All studies and reports into how a just energy transition would play out in South Africa suggest that ensuring a fair transition for all will cost billions. But, this cost need not be borne by the country at all suggests a new study.
Published by specialised advisory group Meridian Economics, The Just Transition Transaction: A Developing Country Coal Power Retirement Mechanism is a summary of how a proposed Just Energy Transition Transaction transition finance or coal retirement mechanism could be constructed.
It suggests securing highly concessional finance from rich countries in return for helping to accelerate the world’s decarbonisation is the ticket out of coal dependency.
Released as South Africa heads for COP26, the study argues setting up such a deal would yield both interesting savings and carbon mitigation. Plus, potentially unlocking investment to move the country into using more renewable energy even faster.
The study suggests a transaction that uses concessional debt backed by a consortium of developed country governments, provided to the South Africa government.
Meridiam Economics’ figures of existing foreign debt of around R400bn and a further $12-13bn in South African USD-denominated government bonds (SOAF) maturing between now and 2030, suggest space to accommodate such a transition load within existing planned debt exposure, even if raised in dollars.
The loan would be repaid by South Africa with a mixture of carbon mitigation performance and cash. The study suggests therefore the extent of the financial concession is dependent on the extent to which South Africa achieves its agreed decarbonisation ambition.
A consortium of developed country governments could underwrite the financial value of South Africa’s carbon mitigation performance (to the extent that it is achieved) as part of their climate finance commitment under Article 9 of the Paris Agreement. And, this transaction could be facilitated by an international financial institution, such as the Climate Investment Funds (CIF).
Additional papers and resources elaborating relevant aspects of the transaction are spelled out and referenced on the Meridian website, as well as The Just Transition Transaction: A Developing Country Coal Power Retirement Mechanism study.