Report on Outcomes of COP26, Implications for SA & COP27 Preparation; Climate Partnership Fund for just energy transition in South Africa; with Minister

Environment, Forestry and Fisheries

10 May 2022
Chairperson: Mr P Modise (ANC)
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Meeting Summary

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Just Energy Transition in South Africa

In a virtual meeting, the Committee was briefed by the Department of Forestry, Fisheries and the Environment on outcomes of the twenty-sixth Conference of the Parties to the United Nations Convention on Climate Change. The Department indicated its six priorities and the outcomes for each of those priorities. One of the key outcomes is the additional $300 million that developed countries have pledged for the Least Developed Country Fund and $450 million towards the Adaptation Fund. A key outcome for the twenty-seventh conference is establishing a Just Energy Transition Financing Framework to support the coal phase-down programmes and more programmatic support for net-zero linked to countries' National Determined Contributions and their expected 2024 Updated National Determined Contributions.

The Department also indicated agreement on the establishment of carbon markets under Article Six of the Paris Agreement. A joint negotiations team has been established between South Africa and the partner group of countries to discuss an investment plan and financing modalities, as reflected in the Political Declaration on the $8.5 billion.

Members asked for the timeline on the $8.5 billion to develop the plan and strategy, which would then be presented to Cabinet. Members questioned the high tax on imported electric vehicles, and suggestions for having local manufacturing of electric vehicles were raised. Members also asked the Department about how South Africa increased its footprint on the green bonds and what type of green bonds the country will pursue. Members requested more clarity on the carbon markets and hydrogen-based products.

Meeting report

The Chairperson was unable to attend the meeting due to not feeling well. Mr P Modise (ANC) was then elected as the Acting Chairperson. The agenda was outlined and agreed on by all Members. The Department of Forestry, Fisheries and the Environment (DFFE) was welcome.

Outcomes of the Twenty-Sixth Session of the Conference of the Parties to the United Nations Convention on Climate Change (UNEFFC COP26)
Mr Maesela Kekana, Chief Director: International Climate Change, DFFE, said that Members would recall that the Department indicated that it had six priorities last year. The six priorities were presented as follows:

1. Finance:
- Secure new commitments of support by developed countries for implementation by developing countries, addressing mitigation and adaptation.
- Provide clarity on and commence the process for determining a new and more ambitious goal for long-term finance, increasing beyond the $100 billion per year from 2025.

2. Market Approaches / Article Six:
Complete work on Market Approaches under Article Six of the Paris Agreement, prioritising securing a share of proceeds for predictable financing for adaptation.

3. Adaptation:
- Launch the work programme on operationalising the Global Goal on Adaptation (GGA).

4. Reporting / Transparency Framework:
- Conclude the elaboration on common reporting formats and tables as this will enhance transparency.

5. Mitigation:
- Conclude consideration of the common time frames for Nationally Determined Contributions (NDCs)
Increased ambition (keeping 1.5 degree alive) through enhanced NDCs and long-term mid-century plans.

6. Securing the Special Circumstances of Africa:
- Securing international recognition of Africa ́s Special Needs and Circumstances remains a priority.

The outcomes for each of the priorities listed were then presented. The deliberations on a new collective global goal on climate finance support for developing countries have been initiated on finance. The agenda item on long time finance for developing countries, which was to have ended at COP26, will continue under the Convention until 2027, with a specific focus on reviewing and monitoring the US$100 billion per annum goal from 2021 until 2025. A platform has been set up to address both the Just Transition and alignment of financial flows, consistent with a pathway towards a low greenhouse gas emission future and resilient climate development. An additional $300 million has been pledged by developed countries for the Least Developed Country Fund and $450 million towards the Adaptation Fund. Dedicated climate finance to the Global Environment Facility (GEF) will be increased.

After six years of intense and difficult technical discussions on carbon markets, there was agreement on the establishment of carbon markets under Article 6 of the Paris Agreement. Africa's key requirement of using the markets to secure a predictable and at-scale funding source for adaptation is partly accommodated through a voluntary share of proceeds contributed to the Adaptation Fund from the Article 6.4 mechanism and reporting under the enhanced transparency framework.

On adaptation, a two-year work programme has been agreed upon to operationalise the global goal of adaptation under the Conference of the Parties to the Paris Agreement (CMA) as the governing body of the Paris Agreement. On the reporting priority, a two-year work programme has been agreed to operationalise the Global Goal on Adaptation under the Conference of the Parties to the Paris Agreement (CMA) as the governing body of the Paris Agreement.

On mitigation, parties have agreed on a five-year common timeframe for implementing the Nationally Determined Contribution, starting in 2031. Parties have also agreed to keep the global temperature increase to 1.5 degrees alive - a call to align NDC with this goal. An annual mitigation ambition work programme has been established, coupled with ministerial roundtables, to assess progress on implementation. And on the last priority, this remains unresolved. Securing international recognition of Africa's special needs and circumstances remains a priority, especially in light of the acute vulnerabilities of African countries and the need for policy space and time to effect a just transition.

