US official says SA's COP26 billions is for retiring coal plants, not building electric cars

accreditation
0:00
play article
Subscribers can listen to this article
Emissions rise from the cooling towers of the Eskom's Tutuka coal-fired power station in Mpumalanga. Photographer: Waldo Swiegers/Bloomberg via Getty Images Photo by
Emissions rise from the cooling towers of the Eskom's Tutuka coal-fired power station in Mpumalanga. Photographer: Waldo Swiegers/Bloomberg via Getty Images Photo by
  • A group of the world’s richest nations that pledged over R130 billion in climate finance to SA wants the money to be used to retire coal-fired power plants, according to an official
  • The funds can also be used to strengthen SA’s grid to make it easier for renewable energy producers to access the grid, and to cushion communities dependent on coal during the transition to green energy
  • When initially announced, the deal was seen as a prototype of a funding model that could be used to decarbonize other coal-dependent nations


A group of the world’s richest nations that pledged $8.5 billion (over R130 billion) in climate finance to South Africa wants the money to be used to retire coal-fired power plants, according to a senior US official involved in the talks, damping suggestions some could be channeled to producing electric vehicles and green hydrogen.

The funds pledged by the US., UK, France, Germany and the European Union and announced at the COP26 climate summit in Glasgow in November, can also be utilised to construct renewable energy facilities, the official said, asking not to be identified as the talks are private.

The money can also be used to:

  • Strengthen South Africa’s grid to make it easier for renewable energy producers to access the grid
  • Cushion communities dependent on coal during the transition to green energy

The aim is to conclude a deal, complete with investment plans, by the COP27 climate summit in Egypt in November at the latest, the official said.

The stance helps clear doubts about the use of the funds. State-power utility Eskom had initiated the talks last year in a bid to raise money to help reduce its reliance on the coal that is used to generate more than 80% of South Africa’s electricity. Meanwhile, the trade and industry ministry has been lobbying to use the financing to develop new, climate-friendly sectors in the economy, such as electric vehicles and green hydrogen.

When initially announced, the deal was hailed as one of the standout achievements at COP26 and is seen as a prototype of a funding model that could be used to decarbonize other coal-dependent nations. South Africa is the world’s 12th-biggest source of greenhouse gases, with Eskom accounting for about 40% of its emissions.

The option of channeling money to other industries was raised soon after talks on the details of the deal began. South Africa’s automotive industry is one of its biggest exporters and needs to transition to electric vehicles to maintain its market share, while an abundance of sun and wind means the country could be a competitive green-hydrogen producer. 

Any money for electric cars and hydrogen will likely come from bilateral deals as the closure of coal plants will be a quicker way of cutting global emissions, the official said. In February, South African President Cyril Ramaphosa spoke of plans to attract $18 billion of investment into a green hydrogen industry and Trade, Industry and Competition Minister Ebrahim Patel said Germany had identified the nation as a potential source of the fuel.

Green Hydrogen

Green hydrogen, which is made by splitting water using renewable energy, is seen as a way of decarbonising activities such as steelmaking and shipping. The country doesn’t currently make green hydrogen on a commercial scale or produce any electric vehicles. 

Eskom and the Department of Trade, Industry and Competition didn’t immediately respond to queries. 

The $8.5 billion, which will come in the form of concessional loans and grants, could also be a catalyst for additional private investment, the official said. 

Eskom has proposed closing a number of its 17 coal-fired plants and replacing them with renewable energy and possibly gas, as well as converting the stations to other uses to limit the impact on jobs. There are about 90 000 coal miners in South Africa with most mines and coal-fired plants in the eastern province of Mpumalanga. Thousands of workers are also employed at Eskom’s power plants. 

Funding for transmission lines would see the grid strengthened in the Northern Cape, an arid province with almost uninterrupted sunlight, and in the Eastern Cape, which is suited to wind plants. Eskom, which has forecast that it will have R416 billion rand in debt by the end of March, has estimated that it needs R180 billion to expand its transmission and distribution networks.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
15.60
+0.8%
Rand - Pound
19.71
+0.6%
Rand - Euro
16.74
+0.8%
Rand - Aus dollar
11.17
-0.1%
Rand - Yen
0.12
+0.8%
Gold
1,853.67
+0.2%
Silver
22.11
+0.4%
Palladium
2,074.50
+2.7%
Platinum
957.50
+0.7%
Brent Crude
117.40
+2.9%
Top 40
63,883
+1.4%
All Share
70,486
+1.4%
Resource 10
76,948
+0.6%
Industrial 25
76,115
+1.3%
Financial 15
16,257
+2.5%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot