From the Milken Institute Review, September 28:
With China and the West digging in for Cold War, they are actively competing to strengthen geopolitical relationships in the non-aligned developing countries — a reality that some of the latter see as an opportunity to leverage this rivalry to constructive ends. But the window of opportunity is fairly narrow.
Take South Africa. In 2021, President Cyril Ramaphosa announced his “Just Energy Transition Investment Plan” (JET IP). The JET-IP details how coal-dependent South Africa plans to use the $8.5 billion pledged in aid at the 2021 UN climate conference (COP26) in Glasgow. Ramaphosa’s goal: net zero carbon by 2030.
The hope now among climate activists is that the plan will prove to be a catalyst for other developing countries struggling to decarbonize. For while nobody’s expecting the major powers to shell out hundreds of billions of dollars motivated solely by enlightened self-interest, the thinking is that the new Cold War could be channeled in a productive direction. Maybe, but the case of South Africa suggests the road will be tortuous.
The Costs of Decarbonization
Although the JET-IP builds on the promises made at the COP26 climate conference and uses the $8.5 billion to pay for the first phase (2023-27), it is only the beginning: JET-IP would cost an estimated $86 billion for full implementation. Besides decarbonizing electricity, the plan proposes a complementary strategy of developing new vehicles fueled with “green hydrogen” — easily transportable and storable hydrogen gas synthesized from water with renewable energy. To get there, South Africa will have to find tens of billions more from foreign sources to cover the rest of the funding gap.
With world leaders dubbing JET-IP as a “benchmark” and a “first-of-its-kind approach to a just energy transition,” other countries are contemplating similar strategies to decarbonize. One of the notable outcomes of COP27 (held in 2022 in Egypt) was an agreement between the IPG (a subset of advanced industrial nations) and Indonesia to finance the latter’s transition away from coal power. Indonesia, a far larger country than South Africa, is asking for a lot larger down payment — $20 billion in grants and concessional loans over the next three to five years. Vietnam should receive a $11 billion climate financing package, for its part, mainly from the EU and the UK.
Actually, there is even more driving the West’s sudden generosity than Cold War jitters and hot-climate consequences. The West, after all, is still largely committed to global economic integration, and that won’t work if the energy transition isn’t coordinated. For example, South Africa now exports over 70 percent of the vehicles it produces to the EU. But the EU intends to forbid purchases of internal combustion engine vehiclesfrom any source by 2035. If South Africa is to remain a well-integrated part of a global economy, getting to net zero before the climate becomes unlivable, it will have to stay in sync.
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