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A Just Transition

Posted by: Leon Nel Date: 29 Aug 2023

South Africa’s journey to Net Zero; a transition where collaboration and support from the world plays a critical role.

On November 21, 2021, as a part of the Conference of Parties (COP) 26 meeting in Glasgow, a ground-breaking International Just Energy Transition Partnership was announced. According to its terms, the US, the UK, France, Germany and the EU agreed to provide South Africa with USD 8.5 billion in grants and concessional loans to support its decarbonisation efforts.

In its Nationally Defined Contributions (NDC) under the Paris Accord (updated in 2021), South Africa has committed to a fixed target for greenhouse gas emissions levels of 398-510 MtCO2e by 2025 and 350-420 MtCO2e by 2030, compared to 398 and 614 Mt CO2e between 2025 and 2030 as communicated in the first NDC.[1]

The Just Energy Transition Partnership is important in this context as South Africa’s journey to Net Zero.

Economic Challenges

South Africa is the second-largest economy in Africa and the 39th-largest in the world. It is a global mining powerhouse – the world’s largest producer of minerals like platinum, chromium, and manganese, the second-largest producer of titanium, the third-largest of vanadium and 11th largest producer of gold. Among its other large mineral productions are iron ore, uranium, cobalt, phosphate and coal. While the share of mining in the GDP has declined as the tertiary sector gained traction, it still contributes to about 60% of the country’s exports.

The Rainbow Nation has been severely impacted by climate change. According to its submissions under the Paris Agreement, since 1990, the national average temperature has increased more than twice that of global temperature increases, which is already resulting in more frequent droughts and extreme weather events.[2] This was dramatically highlighted by the Cape Town water crisis of 2017, when the city almost ran out of water.[3]

Over 80% of South Africa’s power production is dependent on coal. A lot of the generating stations are old. But the crippling power shortages mean that they cannot be shut down to cut emissions unless they are replaced by greener alternatives urgently.

Investment Framework

This is why the funding announcement at COP26 is so vital to the nation and the planet. In the COP27 that followed in Sharm el-Sheikh in Egypt in November 2022, South African President Cyril Ramaphosa launched his government’s Just Energy Transition Investment Plan (JET IP).

The JET IP was prepared by a Presidential Climate Finance Task Team (PCFTT), established by President Ramaphosa in February 2022, which engaged with the International Partners Group (IPG) (the parties providing the funding, namely, the US, the UK, France, Germany and the EU). An independent JETP Secretariat, supported by the World Bank’s Climate Investment Funds (CIF), provided technical and convening capabilities for developing the investment framework.

The JET IP takes into account the unique economic and social challenges inherent in transitioning South Africa’s fossil fuel-dependent economy in a just manner. It supports South Africa in achieving the most ambitious emissions reduction range as stated in the country’s updated Nationally Determined Contribution (NDC) of 420-350 megatonnes of carbon dioxide equivalent (MtCO2-eq) by 2030. It recognises that to be ‘just’, the plan should mitigate the direct and indirect impact that the energy transition has on livelihoods, workers, and communities that a transition will entail.

The JET IP envisages an investment of USD 98.7 billion over a five-year period between 2023-2027. Of this, USD 47.2 is earmarked for the energy sector, USD 8.5 billion for New Energy Vehicle (NEV) Sector, and USD 21.2 billion for Green Hydrogen (GH2), with about USD 21 billion allocated to skills development and enhancing municipal capacities. A bulk (USD 6.9 billion) of the initial USD 8.5 billion funding committed by the IPG, has been allocated to the energy sector.[4]

The break up of the IPG’s initial USD 8.5 billion funding is as follows:

  • USD 2.6 billion through the Climate Investment Funds Accelerating Coal Transition Investment Plan (CIF ACT);
  • USD one billion from France
  • USD one billion from Germany
  • USD 1.8 billion from the UK
  • USD one billion from the US
  • USD one billion from the EU[5]

“Some of this funding is already programmed while other parts of it have still to be finalised and programmed in line with the final Investment Plan.  Work to programme the full $8.5 billion will continue in the coming months. In addition to the $8.5 billion, the World Bank Board has recently approved the Eskom Just Energy Transition project, which is providing $0.5 billion of financing in support of South Africa's Just Energy Transition,” a media release from the EU said in November 2022.[6]

The USD 2.6 billion under the CIF ACT will be used to support the decommissioning and repurposing of three coal power stations, community development and energy efficiency projects in Mpumalanga, South Africa’s coal-rich region. The World Bank's Eskom Just Energy Transition project will provide finance for decommissioning and repurposing of a further coal power station.[7]

While these funding announcements are welcome and would set the tone to attract additional financing to help aid South Africa’s transition to Net Zero, in terms of the support the nation needs, it is just the tip of the iceberg.

According to its updated NDC submission, the government aims to focus in the 2020s primarily on decarbonising the electricity sector. In the 2030s, it aims for a deeper transition in the electricity sector, coupled with a shift in the transport sector towards low-emission vehicles, while the 2040s and beyond will be characterised by the decarbonisation of the hard-to-mitigate sectors.[8]

For this, it needs support in terms of technology, capacity building and about USD 8 billion per year in climate finance by 2030.[9]

Developing Coal-Dependent Regions

What is not clear from these announcements is what kind of support the South African government will get to help regional economies transition away from coal. Take, for example, Mpumalanga. Given coal’s centrality to the economy of the region, the JET IP lays particular focus on its sustainable, long-term regional transition away from coal. This includes

  • Repowering (with clean technologies) and repurposing coal plants;
  • Restoring and repurposing coal mining land, and developing local infrastructure;
  • Promoting economic diversification to support local livelihoods, enterprises, and job creation;
  • Supporting workers to transition out of coal;
  • Investing in training, placements, and career opportunities for youth and workers currently in the coal value chain.

All this, the plan estimates, would require an investment of about USD three billion.[10] Unless this financial support is available, a transition away from coal may have challenges. Besides the political will the challenges have to addressed from an infrastructure as well as people to bring new technologies like hydrogen, solar and others

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[1] https://unfccc.int/sites/default/files/NDC/2022-06/South%20Africa%20updated%20first%20NDC%20September%202021.pdf

[2] https://www4.unfccc.int/sites/submissions/INDC/Published%20Documents/South%20Africa/1/South%20Africa.pdf

[3] https://www.brookings.edu/articles/cape-town-lessons-from-managing-water-scarcity/

[4] https://www.thepresidency.gov.za/content/south-africa%27s-just-energy-transition-investment-plan-jet-ip-2023-2027

[5] https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_6664

[6] ibid

[7] ibid

[8] https://unfccc.int/sites/default/files/NDC/2022-06/South%20Africa%20updated%20first%20NDC%20September%202021.pdf

[9] ibid

[10] https://www.thepresidency.gov.za/content/south-africa%27s-just-energy-transition-investment-plan-jet-ip-2023-2027

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