This tipsheet was developed to introduce the media to net zero in the context of the climate crisis and economic justice. Among the top challenges for the net zero goal is finance and justice, which are the focus of this resource.
South Africa formally committed to reaching net zero greenhouse gas emissions by 2050 to the United Nations Framework Convention On Climate Change (UNFCCC) in September 2021. Net zero refers to achieving a balance between greenhouse gas emissions and removals, meaning that humanity emits no more greenhouse gasses into the atmosphere than it removes. This is essential to limit global warming to 1.5 degrees Celsius, the threshold beyond which the impacts of climate change will become harder for humans and other life on earth to survive and adapt to.
The UN has described the reality driving the net zero goal as one of the greatest challenges humankind has faced, which calls for nothing less than a complete transformation of how we produce, consume, and move about.
The United Nations Intergovernmental Panel on Climate Change (IPCC) says that CO2 emissions need to be halved by 2030, compared to 2010, reaching net zero by 2050. The varying pathways towards the mid-century goal requires mega investments in new infrastructure, capacity building, social security and technologies that will make the transition to low carbon economies possible. This will also take efforts from thousands of non-state actors and various institutions across society who can contribute to meeting the 2050 goal. The latest published assessment (2023), a Synthesis Report, which integrates the findings of six reports released by IPCC during the cycle which began in 2015 – calls for everyone to reach carbon neutrality sooner than planned.
The net zero goal is an unprecedented call for a monumental shift in the way the world goes about its business and will require unprecedented financial support to get there.
Why is this topic important for journalists?
Media plays a vital role in disseminating information in the interest of the public. An informed public is better equipped to hold policymakers and corporations to their commitments. The media will continue to play this role as economies decarbonize and reduce other greenhouse gas emissions. It is a giant transformation for global economies. This resource is meant to present the media with useful information around financing pathways to net zero, international climate change finance and economic justice among other things.
Journalists can cover net zero finance in South Africa by:
Reporting on the government's plans to decarbonize the economy and the challenges that the country faces in achieving net zero emissions.
Investigating the role of the private sector in financing the transition to a low-carbon economy.
Highlighting the impact of decarbonization on workers and communities.
What is net zero finance?
Net zero finance refers to the mobilization of capital to support the transition to a net zero emissions economy. This includes investment in renewable energy, energy efficiency, and carbon capture and storage.
South Africa is one of the most vulnerable countries to climate change, and it has a long history of reliance on coal for energy. Various forms of finance can help to bridge the investment gap and make the transition to a low-carbon economy more affordable.
International climate finance
Global investment in the energy transition reached a record high of $1.3 trillion in 2022, but annual spending must more than quadruple if the world is to meet its climate goals, according to the International Renewable Energy Agency’s (IRENA) World Energy Transition Outlook 2022.
Cumulative investments between now and 2030 need to total $44 trillion, and by 2050, the world will need to have invested $150 trillion.
There are a number of different sources of international climate finance, including:
Government-to-government grants and loans: Developed countries provide grants and loans to developing countries to help them finance climate-friendly projects.
Multilateral development banks: Multilateral development banks, such as the World Bank and the African Development Bank, provide loans and grants to developing countries to help them finance climate-friendly projects.
Private sector investment: The private sector is also investing in climate-friendly projects in developing countries. This investment is driven by a number of factors, including the increasing cost of carbon emissions, the growing demand for clean energy and the need to reduce climate risks.
Multilateral development funds: These are finance facilities developed under a specific convention as a mechanism to channel developed country finance to developing or poorer countries. An example is the Global Environment Facility.
International climate finance has played a significant role in helping developing countries address climate change. For example, between 2013 and 2015, developed countries provided an estimated $103 billion in climate finance to developing countries. This finance helped to support a wide range of climate-friendly projects, including renewable energy, energy efficiency, and adaptation measures. However, international climate finance is still not enough to meet the needs of developing countries. The Paris Agreement on climate change calls for developed countries to mobilize $100 billion per year in climate finance by 2020. However, developed countries have not yet met this target.
The latest OECD report on the $100bn goal found that USD 83.3 billion was provided and mobilized jointly by developed countries for climate action in developing countries in 2020. The OECD report shows that most of this finance came in the form of loans. This is concerning because developing and poorer economies face greater risks under the burden of debt they must accumulate to deal with the climate crisis whereas if countries gave their fair share of financial support –they wouldn’t need to. To date, the OECD report states that global climate finance remains USD 16.7 billion short of the USD$100 bn per year goal.
The assessment which focuses on the period 2013-2020, shows that climate finance was still largely public, accounting for a majority of the total. Private finance however increased from 2016 by nearly 30%.
