“We think it could be a very important feather in the cap of this COP if broad outlines are announced that could provide a template for other country-scale transactions,” said Mike Muldoon, managing director for innovative finance at the Rockefeller Foundation. “We think this is one of the only solutions that meets the scale of the challenge.”
South Africa, whose economy is one of the most coal-intensive in the world, wants to steer investment into renewables and start shutting down its aging fleet of 15 coal-fired, carbon-spewing power plants, which supply 84 percent of the nation’s electricity.
In a September report to the United Nations ahead of the Glasgow, Scotland, climate summit, South Africa pledged to slash its greenhouse gas emissions by as much as a third by 2030 and close six coal-fired power plants to stick to a path of as much as a 1.5 degree Celsius (2.7 Fahrenheit) change in global temperatures since the late 1800s.
But South Africa can’t launch its plan without international help from governments as well as private investors. The state-owned utility Eskom is drowning in more than $27 billion in debt. After borrowing too much to build coal plants, it isn’t able to scrape together enough money to invest in renewables or transmission lines. Frequent rolling blackouts have angered residential and business customers and are making Eskom a target in municipal elections. And restructuring the electricity sector could idle large numbers of the roughly 120,000 workers in power plants and mines, requiring retraining and improved social services.
The rescue plan could tap into money from the United States and Europe, multilateral lending institutions and private foundations. It could also involve bonds whose interest would be paid in the form of carbon reduction.
John Morton, the Treasury Department’s first climate counselor, traveled recently to South Africa and said the utility there, a vertical monopoly, was in a “too big to fail situation.” He said funds could eventually help Eskom regain access to capital markets and help affected workers.
“The major pieces of the deal will likely include a faster rollout of renewable energy and a faster exit from coal, with the just transition agenda featured prominently,” said Katie Ross, also with the WRI. She said in an email that it was important to ensure that “communities and livelihoods tied to the coal industry are uplifted and protected in the transition.” She said it was particularly important in the northeast region of Mpumalanga, where 90 percent of coal mines and 70 percent of coal power plants are located.
The negotiations over Eskom are ripe with historical references and internecine politics. President Cyril Ramaphosa, who was general secretary of the mineworkers’ union in the apartheid era before he became wealthy as a private businessman, has cautiously backed the financial talks. He has received support from the Congress of South African Trade Unions, whose leaders recognize the need to scale back coal.