The effects of climate change are becoming more and more difficult to ignore and the global community is starting to notice. There has been a great increase in interest in sustainable energy creation across the world in response to increasing greenhouse gas emissions and subsequent natural disasters. Many countries have started implementing energy policies and plans to reach “net-zero” over the next few decades.
While all countries are feeling the effects of climate change, Emerging Markets (EMs) are especially vulnerable to the impact of climate change and are often more reliant on traditional coal-based energy production. In combination with this heightened level of vulnerability, EMs also need additional financial assistance from Developed economies, demonstrating the need for global collaboration to mitigate climate disasters.
In response to increasing global pressure and concerns around climate change, the EU, the UK, the US, Germany and France announced their partnership (Just Energy Transition Partnership or JETP) with South Africa at COP26 last year, pledging R131 billion to facilitate the mitigation of greenhouse gas production and the movement away from coal-based energy. This partnership has created much debate in South Africa, which has a highly coal dominant energy production system with around 84% of its energy produced with coal. The coal energy industry and coal value chains also provide a large number of direct and indirect jobs across the country.
With Eskom currently struggling to meet the country’s energy requirements and constant bouts of load shedding threatening South Africa’s economic recovery, and high levels of national unemployment post-COVID, will forcing a transition to green energy production make these systemic problems better or worse?
What is Just Energy Transition?
Just Energy Transition (JET) describes the approach South Africa is said to take in the movement towards green energy production. One of the key factors of this approach is that it is “just”, meaning that all factors, including social factors, the lives of communities surrounding the coal stations, and people currently employed in coal stations, will be considered in decisions taken in the move towards renewable energy. According to Eskom, Just Energy Transition is “about moving towards a lower carbon, greener future while enabling the creation of new job opportunities for those displaced by the replacement of coal by these cleaner technologies”.
While the JET approach explicitly considers the impact that a move towards sustainable energy will have on unemployment, there is still rising fear around the potential of increasing unemployment as coal electricity production is gradually phased out. This issue can be addressed through properly reskilling and upskilling existing workers ensuring continued employment as coal power is phased out. Globally there is great optimism that the development of renewable energy sectors will create a large amount of employment opportunities, though it has not yet been shown how this will affect lower-skilled workers.
Aside from potentially decreasing unemployment there is also the potential for the JET strategy to have a positive economic effect in South Africa through other channels.
Firstly, South Africa has a favorable environment for alternative energy sources like hydro, solar and wind. These sources may provide a more efficient source of energy while being less environmentally harmful. The International Renewable Energy Agency (IREA) released a report which found that over the last 20 years the rising coal production costs in South Africa have actually made coal energy production far less financially competitive when compared to other fuel sources. More affordable and more reliable energy sources may help decrease Eskom's ever-growing debt and repair some of the damage done on the Rand by constant load shedding.
Secondly, as we’re already seeing, the inflow of foreign direct investment (FDI) through funding of green-energy projects. This FDI is imperative for the proper implementation of renewable energy production but also comes with additional economic benefits, it has been found that renewable energy production (REP) has a significant positive impact on economic growth.
While the road towards JET is still not clear, it shows huge potential to improve energy production and undo some of the harm caused by Eskom over the past decade. There is also hope that through FDI, favorable environmental conditions and international partnerships, the JET will accelerate economic recovery in South Africa and ultimately contribute towards the reduction of greenhouse gas production and the mitigation of climate disasters.