Tips for journalists: The investments needed for the transition to a low carbon future warrants a rethinking of the capital markets and its risk aversions. It is important to track financial flows to determine if investments are being redirected to sustainable development activities. Journalists can report on whether Governments are incentivizing market movement well or poorly. High carbon taxes are regarded as one way of forcing industries to mitigate through capital investment in cleaner technologies. Journalists can track its effectiveness in promoting public and private spending in mitigation.
How much finance is needed?
Globally, Bloomberg’s model found investment potential generated by the mid century goal amounts to US$200 trillion by 2050 — or nearly $7 trillion a year. The Network for Greening the Financial System (NGFS), a group of 105 central banks and financial supervisors concluded under one scenario that spending on just physical assets on the path to net zero could reach on average US$9.2 trillion per year. Vivid Economics put the investment estimates at US$125 trillion. US$32 trillion of that should go to six key sectors according to the report commissioned by the UN High-Level Climate Action Champions. Of that, US$1.7 trillion is needed in Africa.
In 2022 the World Bank put the estimated total investments needed for South Africa’s pathways to net zero at USD$500 billion by 2050. The banks Country Climate and Development Report (CCDR) identified three simultaneous transitions namely:
Low carbon transition
Climate resilient transition
The three transitions address both socio-economic risks associated with 300,000 jobs put on the line as a result, developing a climate resilient economy that is just and equitable so no one is left behind. According to the CCDR estimates, the three transitions could cost around R8.5 trillion (about $500 billion in net present value) between 2022 and 2050, of which R2.4 trillion ($140 billion) would be needed before 2030.
South Africa’s Low Emissions Development Strategy (LEDS) follows a peak, plateau and decline (PPD) emissions trajectory to meet a mid-century net zero target. It will need between R4 trillion and R8.5 trillion over the next 30 years for financing the country’s climate mitigation commitments according to Intellidex, a research and financial services consulting firm in its Capital Markets Report 2022.
“Private financing will have an important role to play, including through reforms in the domestic financial market and in the private-public partnership framework,” - Adamou Labara, International Finance Corporation, Country Manager for South Africa.
In an assessment of the climate finance environment in South Africa, the National Business Institute (NBI) concluded that the actual finance gap and its magnitude remain unknown. It attributes this to limited knowledge around tagging and volumes of climate finance. At the same time, most finance is not tied to any climate goals to draw obvious links. Detailed plans for the road to 2050 remain sketchy for most countries who have set plans to update their ambition in 2025 for the post 2030 period despite having committed in theory to the mid century target.
Journalists can cover net zero finance in South Africa by:
Reporting on community benefits from climate finance.
Reporting on environmental rehabilitation as part of transition finance agreements.
Reporting on whether mitigation activities are creating new jobs and opportunities as promised.
Reporting on whether communities are benefitting in other ways from large infrastructure projects.
South Africa's Just Energy Transition Investment Plan (JET-IP)
South Africa supports the position that a just transition to a low-carbon economy will benefit all South Africans by driving economic growth, creating jobs, and increasing energy security, while addressing the serious threat of climate change. The Just Energy Transition Investment Plan (JET-IP) for the five-year period 2023-2027 sets out the scale of need and the investments required to achieve the decarbonisation commitments in the country’s updated NDC.
It plans to kick off its decarbonization pathway through:
Creating quality jobs in new sectors like electric vehicles, green hydrogen, renewable energy, and manufacturing
Increasing energy security and ending load shedding through a massive rollout of new, sustainable energy sources
Addressing the risks of climate change and positioning South Africa to be an important global player in the green economy of the future
Boosting economic growth through more than R1 trillion of new investment in the South African economy
The investment plan gives effect to the political declaration forged at the COP26 Climate Summit in 2021 between South Africa and France, Germany, United Kingdom, United States, and the European Union. Through the political declaration, those countries will collectively mobilize an initial US$8.5 billion between 2023 and 2027. Although still under negotiation, at present, the financial commitment will be made up largely of concessional loans and a small amount of grants.
By agreeing to an $8.5 billion climate finance deal with the US, UK, France, Germany and the EU, South Africa has secured roughly 10% of the R1.5 trillion it needs for the five-year investment period.
The rest will come from the private sector, development finance institutions, and the government. The energy sector is the source of around 75% of greenhouse gas emissions today; it holds the key to averting the worst effects of climate change. Replacing polluting coal, gas and oil-fired power with energy from renewable sources, such as wind or solar, would dramatically reduce carbon emissions, the main GHG driving temperature rise.
