President Cyril Ramaphosa called yesterday for better and cheaper ways of funding the Just Transition to a greener economy from developed nations, speaking at the COP27 climate conference in Sharm el-Sheikh, Egypt.
“A one-size-fits-all approach to financing the transition that disregards African realities is neither just nor equitable and will not work,” he said.
He said the use of non-debt instruments would ensure that developing economies did not have to shoulder an even greater debt burden.
In an echo of the country’s climate change plan he launched on Friday, Ramaphosa said yesterday that the reality was that developing economies had not received the required multilateral support to face the climate challenge, including for loss and damage.
Ramaphosa told an online sitting of the Presidential Climate Commission on Friday that South Africa needed about R1.5 trillion over the next five years to effect the just energy transition, saying the country needed much greater funding than what had been put on the table.
South Africa’s investment plan presented in Egypt sets out a vision for electricity production from renewables, a switch to electric vehicles on our roads and a major new green hydrogen industry, all requiring R1.5 trillion of new investment until 2027.
At a COP27 round-table discussion yesterday, Ramaphosa said there was a need to be “bolder and more innovative in reducing project risk and crowd in private sector finance for climate and Just Transition projects”.
“We need to acknowledge that the multilateral development banks and international financing institutions need to be reformed to meet the climate financing needs of developing economies. Their business models must be modernised so that they can efficiently mobilise financing at scale and deploy a full suite of instruments from grants to guarantees, across the entire range of countries they work with,” he said.
He said commercial financial institutions must do more to support these efforts by structuring project financing instruments that take into account the specific needs and circumstances of developing economies.
He called for a just transition financing framework or pooled financing mechanism to support transition pathways, an entity that could play the role of facilitator between the various funding sources and separate funds to ensure there is coherence in just transition financing. In a veiled reference to unfulfilled promises of a $100 billion per year commitment to help developing countries.
The imperative of a low-carbon transition that was just and inclusive was particularly important for developing economies, which are the worst affected by climate change. Although Africa carried the least responsibility for climate change, the continent experiences much of its harshest effects, he said.
Meanwhile, South Africa and other developing countries might face a bigger hurdle after Reuters reported that the International Monetary Fund (IMF) has said the price of carbon needs to average at least $75 a ton globally by the end of the decade for global climate goals to succeed.
IMF managing director Kristalina Georgieva said the pace of change in the real economy was still “way too slow”.
Recent analysis by the World Bank-affiliated group suggests the sum total of global national commitments on reducing climate-damaging emissions would see them fall just 11% by mid-century.
“Unless we price carbon predictably on a trajectory that gets us at least to $75 average price per ton of carbon in 2030, we simply don’t create the incentive for businesses and consumers to shift,” she said.
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