A just transition transaction (JTT) is a form of climate finance, in that it accelerates the phase-out of coal-fired power. This in itself reduces emissions, and it also creates space for renewable energy – with wind and solar PV already being competitive in SA. This shift our thinking of international climate finance from investing in ‘green’ technologies to supporting the transition away from coal. The JTT is thus understood as `transition finance, bridging the gap between pressure to divest from coal and rise of green finance.
The JTT can thus reshape our thinking of what we mean by international climate finance. These concepts and more were presented and debated in a highly successful second national workshop on 9 June 2020. The workshop was co-hosted with National Business Initiative (NBI), which is a is a voluntary coalition of companies, working towards sustainable growth and development in South Africa. Due to the COVID-19 crisis, the workshop was held online. And the challenges of COVID-19 and increasing levels of debt were part of the vibrant discussion among 91 participants.
After a welcome from Steve Nicholls of NBI, Prof Harald Winkler and Samantha Keen from the UCT team kicked off the workshop case study of a just transition transaction. There is much public debate on the large “Eskom debt”. Yet it is often not clear what is meant by debt. The UCT team distinguished two parts: 1) the additional costs of decommissioning coal, and 2) funding other means of repaying loans. The JTT funds the part 1, enabling Eskom to take up debt. It does not address the ‘legacy debt’ in existing coal-fired power stations. A respondent from Eskom agreed that the JTT is helpful, but does not address all financial problems. A respondent from Meridian Economics, who have been developing the transaction itself, concurred – yet pointed to the benefits from the JTT for Eskom’s overall financial position.
Dr Andrew Marquard moderated the discussion, introducing with four guiding questions:
Participants included change agents from the National Treasury, development finance and retail and investment banks, the national banking association, National Business Initiative staff and UCT researchers. All remarks were made in individual capacities to enable open debate.
The open discussion among participants included not only the problems of debt, but also opportunities created by a Just Transition. The JTT would provide a predictable source of income to a JT Fund. Participants tended to agree that other means would be required to refinance existing debt and debt servicing costs.
Participants discussed potential for development projects in Mpumalanga as part of a shift from coal-based economies to renewable energy and other industries, yet to be identified. They shared concerns about how to ensure that jobs are created in this, the most affected province. The need for bottom-up development as an element of justice and procedural equity was echoed by several participants. This would include the involvement of affected workers and communities to drive bottom-up motivated regional economic development. The discussion raised questions about the role of coal and other mining sectors; how the JTT might interact with Eskom's repurposing plans for decommissioned stations and potential participation of the coal and other mining sectors in a transition process.
Many other points were raised in discussion.
Concluding the online workshop, creative use was made of zoom polling and sli.do to get ideas what research on climate finance might be useful to change agents in SA. Some results of the poll are shown in Figure 2, with the participants being able to choose more than one option.
The case study and workshop are important parts of work in South Africa, as part of an international research project SNAPFI (“Strengthen national climate policy implementation: Comparative empirical learning & creating linkage to climate finance”), supported by IKI.
Interested readers can find a copy of the presentation shown at the workshop ADD URL. The case study will be published, as one of the first set of country reports and will be available on the SNAPFI project web-site under Documents and Publications.