Of the R1.5 trillion, nearly half will go towards the electricity sector — power lines, batteries and renewable energy facilities. The rest will go towards the electric vehicle industry, kickstarting a green hydrogen sector, skills development programmes, and support for municipalities in the coal belt.
Journalists can report on South Africa’s transition plans by:
Focusing on the implementation of both the JET framework and investment plans.
Unpacking the financial agreements to determine the share of grant finance vs. concessional and commercial loans.
Unpacking the impact of finance deals on the country’s debt to GDP vs new opportunities for growth.
Financing South Africa’s short-term goals
In the five years to end-2027, South Africa will require R1.5 trillion to set it on course to achieving the more ambitious end of its decarbonization goals while also safeguarding and bolstering livelihoods, according to the country’s official just energy transition investment plan.
This is based on what would be required to reach the bottom end of the country’s climate commitments for 2030 — known as nationally determined contributions (NDCs). The lower end of South Africa’s NDC range translates into annual emissions of 350-375 million tons of carbon dioxide equivalent.
According to the World Bank’s country climate and development report on South Africa, the country will need to mobilize R2.4 trillion in capital by 2030 to invest in clean energy, climate change adaptation projects, and in programmes that support communities reliant on the fossil fuel industry.
“Achieving these three transitions will require substantial external financing and a combination of structural reforms, including a more flexible labor market, and improvements in fiscal and financial policies,” the World Bank says.
Large concessional inflows and grants from the international community are needed, alongside a better regulatory framework for private capital, it adds.
These investments will stimulate the local economy and make it more competitive.
According to Stanford University professor Mark Jacobson, it would cost the world $62 trillion to switch to clean energy — but it would take just six years to pay that off. For context, global GDP is more than $100 trillion.
According to the PwC Africa Energy Review 2022 report, it would cost $2.6 trillion to decarbonize Africa’s power sector while also ensuring reasonable access to electricity.
Various studies have shown that encouraging private finance in emerging markets for the low carbon transition is a difficult task.
A 2022 study by Standard Chartered concluded that the private sector needs to step up and take the lead with innovative financing products for emerging market investments, especially as around USD 83 trillion of the USD 94.8 trillion would be expected to come from private sector investors.
South African household spending could fall by a total of USD 281.8 billion between now and 2060 if the nation has to self-fund its journey to net zero, according to the Standard Chartered study.
According to Just in Time: Financing a fair transition to net zero, which looks at the transition financing gap for emerging markets and how to close it, South Africa will need assistance from developed markets to meet its net zero goals. Below are some of the reasons why climate finance and economic justice are so closely linked.
The key findings show that:
If the finance South Africa needs to transition to net zero is provided by developed markets, South African household spending could increase by USD 311.1 billion between now and 2060 compared to self-financing.
If emerging markets fund their own transition, without help from developed markets, household consumption in these markets could fall by 5% on average each year.
If developed markets finance the transition, global GDP could be USD108.3 trillion higher cumulatively between now and 2060.
The study found that emerging markets as a whole need to invest an additional USD 94.8 trillion — a sum higher than annual global GDP — to transition in time to meet long-term global warming targets. This is on top of the capital already allocated by governments under their current climate policies. By keeping up to date with research into investment flows, journalists can assess how much South Africa’s private and public sectors are investing in its transition.
The following are some of the key challenges that emerging markets face in accessing international climate finance:
Limited access to finance: Emerging markets often have limited access to international capital markets, which makes it difficult for them to raise the money they need to invest in climate-friendly projects.
High cost of finance: The cost of finance for climate-friendly projects in emerging markets is often higher than the cost of finance for other types of projects. This is because investors are often reluctant to invest in climate-friendly projects because they are perceived as being riskier.
Lack of capacity: Emerging markets often lack the capacity to manage and implement climate-friendly projects. This is because they often lack the technical expertise and the institutional infrastructure to manage these projects effectively.
There are opportunities that emerging markets have in relation to international climate finance:
Growing demand for climate-friendly investments: The demand for climate-friendly investments is growing, both from governments and from the private sector. This is because investors are increasingly recognizing the risks associated with climate change and the opportunities associated with investing in climate-friendly projects.
New financial instruments: New financial instruments are being developed to make it easier for emerging markets to access international climate finance. These instruments include green bonds, which are debt securities that are issued to raise money for climate-friendly projects.
Technical assistance: Developed countries are providing technical assistance to emerging markets to help them develop the capacity to manage and implement climate-friendly projects. This assistance is helping to reduce the risks associated with investing in these projects and making them more attractive to investors.
