PART 1: Just Energy Transition Partnership
This is the first part of a three-part series discussing key takeaways from COP27 and its implications for developing countries, especially those in Southern Africa. This first part will delve into the Just Energy Transition Partnership (JETP) that have been established in COP26 and expanded during this year’s COP27. Our second think piece will analyse the recognition of loss and damages funding, while our third will be a systemic outlook of climate change’s destructive relationship to historical and contemporary capitalism, and the alternatives we have at our disposal. Throughout this series, ACTSA makes the case that climate change cannot be properly dealt with, without deep systematic reform or a break from a capitalist economic system that is uneven, and reliant on extraction and growth at all costs.
Close attention was paid to the COP27 that took place in mid-November in Sharm El Sheikh, Egypt. COP27 in particular has garnered much interest due to the increasing climate crisis and geopolitical situation due to Russia’s invasion of Ukraine. For the most part, as with previous COPs, we saw the reaffirmation of the outcomes of previous Conferences of the Party, as well as the recognition of the science, indicating the understanding of climate change as a common problem that needs to be addressed through multilateral organisations such as the UN. However, there are some noteworthy breakthroughs that are relevant to nations in the global South and Southern Africa in particular, that are worth expanding on.
The first key point to highlight is the progression of the JETP. The JETP are partnerships that provide private and public funding, primarily to developing countries to achieve the goal of Net Zero by 2050. During COP27, we saw an affirmation of the need for social dialogue in a green transition as well as an emphasis on considering energy, socioeconomic, and other factors when making this transition, all of which must be based on nationally defined development priorities. In addition to this, there has been an agreement a “work programme on just transition”, including annual “high-level ministerial round tables”, will take place at next year’s COP28 in Dubai (Chandrasekhar et al, 2022). Two trailblazers in this scheme are Indonesia which received £16 billion, and South Africa. In the case of South Africa, they are promised £82 billion by US, UK and EU governments over the next five years. Initially these nations are mobilising £7 billion for the first phase of this investment, with £1.8 billion promised by the UK. Despite this seemingly positive development, the agreement fails to address concerns about exploitative funding schemes, job security and workers’ rights, as well as ownership patterns that further concentrate power into the hands of multinationals.
In terms of financing, the UNFCCC has recognised that £3 trillion a year needs to be invested in renewables until 2050 to meet carbon emission goals and has expressed the indebtedness that low-income countries are getting into due to these deals. Along with this, there is an acknowledgement that developed countries need to be the ones who are financing developing countries by mobilising £82 billion annually. However, there have been serious shortcomings and criticisms about the form and terms of financing. For example, in the case of South Africa, around 97% of the funding for this transition will be from a variety of loans such as concessional loans, commercial loans, and investment guarantees, with only 3% of the financing in the form of grants(Sguazzin, 2022). This form of funding has consistently led to a balance of payment crisis which has hamstrung developmental and green transition prospects for nations in the Global South. In addition to this, these forms of financing have been used as a disciplining method on developing countries making them implement free-market and austerity on their population. This reality is shared in countries in Southern Africa as we have seen unfair debt arrangements heavily strain economies such as Zambia, who spend more on debt relief from loan repayments, including to the investment management company, BlackRock, than health, education, social protection, water and sanitation combined. This is a symptom of a larger problem around international capital flows, where we have seen countries lose their fiscal autonomy, as they have to deal with tax competition as well as asset migration and capital flight, where capital is able to flow out of the country undetected (Lapavitsas & Soydan, 2022). Another area to consider is the form in which financialisation is taking place in developing countries. In particular, we have the proliferation of ‘hot money’ which are high-frequency, short-term transactions that often lead to highly vulnerable shocks with sudden stops or surges into the country.
Along with financial concerns, the National Union of Mineworkers (NUM) and the National Union of Metalworkers of South Africa (NUMSA), as well as President Ramaphosa have emphasised the need to develop an inclusive transition that prioritises the inclusion of workers, assuring job reskilling and alternative employment. This is important when taking into account that coal mining is an important sector in regions like Mpumalanga and, in a country, with around 40% unemployment it cannot be reasonably argued that the miners should be put out of work. While there has been an emphasis on the need to have a socially just transition, South Africa’s JETP has designated only 1% of the total for social investment meant to cushion communities dependent on the coal-fired power plants that will be closed (Sguazzin, 2022). This has the possibility of creating further instability in South African society. Not only this, but potential unemployment could exacerbate the increase in informal work that is unstable and low-paying and an increase in a reserve army of labour that other industries is able to exploit.
