Why climate action needs climate finance

The Just Energy Transition Partnership (JETP) was one of the major announcements that emerged from COP26. This is a partnership between France, Germany, United Kingdom, United States and the European Union with South Africa. It is a multi-billion dollar venture that aims to facilitate a just energy transition. Overall it forms part of the broader concept of climate finance. 

So what is Climate Finance:

Climate finance according to the United Nations Framework Convention on Climate Change (UNFCCC), is local, national or transnational financing. This financing is to support mitigation and adaptation actions that will address climate change. The financing might come from public, private and alternative sources of financing. The UNFCCC, the Kyoto Protocol and the Paris Agreement call on wealthy countries to assist those that are more vulnerable. 

Recently a Civil Society Town Hall on Climate Finance and Just Energy Transition Partnership, was held. Neoka Naidoo, an independent climate specialist, raised the point that lots of money is being spent on climate finance. Naidoo said the question then arises around where the money is going. 

What is the financial mechanism? 

As part of the climate finance work, there are financial mechanisms to regulate and control the financing. To facilitate the provision of climate finance, the UNFCCC established a financial mechanism to provide financial resources to developing countries. This is a mechanism that serves the Kyoto Protocol and the Paris Agreement. There are two main mechanisms: the Global Environment Facility(GEF) and the Green Climate Fund (GCF). The GEF and GCF serve as the operating entity of the financial mechanism. The mechanisms are accountable to the Conference of the Parties or COP. The COP decides its policies, programme priorities and eligibility criteria for funding. 

The longer term process is aimed at scaling up climate finance of resources originating from a wide variety of sources, public and private, bilateral and multilateral. Reportedly the majority of international public climate finance is provided upfront before a project is operational. In September 2022, the World Bank Group announced it had delivered $31.7 billion as part of climate finance. 


South Africa’s increasing water stress requires urgent informed actions

What is the South African context – JETP as an example of climate financing 

Within the South African context at the moment, the JETP Investment Plan (JETP-IP) is the major climate finance talking point. The plan aims to mobilise the initial commitment of $8.5 billion for the first phase of financing from the JETP. The JETP aimed to mobilise this through various mechanisms including grants, concessional loans and investments and risk sharing instruments. It is an investment plan centred around decarbonisation with a particular focus on electricity. Its other priority sectors include green hydrogen and electric vehicles. It aims to support South Africa’s efforts to phase-down its reliance on fossil fuels for energy through a just transition. South Africa is the thirteenth largest greenhouse gas emitter in the world. The country relies on coal for 70 percent of its total energy supply.

President Cyril Ramaphosa said at the time: “We look forward to a long term partnership that can serve as an appropriate model of support for climate action from developed to developing countries, recognising the importance of a just transition to a low carbon, climate resilient society that promotes employment and livelihoods.”

Questions around the JETP

Hlengiwe Radebe, project officer at the World Wildlife Fund said at the townhall, the question is what is in the plan. Many civil society organisations have raised questions about the accountability and transparency of the process. In October, the cabinet endorsed the JET-IP, which could help unlock the climate-change financing. The JETP-IP is supposed to be presented at COP27 which is happening in Egypt in November. However, the public of South Africa have not been privy to the details of the climate finance deal. The environment minister announced the plan would be available for public comment after COP27. 

Matthew Grant from the South African Federation of Trade Unions said during the townhall that he believes the JETP is a small part of the bigger crisis. Grant said the JETP is going to create more exploitation because it’s going to be on their terms meaning the five countries who will be providing the loan/investment. 


COP26: Africa’s challenges must steer the climate change conference

Why is climate financing important? 

During the townhall, the various speakers and organisations raised a major concern around the lack of civil society participation. Melissa Fourie, a Presidential Climate Commissioner (PCC) and the Centre for Environmental Rights executive director said lots of sectors are eyeing the financing without consideration. Fourie raised the issue that there is a need to track the flows of money from the JETP as there is no guarantee it will go where it needs to go. 

Cleo Shezi from the Climate Justice Coalition said that the wealthy, developed countries need to know “We don’t owe them. They owe us”. Shezi said there has also been no clarification from Eskom about what will be happening on the ground during the preparation of the plans. There is a need for assurances about how the money will be paid back and what the government will do in order to get this process right. 

The just energy transition is an important and urgent process that needs to happen. Climate finance is meant to facilitate the process. However, as Fourie raised during the townhall, there is no clarity around whether progress is being made and who decides what is progress.  

Writing in the Mail and Guardian, Fourie and Wandisa Phama said: “Whatever form it takes, if the South Africa JETP fails to deliver, it would not only be a major blow for South Africa’s own decarbonisation and climate justice, but also demonstrate that the fanfare about this deal by historical emitters of the Global North at COP26 was all smoke and mirrors.” 

Featured image via the LSE