According to media coverage and our discussions with Eskom’s Just Energy Transition office, Eskom plans on trying to secure about $10 billion in international climate finance to accelerate its transition away from coal and decarbonise its energy system. The funding would also help Eskom deal with its unsustainable debt load and to finance a just transition plan. The plan builds on earlier discussions around the possibility of South African President Cyril Ramaphosa working to secure what is being referred to as a “just transition transaction” (JTT).
There is a lot of uncertainty on the Eskom JTT, given a lack of concrete details about what it would look like. As such, it is difficult to support it in its entirety at this stage. 350Africa.org does support the need to move forward with securing funding for a just transition in line with the demands of the Climate Justice Coalition’s campaign for a Green New Eskom – more details available at GreenNewEskom.org.
What will be crucial for this transaction to be successful – to successfully kickstart a transformative just transition – is ambition. The transaction must ensure ambition both in the speed of the transition and the extent that justice is inherent in it. We also welcome an accelerated retirement of coal, particularly if it is coupled with funding to ensure a just transition that protects workers and communities that may be negatively impacted without necessary policies and support for them. Finally, we welcome the need to rescue Eskom from its precarious position, and move it towards a lower-cost, renewable energy future, which will create many more jobs than the current expensive, polluting and unreliable coal-power status quo. However, we have some questions and concerns about the JTT which we raise here.
Questions and concerns
Drawing on the principles and commitments outlined in 350Africa.org’s just transition policy position, we would like to see the following questions and concerns about the proposed transaction addressed if and when the just transition transaction moves forward.
- Speed: In media coverage, Eskom is reported to be aiming for decarbonising in line with a net zero by 2050 target. That is too slow, and is not consistent with South Africa’s fair share of keeping warming to 1.5°C as agreed to under the Paris Climate Agreement. The power sector emits the largest amount of carbon pollution and needs to be the engine of decarbonizing the rest of the economy. As this report by Climate Analytics makes clear, for South Africa to do its fair share of the Paris Climate Agreement target of keeping warming to 1.5°C, then the energy sector must phase out coal by 2033 and be fully decarbonised by 2035-2040. Young South Africans who will most feel the effects of climate change are calling for 100% by 2030.
Eskom has mentioned in meetings that they are modelling more ambitious pathways as part of their attempts to secure the JTT. We implore them to set a pathway in line with needed climate ambition. Looking at other state-owned utilities, we see that a much faster transition is possible. Consider the Danish state-owned utility Orsted. Similar to Eskom now, back in 2006 Orsted was over 80% reliant on fossil fuels for energy. However, thanks to visionary leadership by 2019, already over 90% of their energy generation was renewable energy. They’re aiming for 99% by 2025. Impressively, Orsted made their transition before the stunning drops the cost of in renewable energy which now makes it the cheapest energy on earth. As such, Eskom can and should go even faster than Orsted did.
Meeting such targets will not only be good for the climate, but also our economy. Economic analysis shows that by 2030 if not well before, constructing and operating new wind or solar will be cheaper than continuing to operate coal plants. As such, rather than subsidizing uneconomic coal, shutting down coal plants early would save lives and money. Money which we can invest in a just transition for coal workers, or in areas like education or healthcare.
- More socially owned renewables rather than wide scale privatisation: We recognise the need to put in place significant reforms and restructuring in the energy sector to address the current deep mismanagement and problematic practices within Eskom and government, which have led us into a broken, dysfunctional, mismanaged, polluting, climate destabilising, and unreliable power utility. We are encouraged by some progress in this regard, but also worry that some of the reforms are putting us on a path to widespread privatisation. The recent decision to lift the licensing requirement for new energy to 100MW’s could well start that wide-scale privatisation process if not carefully managed with appropriate policies to build a more socially owned energy future.
We are concerned that early discussions of the JTT made the transaction conditional on the unbundling of Eskom, which unions worry is leading us down the path to privatisation. While the President and Minister of Finance have both claimed that unbundling does not mean privatisation, we do not want to see a just transition used as a backdoor to wide-scale privatisation of the energy sector. Consistent with the Green New Eskom campaign demands, we believe we should strive towards a more socially owned renewable energy sector and avoid the wide-scale privatisation of energy. Within this we see an important role for Small-Scale Embedded Generation (SSEG) to allow South African citizens, communities, and businesses to be part of building and owning a renewable energy future.
- Transparency and Inclusivity: Generally, there is a lot of uncertainty around what the JTT would look like, and we need more details and clarity on it. We are calling for more transparency and accountability about plans for a just transition, which have the potential to have a big impact on South Africa’s energy, political and social landscape. We are also concerned about questions of procedural justice. So far, the JTT seems to have been discussed largely between a handful of experts, financial institutions, and government officials. We believe that should the JTT move forward, that there is a need for more robust public consultation and involvement in the development of what the JTT might look like and what constitutes a just transition for South Africa.Moving forward, we call for more inclusion, and some key stakeholders which should be involved (but not the only ones) are mining affected communities, trade unions especially those directly impacted, youth, women, and environmental and climate justice organisations. At the same time, we also believe that voices included in the process should not water down necessary ambition to ensure South Africa meets its fair share of action to keep warming to 1.5°C as outlined in point 1 of our concerns. A transition is not just if it fails to act with needed moral urgency on climate change and condemns future South Africans to climate destabilisation and further air and water pollution.
