The news on Friday that South Africa has managed to secure its first climate financing ahead of COP26 shows the country is assertive as it looks for further financial support.
The initial funding, announced by South Africa’s environment minister Barbara Creecy at a press briefing in Cape Town on Friday, is likely to be the first in a series to help South Africa clean up its power generation. Climate finance will be a key point at the negotiating table at this year’s climate talks, COP26 in Glasgow. Developing countries such as South Africa will look for more financial support from developed nations to ensure a just transition.
South Africa is set to receive a share of climate finance of up to $500 million from the Climate Investment Funds (CIF), a global fund that helps countries reduce their reliance on coal, Creecy said. This money will be used to develop more renewable sources including green fuel. The exact amount given to South Africa will depend on the type of investment plan that South Africa develops. The funding included a $1 million grant to draft the plan.
Recent emission statistics show that South Africa is now the 8th-largest emitter per capita of greenhouse gases in the world, with an economy that is almost entirely dependent on coal for power. South Africa’s coal dependance, however, presents a major opportunity to move away from burning coal to a green economy where the bulk of its electricity is generated using clean energy technologies.
It’s a start but still a drop in the ocean. Analysts estimate that South Africa requires at least $27 billion for its energy transition. Creecy says the country is realistic that donors won’t be floating around Glasgow with cheque books at the ready.
Instead, she said it is an opportunity to meet many people in a short space of time. Following COP26, there may be opportunities for new deals.
“We are looking for any countries or institutions that want to partner with us,” said Creecy. The funds are needed for South Africa to expand its energy mix to cleaner energy solutions in a way that allows it to attract quality investment in the clean energy sector.
Eskom, South Africa’s struggling power utility, is also in desperate need of recapitalisation, and green energy funding could provide the necessary cash injection while ensuring it evolves into the needed green power utility of the future.
It is this opportunity that has international donors sniffing around South Africa as a country with huge development potential. But with green development certain fossil-fuel industries, such as South Africa’s bread-and-butter coal mining industry, will decline and job losses are one of the main concerns.
A just transition
Creecy is the first to point out that no vulnerable worker will get left behind, and will be included in new clean energy industries. This is the crux of South Africa’s attempts at a just transition – and it will cost money.
Yet climate finance is a sticky point and will be one of the most hotly debated issues at the talks. It was a big reason talks broke down at COP25. Creecy said financing from developed countries to developing nations will be the “make or break” issue for COP26, and developing countries will have to negotiate “hard”.
South Africa will join others in Africa to determine a “common definition of climate finance” and to ensure that countries’ emissions are measured fairly to a universal globally accepted standard. Creecy said developing countries needed “realistic, predictable and ambitious support” to green their economies and meet their climate change obligations. The support should be balanced between:
- helping to prevent runaway climate change (mitigation), and
- adapting to climate change (adaptation).
The CIF invited South Africa along with three other countries, including India and Indonesia, to participate in the Accelerating Coal Transition Investment Programme.
State power utility Eskom takes the lead in the government’s investment plan, but green fuel – with emphasis on green hydrogen – and electric vehicles is also part of the plan. Eskom believes it needs about R400 billion needed to build green generation to replace coal plants, as well as update its transmission and distribution infrastructure.
Creecy acknowledged that more finance is needed in the wake of Eskom’s financial struggles. “What’s on the table at the moment is small,” she said.
Creecy believed though that the initial amount from the CIF’s Clean Technology Fund could leverage additional “blended finance” from development banks.
South Africa would use “informal side meetings” at COP26 to generate further interest for support.
With less than a week until the talks start, the country is off to a promising start.