/ 4 October 2021

Ramaphosa’s panel calls for end to coal, but who’ll fund it?

Graphic Tl Calland Climate Twitter
(John McCann/M&G)

If you want to understand the core problem with international climate finance then go to Cape Town. On the edge of the CBD close to the entrance to the Waterfront you can look up and see the ends of two incomplete freeways. They were supposed to create a fly-over across one of the busiest junctions in the city, but whether by engineering incompetence or some other mishap, they were destined never to meet. 

Here’s the metaphor that neatly captures the persistent failure in the supply of international climate finance to meet domestic demand for the resources needed to shift to a different development pathway. 

And, indeed, vice versa: the failure of domestic demand to intersect with the supply curve from global climate finance funds. 

This past week a vital delegation visited South Africa to try and address this problem — high-level envoys from major bilateral donors, such as Germany, France, and the EU, shepherded by the UK, who hold the presidency of the Conference of the Parties (COP) annual climate change conference, which will be held in Glasgow in November. 

Postponed from last year, for obvious reasons, it is no exaggeration to say that COP26 is a crucial meeting for the future of life on Earth. Its primary purpose is to review progress in relation to the commitments made — and since — at the Paris COP in 2015, which produced the Paris Agreement — itself a vital climate change breakthrough since it created legally binding obligations on member states. 

The strength or otherwise of the “nationally determined commitments” that have been made in the years since, and renewed recently by many — although not yet by significant CO2 coal-hooked emitters such as Indonesia and Brazil, as well as Australia — will determine whether the reductions in emissions required by climate science will be made in time to prevent a life-threatening increase in global warming by the end of the century. 

A big part of the geopolitics of climate negotiations and agreements is the climate finance aspect. Going back further, to 2009 and the end of the disastrous Copenhagen COP, world leaders sat around in a dismal huddle and asked what rabbit they could pull from the hat. They sucked their various thumbs and came up with a donor commitment from rich countries of $100-billion a year by 2020. 

This figure, despite the lack of science in its computation — the actual sum required to shift the whole global economy is far larger, closer to $2-trillion — it has become an important symbol of trust, which goes to the heart of the wicked problem that climate change action presents. 

Developing countries and emerging markets, such as South Africa, need to develop their economies. In many cases, they have large, ostensibly “cheap” coal. Regardless, they understandably don’t care to be told to “develop differently to save the planet” by the very countries that caused the problem in the first place. 

Hence, the only way that this Gordian knot can be untied is by ensuring that developed countries foot the lion’s share of the bill for the additional costs of shifting the development trajectory. 

This is what international climate finance is all about. The problem is that like the missing freeways in Cape Town, international supply of climate finance and domestic demand often don’t intersect. 

Partly this is a failure on the part of nation-states to get their ducks in a row to be able to put forward viable and compelling climate finance “asks”. Partly it is a failure of the developed countries, and the myriad climate finance funds such as the Green Climate Fund, to organise their funds and procedures in a way that renders them accessible, and at the scale needed. 

In South Africa, it boils down to coal — and getting out of it as quickly as possible, but with as big a net positive socioeconomic impact as possible. As the world shifts away from fossil fuels, South Africa is dangerously exposed economically. Hence, there is an economic as well as climate reason — a pragmatic as well as a moral reason — for grasping the nettle of what is a strategically urgent task. 

South Africa is, in its own clumsy, circuitous route, moving towards a clearer, better position on the need for an urgent energy transition. 

The Presidential Climate Change Coordinating Commission (P4C) has emerged as a significant, positive player in this regard, far exceeding expectations in terms of its ability to navigate a tough and treacherous political economy and forge a sufficient consensus.

When it was appointed late last year, I was sceptical as to whether such a bloated (25-person) body could be more than a talk shop. But, with admirable sense of purpose and modus operandi, an exemplary open and participative way of going about its business, the P4C has achieved a great deal in a short period of time, under the “dream team” leadership of wily ANC political veteran Valli Moosa, who is the vice-chair, and chief executive Crispian Olver, one of South Africa’s most incisive and effective bureaucrats (and author, such as of the must-read How to Steal a City: The Battle for Nelson Mandela Bay). 

The P4C is seeking to forge a strong social consensus on the energy transition and to create political momentum so as to push opponents into a corner and isolate them. 

The commission is clearly working closely with Eskom chief executive Andre de Ruyter,  who has produced a very clear vision for a “new” Eskom, with a substantive commitment to getting out of coal quickly and moving towards renewable energy. 

This is the nearest thing we have had to a real strategy for South Africa (both energy and economy) for a long time. It is a coherent, potentially game-changing strategy. But it needs the full support of the government, and it needs a substantial injection of international climate finance — around $10-billion. 

The donor envoys would this week have been seeking signs that a consensus has emerged, that the political and policy commitment is there, and that, more than anything, Minister of Mineral Resources and Energy Gwede Mantashe will not be a serious obstacle to progress. 

For a politically viable deal to be done, certain other factors need to be taken care of. First of all, the climate finance package must contend with two other big-ticket items: Eskom’s debt and the energy transition “losers” — coal workers and the communities that depend on them. 

Unless Eskom’s fiscal position can be stabilised, it’s hard to see it making the transition successfully; more likely, De Ruyter’s vision for the future will be stillborn.  

Equally, without costing and then fully pricing in the cost of protecting the livelihoods of coal workers and communities, the chance of getting past the opposition of Mantashe and Deputy President David Mabuza (whose political stronghold is the Mpumalanga region, where many coal mines are), will be diminished greatly. 

A “just” energy transition demands that the “losers” are protected as far as possible, and the P4C has been working hard on unpacking this delicate issue and figuring out how much funding it will take. 

Second, the energy transition has to be a “whole value chain”. In other words, not just moving from coal to renewable energy, but supporting efforts to create industrial development along the way, that creates real jobs. This will help the doubting Thomases  in government to get behind the energy transition if they can be persuaded that there is a potential net gain in terms of jobs and economic opportunity. 

They are highly suspicious of “green economy” financing that appears to only create new markets for European renewable energy companies. In turn, this financing needs to support local black entrepreneurs’ building of a stake in this new renewable energy-based industrial development — they have to be part of the winners of the transition. 

Hence, this climate finance package needs to have a multidimensional character. It is inherently complex — both technically and politically. But where there is will there is a way. 

One hopes that the special envoys stood with their South African cabinet counterparts in Cape Town and looked up — at least metaphorically speaking — at the unfinished freeways and saw what happens if you don’t take enough care and end up failing to make ends meet. 

There is a deal to be done. Perhaps even a big, game-changing one. Now is the time to do it — for South Africa and for the world.