In addition to the scale of international climate finance, there are also a number of other challenges that need to be addressed, including:
Alignment with national priorities: Climate finance needs to be aligned with the national priorities of developing countries. This means that it needs to be used to support projects that are in line with the country's development plans and that will have a positive impact on the country's people.
Transparency and accountability: There needs to be greater transparency and accountability in the use of international climate finance. This means that developing countries need to be able to track how the finance is being used and that developed countries need to be held accountable for their commitments.
Sustainability: Climate finance needs to be used to support sustainable projects that will have a long-term impact on climate change. This means that projects need to be designed in a way that minimizes environmental and social impacts.
Journalists can cover net zero finance in South Africa by:
Reporting on whether the government's plans to decarbonize the economy aligns with sustainable development objectives and its international obligations under the Paris Agreement.
Investigating the use of international climate finance while monitoring processes for potential corruption.
Assessing whether new financial instruments are effective in the context of the South African market.
Reporting on technical assistance from the international community for new clean energy industries.
Reporting on the high costs of finance for governments vs the private sector.
International financial mechanisms
Among the oldest financial mechanisms to fund global climate mitigation is the Global Environment Facility (GEF) under the Convention since 1994. In 2010, Parties established the Green Climate Fund (GCF) and later the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF), all managed by the GEF — and the Adaptation Fund (AF) established under the Kyoto Protocol in 2001 according to the UNFCCC, Introduction to Climate Finance.
The Climate Policy Initiative’s Global Landscape of Climate Finance Report shows global annual climate finance flows in 2019/20 reached USD 653bn on average, which was 15% higher than in 2017/18.
Domestic financial mechanisms
One of the ways in which countries can raise mitigation finance is through a carbon tax on big emitters. South Africa recognizes that a carbon tax that is implemented gradually and complemented by effective and efficient revenue recycling can contribute to significant emission reductions. “Revenue recycling refers to mechanisms through which income generated from carbon taxation is earmarked and returned back to society,” according to one definition, and is used to incentivize the acceptance of such a tax by showing immediate or long-term benefit to people and the environment. This is argued to encourage the acceptance of such a tax by consumers and businesses who feel the pinch of the new cost. South Africa’s carbon tax system currently imposes a carbon price much lower than that of its major trading partners such as the European Union (EU) according to the Reserve Bank. In 2022 the price of carbon in South Africa increased to ZAR144 (around USD $9) per ton of carbon dioxide equivalent.
The relatively low carbon price in South Africa compared to international markets is expected to rise over the next decade as the country rolls out the tax in phases. According to the Organisation for Economic Co-operation and Development (OECD) in 2021 South Africa’s carbon tax covered 37.8% of emissions. The rate is expected to increase annually with the removal of carbon tax allowances. The tax is expected to lead to an estimated decrease in emissions of 13 to 14.5% by 2025 and 26 to 33% by 2035 compared with business-as-usual.
The International Monetary Fund (IMF) has proposed a carbon price floor of US$25 (R375) /tCO2e to help achieve a 23% reduction in global emissions below baseline by 2030, enough to bring emissions in line with keeping global warming below 2°C.
Emission trading schemes and the carbon market
The Department of Environmental, Forestry and Fisheries has developed a draft post-2020 Climate Change Mitigation System to create a framework for the country to meet its domestic mitigation ambitions and international commitments. Among the policy instruments to support mitigation activities under consideration are Emission Trading Schemes which includes carbon offsets and carbon markets.
A domestic carbon market works on an entity or sector’s domestic carbon budget and essentially allows entities to trade their unused allowance on the market. This means that entities that emit below their allocated carbon budget are eligible to trade their unused carbon allowances or credits to other entities that emit over their emissions allowance. Trading carbon as a commodity comes with its own challenges and limitations such as market volatility, high administrative costs and the risk of turning historical emissions into a carbon credit that is basically an asset. According to an analysis by the World Wildlife Fund (WWF), the social cost of carbon already paid by others in the economy becomes a double financial reward to the high emitter. A noteworthy characteristic of the potential carbon trading system is that the electricity sector will be excluded to avoid “carbon leakage” This occurs when emissions rise in a country without strict climate policies because a company moved its operations from another country where climate policies are stronger. The IPCC defines carbon leakage as “the increase in CO2 emissions outside the countries taking domestic mitigation action divided by the reduction in the emissions of these countries. It has been demonstrated that an increase in local fossil fuel prices resulting, for example, from mitigation policies may lead to the reallocation of production to regions with less stringent mitigation rules (or with no rules at all), leading to higher emissions in those regions and therefore to carbon leakage.”