Implications for South Africa

South Africa is already implementing the decisions of the UNFCCC, e.g. regarding mitigation, South Africa submitted an ambitious Nationally Determined Contribution (NDC) in September 2021. The enhanced NDC has been commended for being compatible with the 1.5 degrees goal. The Department has worked with district municipalities to formulate adaptation strategies on adaptation. On Reporting, Enhanced Transparency Framework (ETF), the Department has submitted the Fourth Biennial Updated Report that the UNFCCC reviewed. Currently working on the Fifth BUR before transition into the new reporting system (ETF) that was agreed in Glasgow. The Climate Change Bill will be key to enforcing implementation by all spheres of government.

The $8.5 billion offer to South Africa

A joint negotiations team has been established between South Africa and the partner group of countries to discuss an investment plan and financing modalities as reflected in the Political Declaration. South Africa has established a Finance Work Stream under Mr Daniel Mminele to work on the details of the financial offer. The Presidential Climate Finance Task Team is analysing the offer to advise Cabinet on its composition, affordability, alignment with the regulatory environment, engaging with partner countries; coordinating relevant government departments, development finance institutions, and the private sector; to also oversee the development of relevant financing mechanisms and facilities to enable the flow of international climate finance to support South Africa’s just transition in the electricity, electric vehicles, and green hydrogen sectors.

Way Forward for COP 27

AMCEN and the AFRICA GROUP OF NEGOTIATORS (AGN) will continue to represent the continent at COP27. In contrast, as the incoming COP27 Presidency, Egypt will provide space for informal Ministerial engagements to prepare for COP27. COP 27 will focus on issues that did not make sufficient progress in Glasgow, including the following:
Finance: there is an expectation for an increased new and quantified long-term goal for finance and clear signals that financial commitments by developed countries will be met. The Department would like to see roadmaps for how such support will be committed and delivered. It remains increasingly concerned about how developing countries will access these so-called new resources.
Adaptation: The event expects good progress on the Glasgow–Sharm el-Sheikh work programme on the global goal of adaptation (GGA), including understanding the goal, metrics for contributions towards the GGA, and how such contributions and financial support for them can be considered adequate and fair.
Loss & Damage (L&D): Funding for L&D is critical, and this conversation should lead to a decision and concrete outcome on financing for loss and damage. There is an expectation for substantive progress on the Glasgow Dialogue on funding L&D.
The AGN has called on COP27 to launch a finance tracking tool on Just Energy Transitions. A key outcome for COP27 is the establishment of a Just Energy Transition Financing Framework that will support both the coal phase-down programmes and more programmatic support for net-zero linked to countries' NDCs and their expected 2024 Updated NDCs.
Africa’s special needs & circumstances: COP27 will seek to reach a decision that launches a consideration of special needs and special circumstances of African countries and other developing countries under the Paris Agreement in line with the relevant and previous decisions adopted by the COPs.

However, the continent will refine these positions as the negotiations under the multilateral process unfold.

Discussion
Mr D Bryant (DA) asked about the feedback on the $US8.5 billion offer and how far along the finance task team was with analysing the offer, with the view of advising Cabinet afterwards. When will it go to Cabinet? Will the Committee get the opportunity to interrogate what is being presented? There are a number of things that need to be taken into consideration – for instance, the desire to increase accessibility to electric vehicles while the current taxes on electric vehicles imported into the country are extremely high. That needs to be urgently addressed before even getting to that point.

On the discussion around green bonds: how will South Africa increase its footprint on the green bonds, and what type of green bonds the country will pursue – for instance, sustainability linked bonds or proceeds linked bonds? All of these are related to how the money will be spent, as the greatest tragedy will be not acting fast enough and not seeing the sense of urgency that is required currently.

Mr N Paulsen (EFF) said that before Members start interrogating how the money will be spent, Members must ask themselves what South Africa’s climate mitigation strategy is. It is then that costs can be attached to that strategy and then determine whether the funds made available will be sufficient for that strategy. The taxes on luxury vehicles are high, as Mr Bryant said. However, more importantly, manufacturers should be encouraged to set up local production plants, which will be a climate mitigation strategy. Manufacturing of these vehicles should be done locally, and that should be one of the key drivers of South Africa’s mitigation strategy. The country must start investing in its ability to produce its own vehicles.

Ms C Phillips (DA) asked whether the Department promotes carbon markets as an income source for impoverished communities. Has such information been made as a presentation to the Committee? There is no point in promoting electric vehicles if they are fueled with electricity from fossil fuels, and a more sustainable way of fueling these vehicles should be looked into. The presentation is nice and short, but more details should be provided to the Committee.

Mr N Singh (IFP) said that words like ‘promises’, ‘commitment’ and ‘pledges’ bring a sense of despair, as actions speak louder than words. Can the Portfolio Committee be given five examples of how funds that have been promised or pledged have been used in the South African context contributing to reducing greenhouse gas emissions, etc?

