel Mminele, a former Deputy Governor of the South African Reserve Bank and Group CEO of Absa, to lead a Presidential Climate Finance Task Team (PCFTT) that is the counterpart for the IPG within South Africa. Mr Mminele has moved swiftly to appoint PCFTT members representing key government departments and state-owned entities, as well as leading experts. The PCFTT reports to an Inter-Ministerial Committee that is chaired by President Ramaphosa. Its mandate is to engage with the IPG with a view to advising Cabinet on the composition, affordability, and alignment of the financing package with the South African regulatory environment; coordinate relevant government departments, development finance institutions, and the private sector; and oversee the development of relevant financing mechanisms and facilities to enable the flow of international climate finance to support South Africa’s just transition in the electricity, electric vehicles and green hydrogen sectors.
Mr Mminele’s appointment has created a platform for ongoing engagement between the Partners on the content and shape of the JETP and on the work necessary to implement it. Frequent discussions between the IPG Chair and Mr Mminele, as well as with the IPG more broadly, are underway and are building both consensus and clarity on the scope and nature of the Partnership.
Support structures: JETP Secretariat
The Partnership’s work is supported by a JETP Secretariat that provides a technical and coordination function to the Partnership, in a neutral and objective manner. The Climate Investment Fund Board has been approached by the IPG and generously agreed to resource and support the work of the Secretariat. All JETP partners have agreed to the appointment of Ms Joanne Yawitch, outgoing Chief Executive Officer of the National Business Initiative in South Africa, as Head of the Secretariat.
The Secretariat conducted a set of engagements in South Africa in early May 2022 to inform its work in supporting the JETP in terms of its scope, structure, and timelines.
These consultations included the PCFTT, the IPG, relevant government focal points and development finance institutions and formally initiated the process to support the development of the JETP-IP. Key issues discussed included:
- Consultations on the nature of the financial offer, including its sources, composition, concessionality, conditionalities and how it could be structured for maximum impact, as well as the ways in which it could be leveraged to bring in additional finance;
- Developing a shared understanding of ambition in relevant priority areas and in relation to South Africa’s NDC range and the investment activities related to this in each of the identified priority areas;
- Consultations on the JETP IP outline and contents, including how the just transition elements should be centrally embedded as a fundamental element of the programme, as well as critical next steps and timelines for its finalisation; and
- The scope, roles and responsibility of the JETP Secretariat, including finalising its Terms of Reference.
The above areas for consideration are based on analytical work that includes:
- Assessment of relevant policies, guidelines and analytical work and the on-going work in the Just Transition area.
- A preliminary review of the investment and policy implications of achieving the most ambitious target possible within South Africa’s updated NDC range through 2030 and beyond, including a preliminary costing and related financing needs of achieving the lower end of the range.
- Mapping the development financiers’ activities and programmes that support the Just Energy Transition, and which are under implementation, preparation, and planned. This includes the following 15 entities: European Commission (EC), IBRD, KfW, GIZ, DEG, AfDB, IFC, AFD, FCDO, BII, EIB, DFC as well as DBSA, IDC and NDB. The analysis addresses both qualitative and quantitative terms, disaggregated by instrument type (grants, concessional loans as defined by the OECD DAC methodology, and non-concessional loans/guarantee). This will provide an insight into the landscape of activities and associated financing by development banks, which will further complement the JET-IP process.
The JETP Secretariat consultations took place at the same time as the second mission of the Accelerating Coal Transition Investment Programme (ACT-IP) funded by the CIF and led by the WBG and the AfDB were in South Africa. The ACT-IP and its programming will be aligned with and supportive of the broader JETP and that it is be developed as an integral element of the broader programme.
Working Group establishment
The JETP will establish five working groups that will be the vehicle through which key technical expertise and experience can be mobilised to inform the development of the JETP-IP. The PCFTT and the IPG have decided to establish a cross-cutting Finance Working Group, an Implementation Working Group, and three working groups addressing the power sector, green hydrogen and the transport sector. Just transition and environmental considerations will be incorporated into each working group.
The terms of reference for the working groups are being developed and will focus on the sequencing of investments relative to the NDC, their contribution to a just transition, and South Africa’s ambitions, priorities, and environmental challenges.
Work is underway by the JETP Secretariat to identify the expertise required for the working groups, including representatives from governments, bilateral and multilateral institutions, and the private sector.
Discussions are underway between the PCFTT and the IPG regarding the nature of funding to be provided through the partnership. The IPG has provided the PCFTT with further detail on the financing instruments that may be offered. This information from the IPG has opened the way for more detailed engagement, including with key DFIs and MDBs. The PCFTT is presently analysing this material together with South Africa’s National Treasury with a view to ensuring that these instruments meet South Africa’s investment needs and fiscal realities.
These discussions are taking place in the context of the JETP’s assessment of the total financing needs for the full period of transition. They are cognisant of the need to consider all forms of finance, including grants, concessional and non-concessional and public and private finance, as well as to ensure that the total package of financing is appropriately structured to support South Africa’s climate ambitions.
In addition, there is considerable interest in the JETP from other potential financiers and donors.
JETP linked initiatives in progress
Importantly, and central to the JETP, South Africa is conducting a countrywide consultation process on the just transition as a core element of its climate response. The JETP will build on existing work relevant to the Partnership, including the financing and architecture that would allow for the just transition to be realised in ways that open up opportunities for affected workers and communities.
The JETP recognizes that there are a number of bilateral and multilateral initiatives at different degrees of readiness that will seek to support South Africa in meeting its short and long-term goals. The Eskom Just Energy Transition Project at Komati is under development and will likely be presented to the World Bank Board for approval before COP27. This project addresses the repowering and repurposing of the Komati Power Station and has a substantial social and just transition component. In addition, project preparation for the Accelerating Coal Transition (ACT) Investment Programme run under the auspices of the CIF is underway. The proposed support involves an indicative allocation of $200-500 million linked to country needs and ambition. This Programme, supported by the IBRD, IFC and the African Development Bank, is to be submitted for approval by October 2022. In addition, work is in progress regarding transmission network strengthening and the private sector pipeline of renewables projects all create the basis for the JETP Investment Plan within an environment that is aligned to and supportive of its aims.
There is also ongoing work related to both green hydrogen and electric vehicles, including a partnership between KfW and South Africa’s Industrial Development Corporation to support potential green hydrogen-related investments and UK support for the development of the Hydrogen Roadmap. In addition, a policy-based operation is already under preparation by AFD and KfW to support South Africa’s priorities.
Focus for the next six months
The Political Declaration determined the JETP’s foundation, its principles and basis for engagement. The declaration emphasizes the long-term nature of the Partnership and ensuring that the financing package supports and meets country needs and catalyses the necessary action.
The Principals are strongly focused on mobilising investment in the short term, within the context of a longer-term plan, and are using the JETP-IP to compile an emerging portfolio in the priority sectors set out in the Political Declaration.
While momentum has built up in relation to the JETP, there is much work to be done both to refine the financing package and to develop the JETP-IP. These two objectives will be the focus of the forthcoming period, with significant work already underway.
Work plan with milestones leading up to COP27
The indicative work plan to December 2022 contains the following priority deliverables and targets:
- Establishment of Working Groups by June 2022
- Draft JETP-IP by July 2022
- Second draft JETP-IP by September 2022
- Final JETP-IP by October 2022
- IPG and PCFTT sign-off by early November 2022
PRESIDENTIAL CLIMATE FINANCE TASK TEAM AND THE INTERNATIONAL PARTNERS GROUP