SANISHA PACKIRISAMY: Green hopes face political realities
Trump’s second term increases the odds of a financial crunch for environmental plans in South Africa and the rest of the world
21 November 2024 - 05:00
bySanisha Packirisamy
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Just 29 years after the first COP, the world teeters on the brink of climate instability. In Baku, Azerbaijan, where oil wealth meets calls for environmental accountability, Donald Trump’s return to the White House casts a long shadow over COP29 negotiations, risking the derailment of climate finance talks.
The potential withdrawal of US financial commitments raises concerns about sustaining momentum for global environmental projects. This threatens ambitious green agendas across emerging markets, including South Africa, and hinders efforts for a just and equitable transition to a cleaner economy.
At COP29, a draft of the new climate finance target, the New Collective Quantified Goal, was unveiled, setting the stage for the next chapter in global climate action. Set to replace the current $100bn annual target when it expires in 2025, this agreement will be vital in securing the funding needed to accelerate global climate initiatives, especially for vulnerable communities. However, with Trump’s criticism of the Paris agreement as a “rip-off” for the US, there are growing concerns that US financial contributions may dwindle. Analysts predict his administration could once again withdraw from the agreement and scale back climate policies, potentially derailing global climate finance efforts.
Picture: 70995775
This uncertainty over US participation raises doubts about whether other nations can bridge the funding gap left by an absent America. For South Africa, already grappling with socioeconomic challenges, the absence of reliable climate finance could spell stagnation or even regression in its climate initiatives.
South Africa’s just energy transition (JET) plan seeks to shift away from coal dependency towards renewable energy, ensuring that communities reliant on fossil fuels aren’t left behind. This ambitious framework requires enormous investment, estimated at R334bn annually to achieve net zero emissions by 2050 and R535bn to meet 2030 nationally determined contributions, according to a report from the presidential climate commission (PCC) in July. But with US climate finance commitments at risk under a Trump administration, securing alternative funding could be a major hurdle.
The JET plan, formally approved by the cabinet in 2023, may face delays if these financial gaps aren’t filled. The plan lays out a road map for transitioning to a low-carbon economy with a strong focus on electricity, municipalities, skills development, new-energy vehicles and green hydrogen, ensuring the process is equitable for all affected communities.
In July, the National Treasury calculated that only $2.1bn of the pledged $11.7bn for the JET plan had been drawn down. Broader environmental initiatives aimed at mitigating climate change impacts — such as water conservation and biodiversity preservation — could also suffer from inadequate financing. If South Africa cannot meet its climate commitments due to lack of funds, it risks falling behind in global efforts to combat climate change.
This threatens ambitious green agendas across emerging markets, including South Africa
Given these challenges, South Africa must adopt a multifaceted approach to safeguard the viability of its environmental projects:
Strengthen domestic financing: Encouraging the issuance of green bonds can boost market depth and liquidity.
Streamline regulatory frameworks: Clear procurement guidelines for public-private partnerships, as proposed by the Treasury, can drive greater private sector engagement.
Enhance regional co-operation: Leveraging partnerships with the Southern African Development Community can mobilise resources, especially in vulnerable sectors such as agriculture and water.
Reduce funding fragmentation: Improving co-ordination across financial mechanisms will help identify gaps and unlock new opportunities.
Increase the bankability of projects: Initiatives such as the 2021 Climate Finance Accelerator can support developers and fast-track finance mobilisation.
Deepen engagement with international climate funds: The PCC notes that the majority of tracked climate finance between 2019 and 2021 came from domestic (private) sources, with only 9% coming from international sources. However, South Africa will need significant international funding to meet its climate goals, as highlighted in the national climate change response white paper.
Additionally, South Africa’s climate finance allocation reveals a worrying trend. The majority of funds are directed towards mitigation rather than adaptation. Specifically, 81% of tracked climate finance from 2019 to 2021 went to mitigation projects, with just 12% allocated to adaptation, according to the PCC. The remainder supported dual-benefit projects. While both elements are crucial for a balanced climate strategy, any disruption in international funding could slow the country’s transition and worsen this imbalance, leading to economic inefficiencies, increased social vulnerability and potential harm to long-term environmental sustainability.