Last year, South Africa released a draft domestic framework for a carbon offset program for public comment. In South Africa, 10% of a company’s carbon tax can be reduced through offsets. Carbon offsetting happens when emission reduction activities are too expensive for a particular company who then pays for another company to lower theirs, thereby counting the emissions cut towards its own. Globally, the WWF report found that the role of developing countries in carbon trading has been dependent on offset demand from developed countries which has remained insufficient and volatile. This could lead to the price signal being ineffective and demand being unreliable. This risk could be similar for South Africa where emissions are concentrated among a few big companies who could potentially monopolize the carbon offset and trading market.
On 22 February 2023, South Africa’s Finance Minister announced a new tax incentive to stimulate the uptake of solar rooftop panels. Individuals who pay personal income tax can claim the rebate against their tax liability. Individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15000 per individual.
Despite the strides made in clean energy finance, financial mechanisms for energy development still include high volumes for fossil fuel development and end up working against mitigation goals. Energy subsidies in South Africa more than tripled between 2017 and 2020 to ZAR 172 billion (USD 10.4 billion), with the highest subsidies allocated to fossil fuels, including coal-fired electricity, according to a report from the International Institute for Sustainable Development (IISD), titled South Africa’s Energy Fiscal Policies: An inventory of subsidies, taxes and policies impacting the energy transition. The report shows that the government spent nearly ZAR 67 billion on bailouts for carbon-intensive companies, particularly the state-owned utility Eskom, as well as ZAR 43 billion to support the oil and gas industry. In addition, carbon tax exemptions cost South Africa a further ZAR 45 billion in lost tax revenues.
To stop the trend of rising fossil fuel subsidies, the authors at IISD recommend that the government must tie bailouts to the energy transition and phase out carbon tax exemptions, particularly in the electricity sector.
More story themes for journalists:
Monitor fossil fuel subsidies that could go to cleaner, more sustainable energy development.
South Africa’s fossil fuel subsidies are among the highest in G20.an this affect future international climate mitigation finance?
Financing South Africa’s most ambitious pathway to Net Zero emissions by 2050 is a tall ask of both the private and public sector — who is leading the way?
Financial market adaptation towards Net Zero in South Africa — how can the markets transform for a sustainable future?
Are alternative and distributive ownership models effective for a just transition in South Africa?
How will South Africa use the USD $8.5 bn pledged towards its just transition by international partners?
Is South Africa incentivizing investments in climate mitigation infrastructure?
How effective is South Africa’s carbon tax for financing climate mitigation?
Is the international carbon market a suitable place for South Africa to raise capital for climate mitigation?
How is fiscal and monetary policy inhibiting ambitious climate action in South Africa?
Financial pledges towards mitigating further harm to the climate is a hotbed on the international and national stage of climate diplomacy. There is collective consensus that certain countries must reach net zero sooner than others as part of their fair share of current and historical emissions driving the crisis. They must also assist less developed economies with the financial means to mitigate and adapt accordingly as a result of that larger share. Parties to the UNFCCC convention and the Paris Agreement agree that both capacity to transition to low emission economies and historical responsibility for current climate damages vary enormously.
South Africa’s emissions gap amounts to 62 MtCO2e to be on a 1.5 degree temperature pathway by 2030 according to Climate Transparency. This will however change if it meets the bottom, and more ambitious end of its Nationally Determined Contribution (NDC) range which is 350 – 420 MtCO2e in 2030. The government considers the link between higher ambition and higher chances of accessing low interest finance from developed countries and multilateral banks.
In 2022, the 13th Emissions Gap Report showed that the most updated emission cut pledges made little difference to 2030 estimated emissions and would not amount to cuts required for net zero emissions by 2050. The annual series is an overview of the difference between where greenhouse emissions are predicted to be in 2030 and where they should be to avert the worst impacts of climate change. The 2022 report found that if policies currently in place stay the same, they are projected to result in global warming of 2.8°C over the twenty-first century. Each degree warmer represents a new level of threat and harm for humanity and the planet.
“Around 80% of global GHG emissions are coming from G20 countries. So it is clear that solutions need to be found in those geographies. The physics of climate change are quite well understood, we need to bring global emissions down to net zero. We as a society, we need to reinvent and reimagine the way we do things.” Joeri Rogelj, Climate Scientist, Emissions Gap Report Author
Here are some creative ways for journalists to report on emissions gaps in their countries. By using creative approaches, journalists can help to raise awareness of the emissions gap and the need for action:
Be engaging. Use storytelling techniques to make your reporting more interesting and engaging. What risks and opportunities might closing the emissions gap present for South Africa?
