SA faces climate funding crisis as US exits Just Energy Transition Partnership

US President Donald Trump’s decision to withdraw from the multibillion-rand Just Energy Transition Partnership (JETP) was yesterday described as a major setback by experts.

This after the move left SA facing about a $1.56 billion (about R28 billion) gap in its JETP financing.

The US government had pledged $1.56 billion for the country’s decarbonisation during the Joe Biden presidency.

The JETP investment plan comprised $56 million in grant funds and $1 billion in potential commercial investments by the US International Development Finance Corporation, with no concessional loans offered by America to South Africa.

‘Major setback’

Political economist Dr Sam Koma said Trump’s pulling out of JETP marked “a major setback to South Africa’s aspirations of developing a climate-resilient economy, by ensuring a low carbon economy and cleaner energies”.

“The decision further puts a brake on the government’s drive to facilitate its renewable energy programme,” said Koma.

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These developments, he said, also affected about 24 African countries engaged in the COP26 held in Glasgow in 2021.

“The decision also has implications for workers, especially those in coal mining who were canvassed that coal ‘is the past, renewable energy is the future’ – in terms of acquisition of the necessary capital and investments to move towards cleaner technologies,” he said.

Funding gap

While Trump’s decision to exit JETP did not come as a surprise, Prof Raymond Parsons of the North-West University Business School said it would leave South Africa facing a $1.56 billion gap in its JETP financing.

“This funding either needs to be found elsewhere or SA’s climate change programme will need to be reprioritised,” he said.

“Fortunately, the other foreign contributors like the UK, France and the [European Union], remain supportive of assisting countries like SA, Indonesia and Vietnam with climate change through agreed JETPs.

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“The fallout from the US announcement on JETPs is not without remedies.”

He said “a red flag” required SA “to regroup, explore ways to mitigate the effects of the US decision – identifying other possible sources of JETP financing”.

Political analyst Daniel Silke said the US stance would “embolden South African politicians, particularly Mineral and Petroleum Resources Minister Gwede Mantashe, who continue to propound coal as the way to go”.

Silke said SA’s preponderance of coal deposits would “encourage those who are reluctant to speed up a lesser role for coal”.

“It will also embolden those who wish to pursue coal as a key energy source for longer.

Climate change goals

“The problem for South Africa is that we desperately need to move away towards green energy,” he said.

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Africa needed “substantial funding from the West to achieve climate change goals”.

“This kind of action undermines Africa’s ability to mitigate against climate change goals that add exports as a key urgently required,” he said.

“This will also help in giving longevity to fossil fuel industries, given that this kind of funding and the cooperative aspect has been cut.

“This throws a lifeline to coal and that will help those with vested interests in coal in SA and communities reliant on it – not making an earlier transition towards green energy.”

Cosatu national spokesperson Matthew Parks said South Africa should “approach domestic institutions, as funding loans in foreign currencies becomes quite expensive”.

“It is important that we learn as a country to fund our own activities, so that we are not at risk when foreign funding is no longer available.”

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