Picture: REUTERS – The UN COP 27 summit in Egypt, November 22, was touted a game changer for the fight against climate change. But as we move towards a more integrated system of climate finance, the unfair trade barriers developing nations face, preventing them from national development, industrialisation and fiscal sustainability, remain, the writer says.
By Ashraf Patel
The UN COP 27 summit in Egypt, November 22 was touted a game changer for the fight against climate change. The meeting placed more emphasis on implementation and securing funding than previous meetings.
South Africa, following the launch of its R1.5 trillion (US$100 billion) G7 Just Energy Transition Investment Plan (JET IP), was able to turn the pledges of US$8.5 billion made at COP26 to grant and concessional loan facilities from its development partners. Part of the funds will be disbursed as loans over the next three to five years.
The African Union, the AfDB and Africa50 in partnership with several global partners launched the Alliance for Green Infrastructure in Africa (AGIA), an initiative to help scale and accelerate financing for green infrastructure projects in Africa. Its mission is to raise significant capital to accelerate Africa’s Just Transition (JT) to net zero emissions.
AGIA will raise up to US$500 million to provide early-stage project development capital The Sharm el-Sheikh Implementation Plan cover decision of COP27 highlights that a global transition to a low-carbon economy will require investments of at least US$4-6 trillion per annum. Africa receives less than 5.5 percent of global climate financing.
It is prudent to point out that the language of real reparations has been dropped from the broader narrative of the UN COP27 and replaced instead with terms loss and damage and neo-liberal concepts such as green finance. The other major omission is fair trade.
So, as we move towards a more integrated system of climate finance, the unfair trade barriers developing nations face, preventing them from national development, industrialisation and fiscal sustainability, remain.
While South Africa’s Just Transition Partnership, JET IP, was marketed as the big win, when unpacking the mega billions, likely with austerity conditionalities, it is a mixed bag of commercial loans that are repayable. In the absence of any rural economy and stagnant land reform, several mining towns, and provinces face collapse, deepening inequality, rapid urbanisation and social crisis. Without fiscal resources and a sustainable Just Transition Fund for the JET plan, who will bear the high cost? The high energy tariffs that Eskom periodically files at NERSA is an example of how the need to fund this high-cost structure of the JET plan, will be borne by consumers and residents.
Some of the G7 meeting in June pledges included:
• Climate finance: The G7 committed, for the first time, to doubling the provision of climate finance for adaptation to developing countries by 2025, working together with other countries. They call on multilateral development banks to present plans for aligning their portfolios;
• Decarbonising electricity/coal phase-out: The G7 has made a first-time commitment to the goal of predominantly decarbonised electricity sectors by 2035. Beyond that, they have committed for the first time to phasing out coal-fired power generation.
• Ending international finance for fossil fuels: The G7 commit to ending direct international public finance of the fossil fuel energy sector by the end of 2022. The commitment does allow exceptions in limited circumstances that are consistent with a 1.5 °C warming limit and the goals of the Paris Agreement. The G7 notes the importance of advancement of national security and geostrategic interests in this context.
• Fossil fuel subsidies: The G7 affirm their commitment to ending inefficient fossil fuel subsidies by 2025. To increase transparency, they aim to report on this commitment in 2023 and will consider options for developing joint public inventories of fossil fuel subsidies. The G7 acknowledge for the first time that fossil fuel subsidies are inconsistent with the goals of the Paris Agreement.
However, the G7 climate club has double standards. Just days away from the United Nations climate summit in Egypt, The Guardian highlighted how the US government was pouring billions into African fossil fuel projects while making relatively limited investments in renewables.
Using Oil Change International’s Public Finance for Energy Database, the newspaper found that since the 2015 Paris Agreement, US funding of fossil fuel development in Africa has soared, despite global goals to limit planet-heating emissions. For fiscal years 2016-21, the US spent $13 billion on fossil fuel projects globally, compared with $4 billion on renewable energy and $1 billion on other projects. Two-thirds of fossil fuel spending, or $9 billion, went to projects in Africa. Just $682 million went to renewables there — meaning the US spent 13 times more on polluting projects across the Continent.
Meanwhile Greenpeace research shows that Deutsche Bank has invested €7.8bn in companies that plan to increase extraction of coal, gas and oil. That’s more than three times as much as any of its domestic competitors; and just last week the UK re-opened a new coal mine in Cumbria, UK, to the chagrin of environmental activists. It is thus a myth that the G7 is committed to UN Climate Change agreements.
The G7 JET IP and COP27 outcomes essentially aim to develop green finance markets, that are more about creating green carbon markets rather than addressing the industrialisation pathways of developing nations. For instance, the African insurance plan is based upon creating a scalable, local market-based funding tool to help countries better manage the financial risk of climate shocks and increase the resilience of its more vulnerable communities, the group said in a statement.
International Monetary Fund (IMF) managing director Kristalina Georgieva suggested that countries should use carbon credits to pay off their sovereign debts and instructed governments to “keep pressuring us to find the solution”.
In this regard platforms such as the BRICS group provide for a more sustainable future for developing nations. Firstly, real finance for development and green industrialisation is available without conditionalities of G7 style austerity.
Secondly, unlike the G7 nations whose business model is to enforce or promote expensive renewable energy technologies to the developing South, the BRICS nations offer a model of technology transfer and support. When a critical analysis is completed, we find that far from being a saviour of Africa, the G7 model of Just Energy Transition JET IP is largely a mega monetary austerity package, and should be re-christened as the “Emperor’s New Clothes”.
Ashraf Patel is a digital economy associate at the Institute For Global Dialogue (IGD).