Focus on solutions. Journalists can also play a role in highlighting solutions to the emissions gap. For example, they could write about new technologies that are helping to reduce emissions, or they could write about policies that are being implemented to encourage people to reduce their carbon footprint.
Be clear and concise. When reporting on complex issues like emissions gaps, it is important to be clear and concise. Use simple language that your audience can understand.
Be accurate. Make sure to check your facts and double-check your sources.
Be fair. Present all sides of the issue fairly and objectively.
Carbon budgets and the concept of Fair Share
To understand “fair share” you must understand the concept of carbon budgets and historical responsibility.
The carbon budget is the maximum amount of emissions that can be released before the point at which temperature goals are missed. Total CO2 emissions in 2022 reached record levels and shows that the carbon budget continues to be used up rapidly. The remaining global CO2 budget to limit global warming to 1.5°C was estimated to be 400 billion tonnes CO2 in the IPCC report of 2021. For an average country, its share of the global CO2 budget will run out in eight years. For a high emission country, its share of the carbon budget will run out in two years.
This means the world has rapidly used up the remaining carbon budget to keep warming limits to livable levels –around four fifths of the budget between 2010 and 2019. At current levels it will use that up in the next eleven years. According to the assessment, for a 67% chance of keeping warming below 2°C, the remaining budget is 1150 GtCO2. Evidently, the world has a very tight emissions budget to share amongst each other in the context of varying historical responsibility and wealth.
There is, however, debate around how effective these absolute targets can be for practical policies given a number of other factors as shown in this Carbon Brief analysis.
The data shows that reaching net zero CO2 emissions by 2050 would now require a decrease of about 1.4 GtCO2 each year comparable to the observed fall in 2020 emissions resulting from COVID-19 lockdowns, highlighting the scale of the action required.
Fair Share speaks to the notion of “common but differentiated responsibilities and respective capabilities, in the light of different national circumstances” in the Paris Agreement (Article 4.3). It was also recognized in the establishment of the Rio Declaration and the UNFCCC itself.
So how is a country’s fair share really determined?
Historical responsibility is a big part of determining fair share in climate finance. As an OECD country, South Africa’s contribution to climate finance is voluntary. Even though India and China are among the highest present day emitters, their historical responsibility for emissions driving the climate crisis is much less than much of the developed nations like the United Kingdom, the United States, Australia and the European Union for example. This is why it is expected that those who have the largest historical responsibility for emissions over two centuries and the highest capability should act faster than those lesser so.
In relative and absolute terms, the US is responsible for the vast majority of the climate finance gap according to available data.
“The country is an outlier for its population size, economic heft and historical contribution to climate change,” said Colenbrander, S., Pettinotti, L. and Cao, Y. (2022) in their paper, ‘A fair share of climate finance? An appraisal of past performance, future pledges and prospective contributors.’ ODI Working Paper.
The climate finance gap in 2022 is forecast to be up to $8 billion (OECD, 2021). According to the paper, the US would singlehandedly fill this gap several times over if it were to deliver its fair share.
“The country provides just 17% of its fair share of international public finance, accounting for $160 billion of the global shortfall.”
The Climate Equity Reference Framework, led by the Climate Equity Reference Project (CERP) who designed the Climate Equity Reference Calculator –is one recognised measure. Developed by Tom Athanasiou & Paul Baer of EcoEquity and Sivan Kartha & Eric Kemp-Benedict of the Stockholm Environment Institute, the fair share analysis framework and calculator is supported by a wide range of civil society groups, including several in South Africa. The same framework was used to determine South Africa’s Nationally Determined Contribution (NDC) deposited to the UNFCCC in 2021.
There are a number of elements to determining Fair Share:
The remaining Carbon Budget
South Africa’s baseline emissions projected by 2030 is 539 MtCO2e and an unconditional pledge to drop emissions by 614 Mt CO2eq in its latest low end of the emission range pledge, according to the Climate Equity Reference Calculator. It plans to reduce the baseline by 42% in the year 2025 and -14% below baseline by 2030. For the high end of the emissions range it will reduce emissions by 398 Mt CO2eq which is only 26% below that 2030 baseline. The calculator shows that the country’s lower end range falls short of the mitigation fair share by 4.5 tCO2e/cap and 1.3 tCO2e/cap for the higher end range.
NB. South Africa’s most ambitious end of its NDC ranges are conditional on financial support.