Is there anyone monitoring whether the solar panels on households all over South Africa are being effectively used? Were there some companies who made a fortune installing these solar panels and then just forgot about them? Which department is responsible for monitoring the use of these solar panels? On projects that would contribute to alternative energy sources in the country are introduced, are managed by overseas companies? Are the funds given to South African companies, or are those companies that come to South Africa and get the funds allocated? Can the Minister and presenter give comfort that all the COPs have produced some form of positive result?

Ms T Mchunu (ANC) asked how far the district municipalities were able to achieve the strategy that had been formulated, i.e., the adaptation strategy. In all the work that talks about the issues of COP 27 and previous conferences, the Portfolio Committee and Department need the collaboration of other Departments. Is there a presentation on the priority of Securing the Special Circumstances of Africa on the needs, and the assessment thereof, that will benefit South Africa and other African countries in the coming COP 27? Can more clarity be provided on that?

Ms S Mbatha (ANC) asked if there was room for South Africa to reduce its carbon intensity without hurting the economy and job losses. What decisive actions will South Africa have to take to halve emissions by 2030 and reach net zero emissions by 2050? How much demand does South Africa have for green hydrogen-based products? What is the M&E tool to monitor the municipality’s implementation of the mitigation plans?

Dr B Holomisa (UDM) remarked that, following the Minister’s response, there might be a need for the relevant portfolio committees to meet and work together. He suggested that, after coming back from the COP convention, a programme on who will be approached and who is a polluter should be presented, and the Department must then approach those people.

Minister’s Response
Ms Barbara Creecy, Minister of Forestry, Fisheries and the Environment, reminded Members to remember the topic that the Department was asked to present. The Department was asked to report on the climate change negotiations at COP 26 and not report on South Africa's climate change strategies and progress in meeting its mitigation and adaptation objectives. The presentation on those other topics can be provided separately to the Portfolio Committee, as it is a priority of the Department.
There is urgency in South Africa's interventions. The Chairperson of the Committee has just come from a two-day workshop that the climate commission had last week on Thursday and Friday, where consultation is taking place across the country on exactly what the Just Transition framework looks like.

For the first time, the Climate Commission has been going into communities dependent on the coal and mining value chain and other areas of high carbon economy. The commission has discussed with communities what a transition from a high-carbon economy to a low-carbon economy looks like. There is extensive work that the Climate Commission is supporting that is looking into seven vulnerable sectors of communities and mapping out pathways. International negotiations move at a very slow pace due to certain reasons. Even though there is a sense of urgency in climate change, it should be acknowledged that such negotiations will take a little bit of time.

Department’s responses
Mr Kekana replied that when the carbon markets were first agreed to under the Convention, it was to assist countries in attaining their mitigation targets. For example, a country can invest in another country to make some mitigation efforts. Such cooperation continues to increase globally, and they were quite important then because they had an element of technology transfer whenever a developed country invests in a developing country. Thereafter, a share of the proceeds from the trading that comes out would go to the adaptation fund, which would bring about this global benefit.

Mr Jongikhaya Witi, Acting DDG: Climate Change and Air Quality Management, DFFE, replied with a summary of the three mitigation instruments that the Department uses. The first one is sectorial emission targets, the second is carbon budgets and the third is the carbon tax.

Follow-up questions
Mr Singh asked for more clarity on exactly who will handle the grant money when it is received. Also, there is a need for more clarity on the economic and social benefits for local communities and companies in South Africa, from utilising these grants to promoting projects that will fall within what the United Nations and everyone else wants.

Mr Bryant asked about the timeline for developing the plan and strategy before presenting it to Cabinet. When did the most recent meeting occur between the South African negotiators and the international negotiating team?

Minister’s closing remarks
The Minister replied that looking at the working guidelines for the Just Transition, two key points were discussed in Cabinet. The first point is that workers in vulnerable sectors of the economy cannot carry the burden of the transition without also having access to opportunities. The second point is that, as the issue of the Just Transition is approached, the Department must ensure that, by introducing green technology, it is also dealing with abiding constraints of inequality, unemployment and poverty.

By saying that, the Department needs to interrogate what is on offer; it wants to know how much grant financing is there, how much loan financing is there and how much concessional financing is there. Once all that information is gathered from the international partners, it is then that the Department will be in a position to determine how all of this matches with the regulatory environment of Treasury and if it helps with the Just Transition objectives. The issue of speed is important, but the nuances and quality of the decision are also important. The five examples that Mr Singh has requested can be provided by Mr Zaheer Fakir, although he is currently not in the meeting.

The fact that this transition has not been done before makes it complex. Other countries are looking at South Africa, as they are interested in understanding how such a complex transition is negotiated. The role of the climate commission in this process is invaluable because this transition is not just a government transition. The actual timeframes are within the Presidency, and, understandably, this is an urgent matter and process.

Mr Kekana replied to Mr Bryant that the most recent meeting was held today.

The Chairperson thanked everyone for attending the meeting.

The meeting was adjourned.

 

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