Cabinet approves South Africa’s plan for R156-billion renewable funding from rich nations

South Africa’s cabinet endorsed an investment plan to help the country transition away from the use of coal, a key step in securing $8.5 billion (R156 billion) in climate finance on offer from the world’s richest nations.

The plan envisages the closure and re-purposing of coal-fired power plants owned by Eskom Holdings SOC Ltd., the state power utility, so additional renewable energy can be produced.

It also covers expanding the transmission grid and fostering the development of electric-vehicle and green hydrogen industries.

The endorsement, announced in a statement on Thursday, indicates that opposition to the deal from some government officials, including Gwede Mantashe, the energy minister, has been overcome.

South Africa depends on coal for more than 80% of its power and 90,000 people are employed at coal mines.

The so-called Just Energy Transition Partnership with the US, UK, Germany, France and the European Union is expected to serve as a prototype for similar deals with coal-dependent, developing nations such as Vietnam, Indonesia and India.

The plan “outlines the investments required to achieve the de-carbonisation commitments made by the government of South Africa, while promoting sustainable development and ensuring a just transition for affected workers and communities,” the cabinet said.

“The Inter-Ministerial Committee on Climate Change will soon hold a media briefing to provide more details.”

The finance deal was unveiled at last year’s United Nations-led climate talks in Glasgow and is likely to be finalised at next month’s COP27 summit in Egypt, which is set to focus on the needs of poorer nations adapting to global warming.

A detailed agreement on how the funds will be apportioned is key to securing their release.

South Africa, the world’s 13th-biggest source of greenhouse-gas emissions, has been pushing for cheaper money in the form of grants and low-interest loans, according to people familiar with the talks, who declining to be identified as negotiations were private.

It remains unclear if the funders, who have focused on encouraging the country to shutter coal-fired plants, will agree to subsidise the development of green industries beyond the provisions of small grants for studies.

A draft of the plan suggested that a total of R128 billion ($7 billion) be spent on electric vehicles, with some of that money going on industrial development and innovation programs, according to a person who had sight of it, but asked not to be identified because it hasn’t been made public.

It’s unclear whether that proposal was included in the version approved by the cabinet.

Still the US, which has previously said the deal should be focused on coal, has acknowledged that other industries may be included.

“While the primary focus of the South African JETP has always been on the decarbonisation of the electricity sector, the program has, from its very announcement, included components on supporting the development of a domestic EV and green hydrogen market as well,” the US Treasury said in an emailed statement in response to queries.

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Cabinet approves South Africa’s plan for R156-billion renewable funding from rich nations