South Africa's JETP energy initiative is make or break for development

In 2021, South Africa’s Just Energy Transitions Partnership, known as JETP, launched at the United Nations Climate Change Conference in Glasgow, promising to provide financing for South Africa’s transition to a lower carbon energy sector. The pioneering plan has been viewed as a model for an approach that could work globally to reduce emissions by decommissioning coal-fired power stations in favor of renewables. Coal’s status as the dirtiest fossil fuel, accounting for about 40% of all greenhouse gas emissions, means that its use must fall dramatically for the world to stay within the recommended 1.5 degrees of warming. But coal also powers a third of the world’s electricity. While it was a major driver of the industrial revolution in the global north, it is now mainly used in economies that are still industrializing, particularly China. South Africa’s JETP is a key test in the international development world because of its emphasis on a “just” transition to a low carbon economy — in particular, through protecting livelihoods. South African President Cyril Ramaphosa’s Presidential Climate Commission adopted the Just Transition Framework in May 2022, which established the principles of distributive justice, restorative justice, and procedural justice in JETP. These cover issues like reskilling, social welfare, addressing historical damages, and supporting workers, communities, and small businesses through the transition. “This is a grand case study in combining a climate action with a potentially very fundamental shift in the economic development pathway of South Africa,” said Richard Calland, associate professor at the University of Cape Town’s Department of Public Law. “It's bringing together development and climate in a very significant way.” What is JETP? Though classed by the World Bank as an upper-middle-income country, South African society has high levels of inequality, with many unemployed or living in poverty. The country is also gripped by an energy crisis, with frequent power outages. Eksom, the state energy company, has been mired in various scandals, which are said to have contributed to the lack of electricity. “What we’ve inherited through apartheid colonialism was a development trajectory that was not sustainable,” said Muzi Maziya, special adviser to Refilwe Maria Mtshweni-Tsipane, premier of Mpumalanga province, South Africa’s main coal region. Apartheid affected the local energy sector, he explained, because government efforts were focused on delivering services to a white minority, rather than providing jobs for everyone, which resulted in an energy intensive “concentrated heavy industry” that was focused on exports. “So not inclusive development,” he added. Despite a lack of reliable electricity, South Africa is the highest carbon emitter in Africa and is among the 20 countries with the highest greenhouse gas emissions globally, though the continent overall is among the regions that have done least to cause climate change. At the program’s Glasgow launch, the United Kingdom, United States, European Union, France, and Germany — who along with South Africa are known as the International Partners Group — announced an $8.5 billion finance package for JETP to last for up to five years. The package is a mix of grants, concessional loans, and investments, with the aim of attracting more private money to help transition from coal power to more sustainable energy. Simultaneously, it’s hoped that the project will improve the economy by prioritizing the electricity sector, electric cars, and green hydrogen, a low-carbon fuel. “Development is not for countries, it is for people. … It’s ultimately about building economies in which people are well taken care of.” --— Sekoetlane Phamodi, director, New Economy Campaigns Hub To help get finance flowing, Ramaphosa launched the Presidential Climate Finance Task Team in February 2022, and the Just Energy Transition Investment Plan, JET-IP, was endorsed in October 2022, outlining South Africa’s spending plans and finance needs for the transition — around $98 billion over five years — while safeguarding jobs and communities. The government has also announced a range of energy sector reforms — though these must navigate a challenging landscape against a range of vested interests, such as coal companies. Further complicating matters, experts told Devex there is widespread suspicion in South Africa of initiatives led by the state or global north. The World Bank, which is supporting aspects of the JETP, is also mistrusted by trade unions, according to Maziya. President Ramaphosa’s authority is said to have helped progress the JETP so far, but next year’s elections mean the country is entering a “period of great uncertainty” which could jeopardize the project if he loses, according to Calland. Coal communities The coal industry employs around 200,000 South Africans, according to the Center for Strategic and International Studies. “Each of those people … are supporting between five and ten people, not just in their