Furthermore, another concern is the ownership structure that will take place in the South African JETP and how we can ensure a mixed model approach to a green transition, and how private enterprises can be held to account for fair conduct. This transition to renewable energy will overwhelmingly be directed to private enterprises, diminishing the role of state-owned enterprises (SOEs) (Hlubi-Majola, 2022). This change in ownership might strip workers of stable jobs that are found in the private sector. Not only this, but this could signal a further decrease in union membership as the public sector tends to have higher union density in the private sector within the South African economy (Bhorat, Naidoo & Yu, 2014). In this case, these private enterprises need to be held to account to ensure that they uphold high labour standards and develop a working relationship with Trade Unions to guarantee adequate pay and conditions. On a larger scale, private enterprises and public enterprises alike need to be transparent in their dealings, making sure that we don’t experience trade-related illicit outflows, trade misinvoicing, and short-term capital flows. While ensuring high standards in the private sector, we need the grassroots to demand the maintenance and expansion of the public sector and other forms of ownership, such as community ownership or worker cooperative models, in the green sector. This pressure can ensure that the green transition does not produce itself on the backs of further unemployment and uneven development.
Sources:
Bhorat, H., Naidoo, K. and Yu, D. (2014) “Trade Unions in an emerging economy: The case of south africa,” WIDER Working Paper [Preprint]. Available at: https://doi.org/10.35188/unu-wider/2014/776-9.
Chandrasekhar, A. et al. (2022) COP27: Key outcomes agreed at the UN Climate Talks in Sharm el-Sheikh, Carbon Brief. Available at: https://www.carbonbrief.org/cop27-key-outcomes-agreed-at-the-un-climate-talks-in-sharm-el-sheikh/ (Accessed: December 20, 2022).
Hlubi-Majola, P. (2022) Climate change deal will trap future generations into a permanent cycle of poverty and inequality, Independent Online. IOL | News that Connects South Africans. Available at: https://www.iol.co.za/the-star/opinion-analysis/climate-change-deal-will-trap-future-generations-into-a-permanent-cycle-of-poverty-and-inequality-8fd5485c-ba5a-40de-8615-739c45450bcd (Accessed: December 21, 2022).
Lapavitsas, C. and Soydan, A. (2022) “Financialisation in developing countries: Approaches, concepts, and metrics,” International Review of Applied Economics, 36(3), pp. 424–447. Available at: https://doi.org/10.1080/02692171.2022.2052714.
Sguazzin, A. (2022) South Africa’s $8.5 billion climate pact is 97% loans, CHN says, Bloomberg.com. Bloomberg. Available at: https://www.bloomberg.com/news/articles/2022-10-23/south-africa-s-8-5-billion-climate-pact-is-97-loans-chn-says (Accessed: December 20, 2022).
Photo via Unsplash, Birger Strahl
Part 2: Loss and Damage
A breakthrough, that has received major media coverage during this year’s COP27 was the agreement to fund loss and damage. This financial allocation will be used to fiscally support developing nations dealing with the effects of climate change. For years, this issue has remained more technical and opposed to something that will be implemented. However, with mounting pressure from 134 countries known as the ‘G77 + China’, developed nations agreed to partake. The reasoning for such hesitation on behalf of the developed countries is their failure to take responsibility for their historic emissions, as well as the framing of this debate. Governments and civil society in the global South often times frame this debate as ‘reparations’ for the effects suffered from the global North’s extractive capitalist economy that is still based around many of the same mechanisms as the colonial era, as well as the recognition that slavery was a major driver of capital accumulation that financed the industrial revolution. This is backed up by data, which indicates that developed countries are responsible for an estimated 92 per cent of estimated historical greenhouse gas emissions, and 37 per cent of today’s emissions, despite only being 15 per cent of the world’s population (Carty and Walsh, 2022). Furthermore, there is a class dynamic that is connected to inequality caused by capitalism, and climate change, which is the fact that the emission of 1 per cent of the global population was more than double the carbon dioxide emitted by the poorest half of the world’s people between 1990 and 2015 (Carty and Walsh, 2022). Taking this into account, there has been a difference in how this is framed with the global South framing this issue as an issue of compensation, while countries in the global North refuse to accept this funding as compensation and see this process as one of cooperation. These issues are one of the major barriers that need to be sorted out moving forward. Moreover, the parties have yet to agree on how this funding will take shape, disagreeing on the methods of payment and who is eligible to receive it, stating that only those who are the worse affected are eligible for funding.
