West indian countries

Billions from rich countries will help bail out Eskom

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  • Six months after the commitment of the rich countries $8.5 billion to help South Africa with its own energy transition, mmany elements of the financial package are still being worked out.
  • One of the package’s aims is to allow the South African government to escape long-term debt pressure from Eskom, a US Treasury official said.
  • The deal with South Africa provides a good model for other countries to build on, experts say.

As they prepare for the next round of global climate negotiations in November, rich country officials try to put together a series of multi-billion dollar packages to help poor countries phase out coal.

But the negotiations were hampered by domestic politics and Russia’s war in Ukraine, which turns the dirtiest fossil fuel into a lucrative commodity to mine and export, according to people close to the talks who asked not to be identified because the talks are private.

READ | “A lot of work to do” to finalize the COP26 billion – Mminele

The talks stem from a Historic pledge of $8.5 billion by the United Kingdom, the United States and the European Union ahead of last year’s COP26 summit in support of South Africa’s move away from fossil fuels. The agreement has become a model for the decarbonization of other countries, including India, Indonesia and Vietnam. The hope is that agreements can be reached with these countries before COP27, the people said, and that South African pact details will be finalized by then.

Indonesia and India

Much of the focus is on Indonesia, which will host the Group of 20 meetings this year and will have a significant influence on COP27. Reaching a deal could win goodwill for wealthy countries in Egypt after failing again last year to meet a decade-old goal. $100 billion a year in climate finance for poor nations. But developed countries are also adamant that money can only flow if recipient governments come up with comprehensive economy-wide plans to end the use of coal.

Three donor country officials who visited Indonesia this year have privately raised concerns that President Joko Widodo’s cabinet remains divided on the need for end the use of coal. This was made worse by the war, which increased the demand for coal exports. The government has not come up with a coherent plan to move away from coal, an obstacle to any breakthrough this year, they said, asking not to be named so as not to jeopardize the talks.

“There are about 20 different views within the Indonesian government on what they’re actually talking about,” said Jake Schmidt, senior strategic director of the international climate program at the Natural Resources Defense Council, who is following the discussions closely. “There are still factions within the Indonesian government that are asking why shouldn’t we build more coal and why should we transition?”

Indonesian ministries contacted by Bloomberg did not immediately respond to questions sent before a week-long public holiday. The government published a plan last October to achieve net zero emissions by 2060 which includes the retirement of all coal-fired power plants by 2055.

Indonesian Minister of Finance, Sri Mulyani Indrawati, said one of the biggest challenges is convincing private owners of coal-fired power plants to turn them off. Speaking on the sidelines of the IMF’s spring meetings in Washington in April, she also said rising inflation and borrowing costs were making any deal more difficult to strike.

“If you ask Indonesia to give up this energy which will bankrupt my budget, bankrupt the PLN, it will not fly,” she said, referring to the electricity utility. PT Perusahaan Listrik Negara.

Still, progress has been made recently as officials grapple with tough questions about the speed of Indonesia’s energy transition and discussions have become more granular, according to a US Treasury official familiar with the matter. US officials met with ministers and PLN officials in Washington last week.

Meanwhile, talks between India and the United States and Germany – representing the EU – have not progressed significantly, according to people familiar with the talks. Any engagement could end up being a bilateral agreement rather than a multilateral one, two of the interviewees said. A coal shortage that has led to power cuts is a hindrance, one of the people said. The Indian government has also chafed at being “exposed” by Western countries that have come up with more studies than concrete solutions, another person said. The Indian Foreign Ministry did not respond to questions.

Agreement with South Africa

As for the agreement with South Africa, major elements of the financial package are still being worked out six months after the signing of the agreement. Details on how the money will be spent have yet to be confirmed, including how much will go to heavily indebted utility Eskom, how communities will be compensated and how the loans will be structured.

Technical details are being worked out to determine the contours and scale of the financing, one of the objectives being that it allows the government to escape the long-term pressure linked to Eskom’s debt, said said a US Treasury official. When the deal was announced last year, South Africa had not appointed a lead negotiator and Eskom’s involvement was unclear, among the many steps needed to turn the declaration into a final plan , the official said.

The country has since appointed Daniel Mminele, a former South African central banker, to lead the talks. He said “work is progressing well” and the focus will be over the coming weeks on “assessing the detail of the funding elements against South Africa’s needs and priorities”.

Although there is still a chance that a broad agreement in principle will be reached for Indonesia before the G-20 meeting in Bali in November, some activists and insiders are more optimistic about the prospects for a pact with the Vietnam at this point. The country has a smaller coal industry and more potential for wind power, one person said. Vietnamese Ministry of Industry and Trade officials were not available for comment.

good model

The European Commission has confirmed that it is exploring energy transition partnerships with Vietnam, India and Indonesia. “A first progress report will be carried out before the summer, in good time before COP27,” said a spokesperson.

The US president’s special climate envoy John Kerry said work was underway on Indonesia and talks with South Africa were advancing. “We have raised funds to help deal with Eskom – bail out the Eskom problem in South Africa and be able to help them transition,” he said at the Global Forum on electrification organized by the Edison Electric Institute on April 25. “In Indonesia, they don’t have an Eskom problem, but they have a kind of challenge to break the status quo,” he said.

Negotiations are ongoing at high levels. US Treasury Secretary Janet Yellen met with finance ministers from South Africa and Indonesia, a sign of the seriousness of the effort, which might otherwise be the domain of energy and environment ministers .

The outcome of the talks will have important consequences for the success of COP27. The conclusion of agreements with large developing countries could lead to similar agreements to help smaller and more climate-vulnerable nations.

South Africa’s plan “provides a good model to build on here,” said Brendan Guy, senior strategist for the NRDC’s international climate program. “But the question really is, can similar packages be tailored to the unique needs of countries like India, Indonesia, Vietnam and others to really help them accelerate the transition beyond coal?”

– With the help of Antony Sguazzin, John Ainger, Yudith Ho, Eko Listiyorini, John Boudreau and Nguyen Dieu Tu Uyen.


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