The stakes are high. With effective international co-operation and funding, South Africa can not only meet its climate goals but also set an example in global efforts against climate change. As President Cyril Ramaphosa put it: “Great prospects are ahead if South Africa uses global change to leverage local transition.” The pressure is on: South Africa must seize its commitment and public support to overcome policy barriers and funding gaps, ensuring a just low-carbon transition that reduces poverty and inequality and enhances resilience.
* Packirisamy is chief economist at Momentum Investments Group
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
SANISHA PACKIRISAMY: Green hopes face political realities
Trump’s second term increases the odds of a financial crunch for environmental plans in South Africa and the rest of the world
Just 29 years after the first COP, the world teeters on the brink of climate instability. In Baku, Azerbaijan, where oil wealth meets calls for environmental accountability, Donald Trump’s return to the White House casts a long shadow over COP29 negotiations, risking the derailment of climate finance talks.
The potential withdrawal of US financial commitments raises concerns about sustaining momentum for global environmental projects. This threatens ambitious green agendas across emerging markets, including South Africa, and hinders efforts for a just and equitable transition to a cleaner economy.
At COP29, a draft of the new climate finance target, the New Collective Quantified Goal, was unveiled, setting the stage for the next chapter in global climate action. Set to replace the current $100bn annual target when it expires in 2025, this agreement will be vital in securing the funding needed to accelerate global climate initiatives, especially for vulnerable communities. However, with Trump’s criticism of the Paris agreement as a “rip-off” for the US, there are growing concerns that US financial contributions may dwindle. Analysts predict his administration could once again withdraw from the agreement and scale back climate policies, potentially derailing global climate finance efforts.
This uncertainty over US participation raises doubts about whether other nations can bridge the funding gap left by an absent America. For South Africa, already grappling with socioeconomic challenges, the absence of reliable climate finance could spell stagnation or even regression in its climate initiatives.
South Africa’s just energy transition (JET) plan seeks to shift away from coal dependency towards renewable energy, ensuring that communities reliant on fossil fuels aren’t left behind. This ambitious framework requires enormous investment, estimated at R334bn annually to achieve net zero emissions by 2050 and R535bn to meet 2030 nationally determined contributions, according to a report from the presidential climate commission (PCC) in July. But with US climate finance commitments at risk under a Trump administration, securing alternative funding could be a major hurdle.
The JET plan, formally approved by the cabinet in 2023, may face delays if these financial gaps aren’t filled. The plan lays out a road map for transitioning to a low-carbon economy with a strong focus on electricity, municipalities, skills development, new-energy vehicles and green hydrogen, ensuring the process is equitable for all affected communities.
In July, the National Treasury calculated that only $2.1bn of the pledged $11.7bn for the JET plan had been drawn down. Broader environmental initiatives aimed at mitigating climate change impacts — such as water conservation and biodiversity preservation — could also suffer from inadequate financing. If South Africa cannot meet its climate commitments due to lack of funds, it risks falling behind in global efforts to combat climate change.
Given these challenges, South Africa must adopt a multifaceted approach to safeguard the viability of its environmental projects:
Additionally, South Africa’s climate finance allocation reveals a worrying trend. The majority of funds are directed towards mitigation rather than adaptation. Specifically, 81% of tracked climate finance from 2019 to 2021 went to mitigation projects, with just 12% allocated to adaptation, according to the PCC. The remainder supported dual-benefit projects. While both elements are crucial for a balanced climate strategy, any disruption in international funding could slow the country’s transition and worsen this imbalance, leading to economic inefficiencies, increased social vulnerability and potential harm to long-term environmental sustainability.
The stakes are high. With effective international co-operation and funding, South Africa can not only meet its climate goals but also set an example in global efforts against climate change. As President Cyril Ramaphosa put it: “Great prospects are ahead if South Africa uses global change to leverage local transition.” The pressure is on: South Africa must seize its commitment and public support to overcome policy barriers and funding gaps, ensuring a just low-carbon transition that reduces poverty and inequality and enhances resilience.
* Packirisamy is chief economist at Momentum Investments Group
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