However, the criteria to receive this funding will be difficult to quantify and could have devastating consequences for many developing countries. In fact, 40 per cent of the world’s population lives in countries that are highly vulnerable to the impacts of climate change, with Small Island Developing States (SIDS) and Least Developed Countries (LDCs) being particularly badly affected (Åberg & Jeffs, 2022). In South Africa, we have already seen the fallout from climate change with the floods this year in Kwazulu-Natal, Eastern Cape, Northwest Province, and most recently in Johannesburg, in which 400 people were killed, and in which there was widespread destruction of vital infrastructures, such as roads, bridges, and housing.
Another issue, other than criteria, is the method and form of funding loss and damage. In this case, again, we can see differences of opinion between the G77 and China, and the developed countries. The former opts for utilising existing funding institutions, while also recognising the need to address financial gaps through the reform of existing institutions. They have also demonstrated their flexibility to address debt by suggesting that countries can draw from the International Monetary Fund’s (IMF) supplementary foreign exchange reserve assets, known as ‘Special Drawing Rights’. Additionally, developed countries have also suggested creating partnerships with initiatives outside the United Nations Framework Convention on Climate Change (UNFCCC) by working with the likes of the Climate Risk and Early Warning Systems (CREWS) initiative, the InsuResilience Partnership. The latter, while showing variety in their preferred mechanism, generally prefer setting up a new entity to address loss and damage. Their rationale is that reforms to existing institutions would be hard to execute as they would require the approval from the boards of various organisations, while others noted the risk of diverting resources away from other funds, such as the Adaption Fund. Another suggestion has been to include loss and damage as a sub-target in the New Collective Quantified Goal on Climate Finance, with funding based on the worst-case scenario of projected temperature as well as the funding being public and grant-based (AOSIS, 2022). These differences in opinion are reflected in the released loss and damage text, which walked a middle ground between the demands of all parties, describing the text as a ‘mosaic’ of solutions. It will be interesting to see how negotiations play out.
Similarly, to the Just Energy Transition Partnership, the form of funding for loss and damage, can’t be in the form of predatory loans which have created further indebtedness in developing countries. The approach developed countries opted for could result in this possibility, as they suggested the inclusion of institutions like the IMF, which are notorious for the debt trap loans they provide for Southern Africa and the rest of the global South. Moving forward, ACTSA supports the idea of the global South taking a leading role in creating the funding institutions, with developed countries providing grant-based loans and allowing nations to utilise their loss and damage funding in a sovereign manner. It is important to push for this goal within civil society and in the grassroots.
Sources:
Adaptation and financing to address loss and damage take centre stage at Bonn Climate Change Conference (2022) AOSIS. Available at: https://www.aosis.org/aosis-adaptation-and-financing-to-address-loss-and-damage-take-centre-stage-at-bonn-climate-change-conference/ (Accessed: December 21, 2022).
Carty, T. and Walsh, L. (2022) “Footing the bill: Fair Finance for loss and damage in an era of escalating climate impacts.” Available at: https://doi.org/10.21201/2022.8977.
Åberg, A. and Jeffs, N. (2022) “Loss and damage finance in the Climate Negotiations: Key Challenges and Next Steps.” Available at: https://doi.org/10.55317/9781784135461.
