Recent discussion has emerged around the possibility of South African President Cyril Ramaphosa working to secure what is being referred to as a “just transition transaction” (JTT), which would help provide funding for embattled Eskom and for a just transition away from coal. As reported here and in other venues, there is a lot of uncertainty on the JTT, given a lack of concrete details about what it would look like, and a lack of commitment from the government that they are moving forward with it. From what information is available, the suggested mechanism is for South Africa to pursue an accelerated retirement of coal power plants in exchange for lower cost debt on the financial markets. That lower cost debt would be part of a blended finance facility, which reports suggest would try to raise $11 billion of funding. The funding would be split into two flows: the first to help pay off Eskom’s R460-billion debt, conditional on accelerated decommissioning of the utility’s current coal fleet; the second into a “Just Transition Fund” to help finance programs for a just transition away from coal.
350Africa.org supports the need to move forward with securing funding for a just transition as part of our campaigning for a Green New Eskom – more details available at GreenNewEskom.org. 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, have some questions and concerns about how this will play out.
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.
- The proposal suggests an accelerated retirement of coal. We would like any accelerated timeline to be consistent with South Africa’s fair share of keeping warming to 1.5°C as agreed to under the Paris Climate Agreement. That means that South Africa needs to be moving towards zero emissions by 2050 at the latest – a target also agreed to under the National Planning Commission’s Stakeholder Dialogue on Pathways for a Just Transition. A failure to do so will further drive catastrophic climate change.
Eskom is aiming to reach net zero by 2050. We see this as inadequately ambitious and too slow for a number of reasons. Net zero by 2050 means that by 2050 Eskom aims to be taking more greenhouse gas emissions out of the atmosphere than it is putting in. In some plans, they aim to do this by continuing to burn coal past 2050 and buying carbon offsets to balance out those emissions. This is far too slow.
If the whole country needs to get to zero before 2050 for South Africa’s fair share of keeping warming to 1.5°C, then the electricity sector must transition well before then. Electricity is supposed to be the driver for decarbonising other sectors like transport and industry. It should not be relying on offsets itself to reach zero.
The climate crisis is here and we need to transition as fast as ethically possible. Not continue polluting for another 30 plus years. Any delays condemn us to deepening climate chaos, and more air, soil and water pollution from reliance on coal and fossil fuels.
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 in renewable energy which makes it the cheapest energy on earth. As such, Eskom can and should go as fast if not faster than Orsted. That means reaching 100% renewables well before 2040, rather than after 2050. Young South Africans who will most feel the effects of climate change are calling for 100% by 2030.
Economic analysis shows that by 2030 if not 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.
- 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.
- 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 our position on a just transition, 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.
- Generally, there is a lot of uncertainty around what the JTT or any just transition policy 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 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. The NPC Just Transition Dialogue played this role to a certain extent, but unlike the NPC, the JTT is so far being pursued in a non-inclusive manner. 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, 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.
- 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. Additionally, while $11 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.
- 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 profiteeringl 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) 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. 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.