own households but also … [through] remittances … never mind the informal economies that are built around the coal value chain,” said Sekoetlane Phamodi, head of NGO the New Economy Campaigns Hub. “So, the end of coal … literally means death for people.” The aspiration should be to ensure “communities don't get abandoned in the name of progress,” said Calland. He contrasted JETP’s aims to the U.K.’s “brutal” transition away from coal in the 1980s under Prime Minister Margaret Thatcher, which polarized the country and isolated coal-dependent communities. Still, he said, South Africa needs to transition out of coal because of the risk of the industry’s facilities becoming “stranded assets” amid a global market rapidly shifting toward renewables. Phamodi said JETP represents a “really great opportunity” for economic and social transformation, using the “green economy as a catalyst for the distribution of social [and] economic benefits.” But they expressed concern that “it’s not going in quite in that direction” and more work will be needed to ensure those social benefits are realized. Other civil society groups have raised concerns about alleged shortcomings in JET-IP, particularly around community engagement. Success in JETP could also reduce the economic sting of the European Union’s Carbon Border Adjustment Mechanism, which could penalize South Africa’s carbon-intensive industrial exports. “We really need the JETP to work, to green our steel production, to green our industrial capabilities so that we are not as adversely impacted as we stand to be in the mid-long term,” said Phamodi. The government’s role Mpumalanga province is known as South Africa’s coal capital and is home to 11 of South Africa’s 14 coal-fired power stations. But rather than an economic threat, Maziya sees JETP as a “massive opportunity” to battle the area’s high unemployment and coal-fueled health problems. The province’s plan for replacing coal is to lean into agriculture, tourism, and renewable energy — for which some younger coal workers could be reskilled, while others closer to retirement would have to rely on social security. The provincial government has set about creating new institutional frameworks to support the transition, holding a forum to bring together businesses, unions, community groups, and academics to get their input. One potential plan supported by Mtshweni-Tsipane and the governing African National Congress is a special economic zone dedicated to renewable energy in Mpumalanga, said Maziya. Production, supply, and distribution would all happen in this zone “so the people of the province benefit from entire value chain of renewables,” he explained As in the United Nations climate negotiations at the highest level, one thing remains clear: the need for finance to support the transition is as strong as ever. “South Africa doesn’t have the money to address all the needs … there’s an estimate that says by 2050 to address our commitments, we need some trillions of rands,” said Maziya. Next steps While South Africa was the first JETP, it is not intended to be the last. And despite the country’s unique social and political context, it’s seen as a model for other JETPs slated for Vietnam and Indonesia. Calland described South Africa’s JETP as a “really important case study for this form of climate finance packaging.” If successful, it could show donors how to create “reasonably attractive packages of climate finance, which then can work with private capital in key countries to pull this lever of transition,” he said. While JETP is far from complete — many experts believe it is a decades-long process — Calland insisted that “we’re making progress.” But JETP also presents financial risks to South Africa, especially given only a small amount of the funding is in grant form. Daniel Mminele, former head of the Presidential Climate Finance Task Team, told Devex last year: “We make sure that in trying to solve one problem around climate risk and climate change, we don't inadvertently cause another one by loading up on climate-related debt.” Global indebtedness is worsening and preventing governments from properly spending on public services. Last year, Climate Home reported only 3% of the International Partner Group funding would be in grant form. And the social and political risks present in South Africa are present in many other countries; Kate Hughes, senior climate change specialist at the Asian Development Bank, pointed out. Last year, ADB launched its Just Transition Support Platform to help transitioning countries navigate these challenges. But barriers to JETPs can also come from the top. India — one of the world’s largest coal producers — has ruled out a JETP for now because the government is wary of committing to a timeline for phasing out the fuel. Phamodi warned that while governments eye greener economic growth through JETPs, it’s important to keep in mind who the program is meant to serve. “Development is not for countries, it is for people,” they said. “It’s ultimately about building economies in which people are well taken care of.”