PART 3: Systemic Analysis
While progress has been made in regard to the deals that have been agreed upon in this and previous COP events, they need to be looked at on a broader scale. Despite understanding key issues rhetorically, the current economic system is based on growth at all costs, extraction, and corporations’ ability to forcefully utilise various channels in the economy for their own gains. This can be seen in the use of Investor-State Dispute Settlement (ISDS), where foreign investors are allowed to sue foreign countries for state actions involving foreign direct investment (FDI), vastly undermining the sovereignty and capabilities of developing countries to implement sustainable policies. This is only one aspect of the negative impact free trade has played on the economy and it must be noted that ISDS frameworks that are part of bilateral investment treaties can be discontinued (which could result in an international backlash) once these deals are finished, as was the case with South Africa. However, this is a symptom of a larger system where free trade allows multinationals in the global North to have vast control over operations around the world whether it be directly or indirectly through pressure on foreign subcontractors. Another way in which multinationals have concentrated power is through the use of intellectual property (IP) agreements such as TRIPS. Through this mechanism, these companies can monopolise tangible and intangible assets, creating a system where they have full control over how technology can be transferred to firms in developing countries. This can be seen recently in the reluctance to provide COVID vaccines to developing countries, despite the pandemic being a global emergency. This could also have a negative effect on implementing and scaling technologies that could be used to lessen carbon emissions.
With this in mind, multiple groups within civil society have pointed towards a deeper economic transformation that breaks from the current capitalist model that is based on unequal exchange, and resource extraction to a more egalitarian, democratic, and ecological model to run our society. This vision would require continuing financial support from Global North to Global South countries, with conditions that do not handicap their sovereign developmental goals. As mentioned prior to this, there has been a verbal acknowledgment of indebtedness and the especially complicated situation that developing countries face. However, this is not enough and deep transformation is needed. While this seems like a tough task and it’s hard to pinpoint even where to start in making these changes, there have been attempts systematically to change the economic system to one that places more value on nature as opposed to environmental damage for capital accumulation. One blueprint is the ‘People’s Agreement of Cochabamba’ that looks to move beyond a system that is defined by “logic of competition, progress, and limitless growth”, to one that opts for harmony with nature and respect for life. In this agreement, we see concrete suggestions such as assuming “the costs and technology transfer needs of developing countries arising from the loss of development opportunities due to living in a restricted atmospheric space” as well as assuming the “adaptation debt related to the impacts of climate change on developing countries by providing the means to prevent, minimize, and deal with damages arising from their excessive emissions”. Furthermore, this document also highlights the need to establish a fund for the financing and scaling of technologies that are intellectual property rights, stating that patents “should move from the hands of private monopolies to the public domain in order to promote accessibility and low costs”. In addition to this charter, we have seen mass movements calling for system change.
In the context of Southern Africa, we have seen similar demands come out of civil society, calling for a systematic change. For example, the Climate Justice Charter Movement (CJCM) has called for an end to South Africa’s carbon-based accumulation, as well as racial, gender, and class oppression. In addition to this, they call for an ‘eco-socialist’ society based on a new ‘socio-ecological’ order, based on “democratic planning, socially owned renewable energy, clean energy mass public transport and eco-mobility, food sovereignty, a universal basic income, democratising the water commons” (CJCM, 2022). While this group does not dive into detail regarding policy implementation, mass-based groups will push at the grassroots level and work to pressure governments to break with the status quo and look to establish a new way of operating our system.
Despite these radical demands and foundational beliefs against the core features of capitalism, there are a lot of factors that need to be addressed for developing countries as a whole. Such considerations include how can developing countries escape from the historical process of industrialisation as the main means to develop their economy and society, as that has been the only route for development we have seen in the history of capitalism. If we can address the prior point raised, does this mean a lack of progress in living standards? How do we create an equal playing field for developing and developed countries free from power dynamics and hierarchy? These systematic issues are of great importance. This problem calls for civil society to band together and work collaboratively to form and push for new policies and systematic change in order to address climate catastrophe.
Sources:
Climate Justice Charter Movement (2022) CJCM STRATEGIC PERSPECTIVES Accelerate the Deep Just Transition Now! Together securing a democratic and climate justice future for South Africa [Preprint].
People’s agreement of Cochabamba (2010) World People’s Conference on Climate Change and the Rights of Mother Earth. Available at: https://pwccc.wordpress.com/2010/04/24/peoples-agreement/ (Accessed: December 20, 2022).