A Centre for Environmental Rights report however concluded that new coal (1500 MW) planned in South Africa’s existing energy masterplan (IRP2019), runs counter to efforts to keep to the country’s fair share of emissions reductions and its NDC’s most ambitious targets, “introducing unnecessary emissions and raising energy costs. Indeed, it would increase by R109 billion the cost of efforts to reduce emissions to a level (350 MtCO2eq) consistent with South Africa’s fair share of global emission reductions and consistent with the Paris Agreement’s temperature limitation objective,” the legal environmental rights organization said. The IRP is currently under review. In May 2023 the Presidential Climate Change Commission released its recommendations for the new Integrated Resource Plan following a multi stakeholder colloquium.
Journalists can cover South Africa’s fair share by:
Reporting on public investments in fossil fuels that are in contradiction to SA’s NDC and fair share
Reporting on the new electricity plan in relation to international climate finance agreements
Reporting on South Africa’s future role in the climate crisis if things remain “business as usual” and what that means for vulnerable groups
The costs of different energy technologies
In South Africa, as in most other countries, solar and wind are the cheapest options for new power generation capacity.
This follows substantial declines in the costs of new projects as these technologies matured.
In bid window five of South Africa’s renewable energy procurement program, the average cost of solar and wind projects was 47c per kilowatt hour (kWh). One wind project was bid at just 34c/kWh. This is an all-in cost that includes construction, operations and maintenance. Importantly, this tariff only applies to electricity sold to Eskom – in other words, Eskom does not pay a wind farm if it is not contributing to the grid.
In bid window six of the renewables program, which ended up being exclusively focused on solar projects because grid constraints effectively disqualified wind farms, the average tariff was 49c/kWh. The increase in tariffs came as no surprise – input costs had surged in the wake of Russia’s invasion of Ukraine and China’s Covid-19 lockdowns.
In comparison, however, Eskom’s coal purchases alone cost the equivalent of 44c/kWh in 2022. This excludes construction, operations and maintenance costs.
A new coal project would cost about R1.27/kWh, based on the most recent project bids, adjusted for inflation.
New nuclear or gas facilities would cost well above R1/kWh, according to the Council for Scientific & Industrial Research.
Citing data from financial services company Lazard, Eskom says solar photovoltaics (PV) and wind are the cheapest sources of new power generation capacity available in the global market.
Gas, nuclear and coal trail behind, in that order. On a levelized cost of energy basis, a new coal-fired power plant delivers electricity at nearly four times the cost of a new solar plant.
In an October 2021 report, Lazard found that when government subsidies are included, the cost of onshore wind in the US averaged $25/MWh, while utility-scale solar projects cost $27/MWh.
On the other hand, the cost to merely operate an existing plant averaged $42/MWh for coal, $29/MWh for nuclear, and $24/MWh for combined cycle gas generation. This excludes construction costs.
It is therefore generally cheaper to build, operate and maintain a solar or wind farm than it is to keep a coal or nuclear facility operational.
The changing energy mix
In 2022, renewable energy technologies — solar, wind and hydro in particular — accounted for 29% of the global power generation mix, according to the International Energy Agency (IEA). Nuclear held a 9% share, coal 36%, and gas 23%.
The share of renewables was up 6 percentage points from the 2015 figure (23%).
The energy transition is finally gaining momentum due to the rapid decline in wind, solar and battery storage costs, and because nations are seeking to shore up energy security in the wake of Russia’s invasion of Ukraine, which pushed up fossil fuel prices and led to supply shortages in some cases.
The IEA says renewables — and to a lesser extent, nuclear — will account for the vast majority of new generation capacity additions in the years ahead. Together, these low-carbon sources are expected to meet more than 90% of the additional electricity demand over the next three years.
By 2025, renewables will cover 35% of the world’s electricity needs, the IEA predicts.
In contrast, renewables — including hydro — made up just 14% of South Africa’s electricity mix in 2022. Coal supplied 80% of the country’s power, nuclear 5%, and diesel 2%.
But the country’s electricity mix could change fast.
Seven of Eskom’s 15 coal-fired power plants will reach their end of life by 2030, thus removing another 22GW of capacity from the grid. It’s important to note that the country’s just transition plans do not accelerate coal plant closures — this was not necessary given that most of Eskom’s stations are nearing their end of life in any case.
South Africa’s future electricity mix will be determined by the department of mineral resources and energy’s Integrated Resource Plan (IRP), which is currently being updated, and by the actions that municipalities and companies take now to shield themselves from rolling blackouts.
The 2019 version of the IRP includes some allocations towards coal and nuclear power, despite these being the most expensive options. Nevertheless, the largest allocations were for wind and solar power.
