/ 8 November 2022

COP27: SA receives an extra $10-bn to shift from fossil fuels

Planned Fossil Fuel Output Swamps Paris Climate Goals
South Africa is one of the winners at COP27 — the International Partner Group (IPG) of five nations pledged an extra $10-billion to support the country’s transition investment plan from fossil fuels. (Kevin Frayer/Getty Images)

South Africa is one of the winners at COP27 — the International Partner Group (IPG) of five nations pledged an extra $10-billion to support the country’s transition investment plan from fossil fuels  — but it will be costly.

This was announced by President Cyril Ramaphosa, who was speaking at a virtual press briefing at COP27 in Egypt on Tuesday.

South Africa, which is the world’s 13th-biggest source of greenhouse gases, with almost half of its emissions coming from coal-fired electricity generation, is being supported by IPG partners France, Germany, United Kingdom, United States and European Union to move away from its reliance on coal.

Ramaphosa said the $8.5-billion the IPG pledged last year comes in the form of loans and grants. “The grant component was quite low, at 2.7%. The rest [98%] comprised concessional loans and loans from commercial institutions,” he said.

He added that South Africa told the partners the country required R1.5-trillion. “We need to restructure the Glasgow negotiations and have more grants as already we can see that our investment plan requires much more money to be properly and fully implemented. 

“We have communicated this to our partners and said, because South Africa carries a sizable loan burden, which it has to service from its fiscus, we require more grant funding.” 

Despite the indorsement, Ramaphosa called on the partners to honour their pledges because their failure to do so after COP26 in Glasgow and COP21 in Paris had created lack of trust between developing and developed countries.

He also called on lending partners such as development banks and the World Bank to reform their policies so that developing countries could pay back their loans.

“Because failing to honour these commitments breaks trust and confidence in the process. International funding institutions needed to transform for the plans to move forward at present, multilateral support is out of reach of the majority of the world’s population due to landing policies that are risk-averse and carry onerous costs,” he said.

Several countries are doubling down on their plans to push for more finance to enable them to respond to climate change effects without worsening their debt.

Last week, during a virtual presidential climate briefing, Ramaphosa said the $8.5-billion pledged by the IPG at COP26 last year was not enough for South Africa. He reiterated calls for developed nations to honour their commitments of financial support to developing economies to respond to the climate crisis.

“The country will require about R1.5-trillion over next five years to meet targets in transitioning from coal to renewable energy,” he said at a meeting of the Presidential Climate Commission, citing the country’s climate investment plan.

On Tuesday, he added that although the partners had endorsed the country’s investment plan, it risked pushing the country into more debt, which is already about R4.7-trillion.

SA ahead in renewables

Ramaphosa said South Africa is scaling up investment in renewable energy and is on course to retire a number of ageing coal-fired power stations.

In his weekly newsletter, the president said the move from fossil fuels to greener, cleaner energy sources cannot take place at the expense of economic growth and job creation.

“A transition to a low-carbon, climate change-resilient economy should not jeopardise South Africa’s developmental goals,” Ramaphosa said.

He explained the importance of the deal and the just transition more generally. 

“The imperative of a low-carbon transition that is just and inclusive is particularly important for developing economy countries, which are the worst affected by climate change. 

“Although Africa carries the least responsibility for climate change, the continent experiences much of its harshest effects. The same is true for vulnerable countries and communities in other parts of the world, including small island states.”

Extreme weather such as floods and droughts are driving food insecurity, displacing populations, causing damage to infrastructure and leading to the loss of livelihoods.

News24 reported that the $8.5-billion comprises $1-billion each 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 (about R9-billion) with Germany, the UK, and US providing about 65% of the funds, which will support the decommissioning and repurposing of coal power stations, community development and energy efficiency projects in Mpumalanga.