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This Bold Plan to Kick the World’s Coal Habit Might Actually Work

One hundred miles east of Johannesburg in South Africa, the Komati Power Station is hard to miss, looming above the flat grassland and farming landscapes like an enormous eruption of concrete, brick, and metal.

When the coal-fired power station first spun up its turbines in 1961, it had twice the capacity of any existing power station in South Africa. It has been operational for more than half a century, but as of October 2022, Komati has been retired—the stacks are cold and the coal deliveries have stopped.

Now a different kind of activity is taking place on the site, transforming it into a beacon of clean energy: 150 MW of solar, 70 MW of wind, and 150 MW of storage batteries. The beating of coal-fired swords into sustainable plowshares has become the new narrative for the Mpumalanga province, home to most of South Africa’s coal-fired power stations, including Komati.

To get here, the South African government has had to think outside the box. Phasing out South Africa’s aging coal-fired power station fleet—which supplies 86 percent of the country’s electricity—is expensive and politically risky, and could come at enormous social and economic cost to a nation already struggling with energy security and socioeconomic inequality. In the past, bits and pieces of energy-transition funding have come in from organizations such as the World Bank, which assisted with the Komati repurposing, but for South Africa to truly leave coal behind, something financially bigger and better was needed.

That arrived at the COP26 climate summit in Glasgow, Scotland, in November 2021, in the form of a partnership between South Africa, European countries, and the US. Together, they made a deal to deliver $8.5 billion in loans and grants to help speed up South Africa’s transition to renewables, and to do so in a socially and economically just way.

This agreement was the first of what’s being called Just Energy Transition Partnerships, or JETPs, an attempt to catalyze global finance for emerging economies looking to shift energy reliance away from fossil fuels in a way that doesn’t leave certain people and communities behind.

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Since South Africa’s pioneering deal, Indonesia has signed an agreement worth $20 billion, Vietnam one worth $15.5 billion, and Senegal one worth $2.75 billion. Discussions are taking place for a possible agreement for India. Altogether, around $100 billion is on the table.

There’s significant enthusiasm for JETPs in the climate finance arena, particularly given the stagnancy of global climate finance in general. At COP15 in Copenhagen in 2009, developed countries signed up to a goal of mobilizing $100 billion of climate finance for developing countries per year by 2020. None have met that target, and the agreement lapses in 2025. The hope is that more funding for clear-cut strategies and commitments will lead to quicker moves toward renewables.

South Africa came into the JETP agreement with a reasonably mature plan for a just energy transition, focusing on three sectors: electricity, new energy vehicles, and green hydrogen. Late last year, it fleshed that out with a detailed Just Energy Transition investment plan. Specifically, the plan centers on decommissioning coal plants, providing alternative employment for those working in coal mining, and accelerating the development of renewable energy and the green economy. It is a clearly defined but big task.

South Africa’s coal mining and power sector employs around 200,000 people, many in regions with poor infrastructure and high levels of poverty. So the “just” part of the “just energy transition” is critical, says climate finance expert Malango Mughogho, who is managing director of ZeniZeni Sustainable Finance Limited in South Africa and a member of the United Nations High-Level Expert Group on net-zero emissions commitments.

“People are going to lose their jobs. Industries do need to shift so, on a net basis, the average person living there needs to not be worse off from before,” she says. This is why the project focuses not only on the energy plants themselves, but also on reskilling, retraining, and redeployment of coal workers.

In a country where coal is also a major export, there are economic and political sensitivities around transitioning to renewables, and that poses a challenge in terms of how the project is framed. “Given the high unemployment rate in South Africa as well … you cannot sell it as a climate change intervention,” says Deborah Ramalope, head of climate policy analysis at the policy institute Climate Analytics in Berlin. “You really need to sell it as a socioeconomic intervention.”

That would be a hard sell if the only investment coming in were $8.5 billion—an amount far below what’s needed to completely overhaul a country’s energy sector. But JETPs aren’t intended to completely or even substantially bankroll these transitions. The idea is that this initial financial boost signals to private financiers both within and outside South Africa that things are changing.

Using public finance to leverage private investment is a common and often successful practice, Mughogho says. The challenge is to make the investment prospects as attractive as possible. “Typically private finance will move away from something if they consider it to be too risky and they’re not getting the return that they need,” she says. “So as long as those risks have been clearly identified and then managed in some way, then the private sector should come through.” This is good news, as South Africa has forecast it will need nearly $100 billion to fully realize the just transition away from coal and toward clean vehicles and green hydrogen as outlined in its plan.

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Will all of that investment arrive? It’s such early days with the South African JETP that there’s not yet any concrete indication of whether the approach will work.

But the simple fact that such high-profile, high-dollar agreements are being signed around just transitions is cause for hope, says Haley St. Dennis, head of just transitions at the Institute for Human Rights and Business in Salt Lake City, Utah. “What we have seen so far, particularly from South Africa, which is the furthest along, is very promising,” she says. These projects demonstrate exactly the sort of international cooperation needed for successful climate action, St. Dennis adds.

The agreements aren’t perfect. For example, they may not rule out oil and gas as bridging fuels between coal and renewables, says St. Dennis. “The rub is that, especially for many of the JETP countries—which are heavily coal-dependent, low- and middle-income economies—decarbonization can’t come at any cost,” she says. “That especially means that it can’t threaten what is often already tenuous energy security and energy access for their people, and that's where oil and gas comes in in a big way.”

Ramalope says they also don’t go far enough. “I think the weakness of JETPs is that they’re not encouraging 1.5 [degrees] Celsius,” she says, referring to the limit on global warming set as a target by the Paris Agreement in 2015. In Senegal, which is not coal-dependent, the partnership agreement is to achieve 40 percent renewables in Senegal’s electricity mix. But Ramalope says analysis suggests the country could achieve double this amount. “I think that’s a missed opportunity.”

Another concern is that these emerging economies could be simply trapping themselves in more debt with these agreements. While there’s not much detail about the relative proportions of grants and loans in South Africa’s agreement, St. Dennis says most of the funding is concessional, or low-interest loans. “Why add more debt when the intention is to dramatically catalyze decarbonization in a very short timescale?” she asks. Grants themselves are estimated to be a very small component of the overall funding—around 5 percent.

But provided they generate the funding needed to bring emissions down as desired, the view of JETPs is largely positive, says Sierd Hadley, an economist with the Overseas Development Institute in London. For Hadley, the concern is whether JETPs can be sustained once the novelty has worn off, and once they aren’t being featured as part of a COP or G20 leadup. But he notes that the fact that the international community has managed to deliver at least four of the five JETP deals so far—with India yet to be locked in—shows there is pressure to make good on the promises.

“On the whole, the fact that there has been a plan, and that that plan is broadly in progress, suggests that on balance this has been fairly successful,” he says. “It’s a very significant moment for climate finance.”

Updated 8-23-2023 10:00 am BST: The location of the Komati Power Station relative to Johannesburg was corrected.

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