Climate Finance for South Africa May Kick-start a New Fossil Industry — Gas

This originally appeared as an op-ed by Business Day on December 9, 2021, and is reprinted below with permission.

On the margins of the 2021 UN Climate Change Conference (COP 26) in Glasgow, a group of developed countries, including France, Germany, the UK, and the US, pledged to mobilise $8.5bn (R131bn) over the next few years to help South Africa move away from coal and speed up its transition to a low-carbon economy.

The partnership is potentially excellent news. If successful, it will serve as a model for climate progress, ensuring that the costs of the energy transition and climate change are split in a more equitable way between developing countries facing high bills, and developed countries bearing the responsibility for most carbon emissions in the atmosphere.

Reactions to the announcement have ranged from cautious optimism that international climate finance may finally deliver transformational funding to strident opposition to foreign governments interfering in South Africa's domestic energy policy. Still, the majority agree the deal lacked detail and clarity on what exactly it would deliver.

No matter what it says, though, one thing should be clear: these funds cannot be used to support gas projects and unwittingly kick-start a whole new fossil fuel industry in South Africa. But as it stands, this dangerous outcome remains a possibility.

The deal stated that the money would help accelerate the development of renewable energy, electric vehicles, and hydrogen, and would support coal workers facing job losses due to plant closures. However, it also noted that state-owned power utility Eskom would have access to financing to decommission — or repurpose — part of its fossil fuel-based electricity fleet. And Eskom — whose total generation fleet of 46GW includes 39GW of coal-fired capacity — has not explicitly ruled out a conversion of existing coal plants to gas-fired units. 

Advocates of gas might argue this is a good idea as gas plants are generally thought to emit less carbon than coal, and repurposing coal plants might be quicker than developing new gas-fired plants. Yet, the long-term effects of investing in gas would be detrimental.

While carbon emissions from gas-fired plants are indeed considered to be lower than coal, emerging evidence on emissions due to methane leakage across the gas supply chain — from production and transport to final burning — shows that coal-to-gas switching cuts the emissions 0% to 30% at best, making the technology dirtier than previously believed, and perhaps no better than coal at all.

In addition, developing gas infrastructure would put the next generation of gas workers and their communities in the same challenging position that coal workers are experiencing today. Gas assets are likely to become stranded and unable to operate due to worsening economics and tightening emissions standards long before the end of their technical lifespan. The new climate finance for South Africa is meant to deal with precisely these kinds of issues, by accelerating, not hindering, a just transition. Imagine the irony if, instead, it was used to create the same problem for the next generation of workers.

Finally, as more than 20 countries recently pledged to end fossil fuel finance abroad, support for gas projects is becoming harder to find, which is weighing heavily on the economic viability of the gas sector — from exploration and production, to pipelines and power stations.

This is not to say that no gas investment should be allowed to take place in the country at all, but simply that there is no reasonable justification for including gas-fired generation among the projects funded by climate finance. Truly low-carbon technologies, such as renewable electricity generators, green hydrogen, and storage technologies, are available and should be at the centre of any serious climate-financed investment package.

So let there be no mistake. Substantial volumes of gas-powered generators that have not been fitted with carbon capture and storage technology to stop the emissions from entering the atmosphere are not compatible with net-zero emissions pathways. Gas can no longer be seen as a “bridge fuel'” between coal and renewable technologies as the latter are now cost-competitive with thermal plants. To qualify for climate finance, projects should generate close to zero carbon emissions, rather than represent a self-claimed improvement on coal, which, for gas plants, is likely to be marginal, or even negative, depending on gas-related methane emissions. 

The next step for the climate finance partnership is to establish a task force and determine an unambiguous action plan. It is vitally important that these climate funds are not the catalyst for the development of a fossil gas industry in South Africa. The task force should explicitly rule out substantial investments in fossil fuel-based projects to ensure that these funds support workers and communities while building a climate-safe future for all South Africans.