COP26: Western nations pledge $8.5 billion for South African coal phase-out

Western nations have pledged some $8.5 billion over the next five years to support South Africa's decarbonization efforts with a new political declaration announced Nov. 2 at the UN Climate Change Conference.

The UK, US, along with France, Germany, the EU and South Africa announced the "Just Energy Transition Partnership", which is expected to prevent up to 1.5 gigatonnes of emissions over the next 20 years.

"This will provide a significant boost to investment and growth while ensuring [state-owned utility] Eskom can access resources to finance repurposing of coal fired power-stations due for decommissioning over the next 15 years," South Africa's President Cyril Ramaphosa said in a separate statement.

Coal prices have surged in 2021 as global economies rebound from COVID-19. CIF ARA 6,000 kcal/kg NAR thermal coal assessed by S&P Global Platts on a 15-60 day basis has gained 157.4% this year to $177/mt Nov. 2.

South Africa depends to up to 90% on coal for its electricity, the highest share amongst G20 nations.

The country's 15 coal-fired power stations generated some 191 TWh in 2020, making it the world's sixth-largest coal generator, according to environmental think-tank Ember.

Over the next five years, the partnership will mobilize the initial commitment for the first phase of financing, through various mechanisms including grants, concessional loans and investments and risk sharing instruments, including the private sector, the joint statement said.

The 20-point political declaration sets out a framework how to deploy the funds with a basic timeframe to allow South Africa to move away from coal.

The declaration noted its "intention to decommission and repurpose or repower coal-fired power stations, invest in new low-emission generation capacity such as renewables, increase energy efficiency and pursue green industrialization such as manufacturing using green technology and a shift to the production of electric vehicles."

In a separate statement, Germany's environment ministry also mentioned support for green hydrogen with around $700 million coming from Germany's development aid funds.

French energy minister Barbara Pompili added that France was contributing $1 billion to the partnership.

Further details and an action plan for the coming 12 months are set out in an annex to the declaration including an investment plan for the partnership and progress reviews.