As the world moves towards a just transition to clean energy and away from fossil fuels, including coal, which are the main contributors to global warming, financing this evolution remains a challenge.

Yet developing countries, who are more vulnerable to the devastating impacts of climate change, continue to bear the burden of global warming they have least contributed to, and largely caused by the biggest emitters from fossil fuel-producing wealthy nations.

Last week, Africa’s journey to a just energy transition was jolted further when climate change-sceptic US President Donald Trump continued with his spate of funding cuts in his second term when he pulled the US out of the Just Energy Transition Partnership (JETP) involving Indonesia, South Africa and Vietnam.

Trump’s right-wing administration has already given notice that it will leave the Paris Agreement, which aims to limit global warming to below 1.5 degrees Celsius, rescinded pledges of US$4 billion to the Green Climate Fund, and given up the US seat on the Loss and Damage Fund board.

By quitting the JETP initiative it helped launch to support developing countries in their shift away from coal to clean energy, the US ended its contribution to the US$45 billion in climate finance to back their efforts.

The JETP initiative was launched amid pomp, with South Arica signing the first deal with the International Partners Group (IPG), which included the European Union, France, Germany, the UK and the US at the COP26 climate summit in Glasgow, Scotland.

Decarbonisaton plan

Ahead of COP27 in Egypt, in November 2022, South African President Cyril Ramaphosa set out a 200-page investment plan, Just Energy Transition Investment Plan (JETP), urging partners to finance his vision shifting from coal to clean energy.

He pitched to the international community a 1.5 trillion-rand (US$84 billion) plan to kick-start the decarbonisaton of South Africa’s coal-dependent economy over five years, describing it as a blueprint for an economic transition from fossil fuels to renewable energy. This would address the country’s frequent blackouts, unacceptable levels of poverty and the climate crisis.

The South African government estimated that it lacked financing for US$39 billion – around 44 per cent of its investment needs – as it worked to mobilise more funding from other country partners, the private sector and philanthropies.

Ramaphosa had said that the US$8.5 billion coal-to-clean package wealthy nations agreed to spend in support of the transition would play an “important catalytic role” but was not sufficient to meet the scale of the objective. Now the US withdrawal of funding to the IPG has raised questions on financing South Africa’s just transition to clean energy.

South Africa’s Hendrina power station is among the coal plants expected to close under the country’s JETP as the world portends a bleak future for coal in the just transition to clean energy.

Aware of these concerns, the Global Coal Forum in July 2022 emerged with eight themes as it explored the pace and scale of disruption to coal markets. Coal investors face a multi-layered and unavoidable challenge – markets distorted by war, trade constraints and the existential threat of the energy transition.

The forum’s experts dug deep into the geopolitical shifts, the gathering pace of the energy transition and the technologies upon which decarbonisation will rely. They noted that geopolitical factors from big-power confrontation to sanctions, will continue to dominate coal trade policy.

The fractious geopolitics of energy is not going to ease any time soon amid a widening global division on energy transition and supply insecurity driven by the Russia-Ukraine war crisis. Energy insecurity has sped up energy transition in Europe but pushed Asian countries to remain coal-dependent.

The US last week wrote to the three IPG-recipient countries—Indonesia, South Africa and Vietnam – informing them of its decision to withdraw funding as part of the group, a coalition of donor countries and financial institutions providing funds and other technical support to the deal. The withdrawal complicates the IPG’s efforts towards a just transition from fossil fuels to clean energy.

IPG pledged to mobilise an initial US$8.5 billion between 2023 and 2027, a total that increased by several billion dollars as Denmark and the Netherlands joined. In 2022 Indonesia negotiated a JETP deal with the IPG committing US$20 million, including US$10 million from commercial investors, followed by Vietnam with US$15 billion. A fourth JETP was agreed with Senegal, but the US was not part of that from the beginning.

Expressing regret at the US decision, Germany however expressed optimism in JETP’s work in the just transition to clean energy. German Development State Secretary Jochen Flasbarth said his government is convinced the work of the JETPs “can be continued successfully”.

Shared responsibility

The authoritative UK-based Climate Home News last year reported that Germany and the UK disclosed at the COP29 climate summit in Baku, Azerbaijan, last year that they were hesitant to pursue additional JETPs and set out the lessons learned so far.

In its latest edition however, the award-winning independent digital publication reporting on the international politics of the climate crisis said that in his statement on the US withdrawal, Flasbarth said the partnerships have grown, adding that the decision to share responsibility between so many partners is now turning out to be “very helpful”.

He added that while public funding plays an important role in the JETs, the mobilisation of private investment is far more important. The partnership has been working on the “conducive environment and reliable regulations” to stimulate such investment flows.

In South Africa, for example, energy legislation reforms laid the foundation for a market-led boom in renewable energy, Flasbarth noted, meaning that renewables are now mostly cheaper than fossil fuels.

While the IPG plans to move on without the US, environmental group 350.org said the US remains morally bound to deliver on its financial obligations to developing countries, adding that the exit is “deeply concerning” for the future of the planet and communities dealing with escalating climate chaos.

“Big polluters like the US are financially obligated to support climate-vulnerable nations,” Norly Mercado, Asia regional director at 350.org told Climate Home News. 

Mercado said the US exit sets a “dangerous precedent” and signals to the rest of the world that the second-biggest emitter of planet-heating gases will no longer be accountable for its climate obligations.

Mercato added that the JETP withdrawal by the world’s richest country should not serve as an excuse for developing countries to roll back their commitments to phase out coal and urged them to accelerate the adoption of cleaner renewable energy sources.

Joanne Yawitch, the head of South Africa’s Presidential Just Energy Transition Project Management Unit, said their government remains steadfast in its commitment to achieving a just and equitable energy transition. She added that the country will seek alternative funding, while other partners in the IPG remain “firmly committed to supporting South Africa’s Just Energy Transition Investment Plan (JETP).

The US pledge to South Africa included grant funding of $56 million and $1 billion in commercial investments, which the JETP unit said did not amount to a significant reduction from the total investment of $13 billion.