Outside of the formal IRP process, the private sector is also favoring solar and wind, as these are the cheapest technologies available and the fastest to roll out.
In late February, Eskom revealed that power projects with a combined capacity of 20.2GW — mostly solar and wind projects — are actively seeking grid access or are already in the process of connecting to the national electricity network.
A large share of these projects will have to be rejected as the grid is already congested in some areas, but experts say this shows encouraging progress given the size of the task ahead.
According to South Africa’s just energy transition investment plan, the country will need 50GW of new renewable electricity capacity by 2030, plus gas and battery storage capacity to ensure security of supply and grid stability.
As such, South Africa will need to raise its ambitions — fast. Like the rest of the continent, the country is falling far behind in the transition to cleaner, cheaper energy.
According to the Global Wind Energy Council (GWEC), about 77GW of new wind energy capacity was connected to power grids in 2022, led by China, the US, Brazil, Germany and Sweden.
In South Africa, however, no new wind facilities were connected to the national grid. This reduced South Africa’s share of the world’s total installed wind capacity to just 0.4%.
In a separate report, the International Renewable Energy Agency (IRENA) found that Africa as a whole accounted for only 1% of the 295GW of renewable energy installations in 2022.
Pros and cons
Traditional energy technologies — coal and nuclear in particular — are uncompetitive economically, partly because they require a constant supply of fuel. However, they do carry some advantages.
They generally deliver power most of the time, and can dispatched when needed (although coal and nuclear plants are much slower to start up relative to gas or battery storage facilities). This is why they are sometimes referred to as “baseload” plants.
On the other hand, solar and wind farms cannot always be dispatched when needed, and they generally operate at lower capacity factors than coal and nuclear plants.
Moving to wind and solar also requires investments to modernize the electricity grid. New transmission lines are required to connect solar and wind farms in remote areas, such as rural parts of South Africa’s Northern Cape. Eskom’s transmission unit has been unbundled from the entity and will operate as the Transmission Company of SA. It will require finance for around 8000 km of new transmission lines according to the state utility.
Batteries and pumped hydro facilities are necessary for storing solar and wind energy for when it’s needed most, and other technologies.
These and other technologies, such as flywheels and synchronous condensers, will also be required in a renewables-led grid to keep it stable and functioning optimally.
All things considered, however, a power grid dominated by renewables will reduce costs and ensure energy security and price stability by removing the need to constantly burn fuels.
In a modern electricity network, such as the one Australia is rapidly moving towards, solar and wind farms compete to supply the grid every single day. Using advanced weather forecasts, they bid in the day-ahead spot market. The system then runs ongoing bids each day to smooth out any shortfall or excess supply.
In this way, electricity grids are becoming increasingly flexible — drawing on whichever generation facilities are online and offering power at the lowest cost.
Tips for journalists: Use data visualization to make the issue more accessible to readers. Data visualization can help to illustrate the scale of the emissions gap and the impact it is having on the environment. For example, journalists could create infographics that show how much carbon dioxide is being emitted by different sectors of the economy, and their carbon budget or they could create maps that show the source of emissions. Tell human stories to connect with readers on an emotional level. Stories about people who are being affected by a lack of climate change finance that can help to bring the issue to life for readers. For example, journalists could interview people who have lost their homes to floods or wildfires. Or, people who lost their jobs to coal power closures and are entitled to receive relief from a social welfare fund or reskilling opportunities. You could interview people who are transforming local economies with new sustainable sectors Assess whether new electricity development plans align with the just transition framework and the conditions of international finance deals. Inform communities of opportunities that emerge from the changing energy environment
Resources for Journalists
- Sources for the information contained in this tipsheet are hyperlinked where referenced for your convenience.They include finance tracking, emission gaps, country info, fair share calculators and other scientific reports.
- For familiarity on finance as per the Paris Agreement and the UNFCCC you can navigate their summaries for policy makers for a shorter read.
- South Africa is among the OECD countries with a country profile and information relating to climate change.
- The Presidential Climate Change Commission uploads most meetings and reports from the secretariat office here.
- Climate Action Tracker monitors and updates climate commitments — ranking them between highly insufficient and highly efficient.
- You can find South Africa’s 2021 Nationally Determined Contribution submitted to the UNFCCC here.
- South Africa’s Low Emissions Strategy is an important guide for reducing GHG emissions in high emission sectors.
- A useful study on the climate finance environment in South Africa is here.
This tipsheet was produced by Tunicia Phillips with input from Nick Hedley.
Banner image: The Rooiwal Power Station, South Africa/ Credit: Tambako The Jaguar via Flickr.