Todays Latest

Billions in U.S. Funding Hasn’t Convinced Developing World to Ditch Coal

But two of the most ambitious efforts yet—in South Africa and Indonesia—are now at risk of unraveling, sowing doubts about the rich world’s ability to push developing countries away from coal and other fossil fuels.

South Africa and Indonesia, among the world’s most coal-hungry economies, are backtracking on commitments they made to burn less of the fuel under agreements known as Just Energy Transition Partnerships, or JETPs, which offered them $28.5 billion from the U.S. and other wealthy nations. Officials are working to prevent the agreements from falling apart as governments convene in Dubai for COP28, the annual United Nations climate summit.

Resistance from pro-coal politicians in both countries and fears about the economic and technical viability of replacing the fuel quickly are jeopardizing the agreements. South African and Indonesian officials say the money from wealthy countries isn’t what they hoped: Most of it will come in loans, not grants, saddling the countries with more debt.

Climate funding “should be more constructive, not in the form of debts that will only increase the burden on undeveloped or developing countries,” Indonesia’s President Joko Widodo said last month.

South Africa’s state-controlled power company has delayed its plans to retire coal-fired power plants. Indonesia says it likely won’t meet a cap for power-sector emissions negotiated under its program because of thousands of megawatts of coal-fired power plants that weren’t accounted for previously.

Their backtracking shows the immense challenge of replacing coal in countries that rely on the fuel not only to generate electricity but also to provide jobs for tens of thousands of miners and facilitate economic development. Coal supports local economies and industries, and politicians have deep ties to mining companies and unions. Developing countries also say they are wary of ditching a reliable fuel source with new technologies that aren’t widely used yet, even in the developed world.

Wealthy nations aimed to assuage those concerns with billions of dollars in grants and low-interest loans to build clean-energy projects and find new jobs for miners. Such finance is crucial to advancing climate negotiations under the U.N.

“JETP was advertised as this groundbreaking new way to help the Global South decarbonize, but more than 1.5 years later, it is looking increasingly shaky,” said Richard Halsey, policy adviser on the South African energy team at the International Institute for Sustainable Development, a think tank.

Since last year’s climate conference, Vietnam—another coal-reliant economy—and Senegal have also signed JETPs, valued at $15.5 billion and $2.7 billion, respectively.

“Sometimes the national debate shows there are people in the country who are not progressive,” said Mathilde Bord-Laurans, head of the climate division at the French Development Agency, which is helping fund the JETP programs. “You feel this tension, which is indeed very, very high in South Africa, but also in Indonesia and in Vietnam.”

The coalition of wealthy nations that are funding the JETPs say they remain committed to the programs of South Africa and Indonesia.

Officials are searching for ways to keep South Africa’s emissions in line with its JETP despite the delays to coal-plant retirements. They will conduct a study with Indonesia in the coming months to find replacements for coal in the country’s fast-growing smelting industry. The U.S. is offering more grant financing in response to the countries’ concerns, said a senior U.S. Treasury official.

President Biden and other leaders unveiled South Africa’s program, the first JETP, in 2021 at the U.N. climate conference in Glasgow. The U.S., France, U.K., Germany and the European Union promised $8.5 billion in loans, investments and grants in the next five years to help South Africa move away from coal faster. Nearly a year later, Indonesia was promised $20 billion under its own JETP.

South Africa’s program soon became a lightning rod for criticism from several of the country’s politicians for burdening the country with more debt and containing too few outright grants.

The powerful mining and energy minister, Gwede Mantashe, who is also chairman of the ruling African National Congress party, has repeatedly attacked the concepts underpinning the JETP, saying developed nations have weaponized climate change against the developing world. A staunch coal supporter and former coal miner, he has dragged his feet for years to draw up a clean-energy plan, according to analysts and economists.

President Cyril Ramaphosa said in May that the country was still committed to transitioning away from coal, calling the JETP a “boon” to South Africa, but stressed that the pace would be in line with the needs of the domestic economy and society.

Mantashe and Ramaphosa’s offices didn’t return requests for comment

“I won’t sugarcoat that it’s easy,” said a senior U.S. Treasury official. “But I still think we have sufficient reformers and political will to get there.”

Adding to the political resistance is the disintegration of South Africa’s electrical grid. Rolling power outages can last for up to 11½ hours a day, caused largely by constant breakdowns and lengthy maintenance shutdowns of the country’s aging fleet of coal-fired power stations.

South Africa’s near-bankrupt state utility Eskom had been planning to shut down more than 6,000 megawatts of coal generation capacity, representing about 14% of installed coal capacity, by the end of 2028. But in its outlook report released in October, the utility “assumes that no coal power plant will be shut down” during the next five years.

A previous coal plant retirement last October was botched, South Africa’s Presidential Climate Commission said in a study. The plan, funded with $500 million from the World Bank, was meant to show the viability of retiring coal plants early. But it only began creating new jobs for the workers five months before the closure of the plant.

“It happened too quickly and ignored the ‘just’ part of the ‘just transition,’ ” said one person involved in the negotiations.

Coal is integral to South Africa, which gets more than 80% of its electricity and nearly one-fifth of its liquid fuel from coal. It is also a top-10 coal producer globally; coal mining accounts for more than 90,000 jobs in a country with an unemployment rate of over 30%.

Delaying the retirement of coal plants, however, means South Africa risks breaking its climate promises, which include reducing carbon emissions by between 5% and 21% by 2030, from 2020 levels.

“If this happens, then we cannot fund this,” said a negotiator from one of the wealthy countries.

Indonesia’s program was upended this year when the government said that the JETP didn’t account for a host of coal plants built for metal smelters and other factories in remote areas that aren’t connected to the grid. Indonesian authorities are planning for companies to build many more of them despite the country’s JETP commitments, part of a national strategy to become a major smelter of nickel and cobalt, needed to make electric-vehicle batteries.

When the agreement was first announced, U.S. officials were assuming that Indonesia would have 9,000 megawatts’ worth of off-grid power plants installed by 2030. Since then, Indonesian officials have disclosed that there are already around 14,000 megawatts of them around the country. Indonesian companies plan to build an additional 20,000 megawatts.

Indonesia’s Ministry of Energy and Mineral Resources didn’t respond to a request for comment.

“This was eye-opening not just for us but also many in the Indonesian government,” said a U.S. State Department official.

Write to Alexandra Wexler at [email protected], Sha Hua at [email protected] and Matthew Dalton at [email protected]