- A Gas Bridge to Nowhere. We are concerned that the money raised from the JTT will be used to fund Eskom’s proposed new gas power plants rather than a renewable energy future. From presentations that Eskom has given to the Climate Justice Coalition, we see that over the next five years, they plan to build about 4000MW of gas versus about 3000MW of renewables. In line with the Green New Eskom campaign, we argue that rather than locking us into more polluting infrastructure, we should be rapidly rolling out renewable energy and storage, which is our most cost effective means of providing energy. On 18 May 2021, the International Energy Agency (IEA) released a vital report showing the steps the world needs to take to transform its energy in line with the United Nations Paris Climate Agreement’s goal of keeping warming from rising above 1.5°C. The report showed that “for emerging economies heavily dependent on coal power generation… the bulk of their transition will be straight from coal to clean energy” not coal to gas. The reality is that gas, once considered a bridge fuel, is a bridge to nowhere.
- Defunding Polluters We welcome the need to raise funding for a just transition and to secure international climate finance to assist South Africa to ensure a just transition. However, we also believe the state should play a leading role in funding a transformative just transition. That starts with providing no more public funding for new fossil fuel projects, particularly from our public finance institutions, the Development Bank of Southern Africa and the Industrial Development Corporation. Currently the state subsidises coal to the tune of at least R50bn per year – arguably a conservative figure. Instead, as Spain did, we could and should, redirect that funding to a just transition and to helping currently coal-dependent communities and workers transition to renewable energy. We are spending hundreds of billions on infrastructure projects aimed at propping up polluting industries, which we could instead be directing to a renewable energy future. We should be making wealthy and polluting individuals and corporations pay for a just transition, rather than subsidising them.
Additionally, while $10 billion may sound like a lot, we are concerned that only a small portion of this will go to funding a just transition. We believe we need to be raising much larger sums to ensure a truly just and transformative transition to a net zero carbon, renewable energy future, where we use the transition as a means not only to ensure that communities are not negatively impacted, but also as a way to ensure that communities thrive. As per 350Africa.org’s just transition policy position, we believe we should pursue a transformative just transition that goes beyond just ensuring that there are no negative impacts. Our aim should be to aspire to transform the economy in a way that makes it more socially and ecologically just, working for the many and not just the few.
- What Strings Attached? While securing international climate finance can be a helpful way to assist South Africa with financing needs, we are also concerned about what conditionalities might be attached to that finance. We are concerned that the vehicle may be a way that organisations like the IMF and the World Bank might impose austerity conditions on South Africa and work against the interest of the people and planet in favour of the agenda of profiteering banks and multinational corporations. Already, South Africa is locked into what is arguably odious debt with the World Bank deal which left us with the climate-destabilising, polluting, corrupted, and deeply expensive disasters that are the Medupi and Kusile coal-fired power plants. We cannot allow our desire for funding to lock us into conditions that work against the interest of South Africans. Rather funding must be used to the benefit of our people and the planet.
Moving ahead with a transformative just transition
Recognising the need to quickly reduce South Africa’s carbon emissions, to stop the pollution of the air and damage to people’s health, and to provide electricity for development, we welcome the motivation to fund a just transition to renewable energy behind the Just Transition Transaction. Without additional details around the transactions, and with the concerns raised above, we propose that future action towards a just transition takes into account the following additions.
- There is an urgent need to reduce South Africa’s electricity sector’s contribution to climate change by retiring coal-fired power plants as soon as possible. At the very least, this should be done consistently with South Africa’s fair and ambitious share of the Paris Agreement’s aspirational goal of limiting global heating to 1.5°C.
- We understand that there is a role for the private sector. However, a model where a small percentage of the population of South Africa, and foreign multinationals owns, controls and benefits from most of our electricity needs to change. The transaction should encourage, and the government should ensure a clear pathway to a more socially-owned electricity sector. This could involve, for example, ensuring that money generated by the transaction is used to fund initiatives aimed at increasing social ownership of renewable energy, and increasing local employment, entrepreneurship, and training in the sector.
- The process to develop just transition plans should be transparent and inclusive. The people that will be affected most by the change (workers, frontline coal communities, youth) should be consulted and have a chance to voice their opinion on the transaction. As the transaction evolves, these affected people and groups, as well as civil society should be included in the process to gain wide-spread support for the transaction and the changes the transaction seeks to drive.
- We cannot only look at new and foreign money entering the system. As well as closing down coal-fired power stations, just transition plans should also include clear commitments from the state to shift funding from fossil fuels to a transformative just transition. The climate science is clear that as one of the most polluting countries in the world, South Africa must urgently transform its economy if we are to help avert catastrophic climate change. Similarly, justice demands that we transform South Africa, the world’s most unequal country, characterised by deep poverty, unemployment, and multiple injustices.