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A landmark climate finance framework endorsed by world leaders as a way to fund the green transition in poorer countries is struggling to raise capital, a report has said, resulting in polluting coal plants staying open.
The US, EU and UK were among the donors that promised to help mobilise vast sums for the green transition under the auspices of so-called Just Energy Transition Partnerships. Pledges have included a $20bn package for Indonesia to pay for the coal-dependent country’s shift to renewable energy, with similar projects in South Africa, Vietnam and Senegal.
Leaders including US President Joe Biden, former UK prime minister Boris Johnson and European Commission president Ursula von der Leyen pitched the model at the Glasgow climate conference in 2021 as a mechanism to plug the financing gap hampering the green transition in developing countries.
But according to a report from a charitable foundation based on conversations with donors and other stakeholders, frustration has grown that the deals have not yet raised the capital promised. This has forced lower-income countries to keep coal and other plants open.
The Rockefeller Foundation warned in a report on Thursday that the JETP model “may not be scalable” in its current form, blaming a lack of consistent support from multilateral development banks and the premature announcement of deals by political leaders before funding had been secured.
The current model has been “long on promise but short on progress”, said Rajiv Shah, its president.
The foundation is helping to pilot what it sees as an improved JETP-style funding pitch for up to $165bn until 2050 to accelerate renewable power and grid capacity in the Philippines, led by the country’s own institutions.
A new approach to “delivering real new money on the table” was needed, said Ashvin Dayal, who leads Rockefeller’s power and climate work. “The minute the numbers get contorted in ways that don’t actually stack up based on the original announcements, that’s when you lose political will.”
One problem has been the perception that richer countries were pushing for coal power plant closures in South Africa and Indonesia before consensus had been reached in those countries on clear job and wealth-creation plans. “It has to be centred around a vision of energy abundance,” said Dayal.
Joko Widodo, Indonesia’s outgoing president, told the FT late last year that there was “tremendous” concern over the funds not materialising.
The Asian Development Bank, which is providing technical support for the Indonesian financing package, highlighted that “the planning, design, preparation and construction of large energy infrastructure is a big undertaking”. It added that the bank was committed to helping members achieve a “just, affordable and reliable energy transition”.
Leo Roberts, head of fossil fuel transitions at the climate focused think-tank E3G, said the “negligible” sums raised showed that world leaders had set “unrealistic” expectations about JETPs.
“Without a shiny celebrity cheque there wouldn’t have been enough momentum to get them off the ground in the first place,” he said, adding: “There were billions of dollars promised to countries for certain things and that money doesn’t seem to be being moved from the Global North to the Global South.”
The Glasgow Financial Alliance for Net Zero, a group of financial institutions which has tried to mobilise private sector capital in Indonesia and Vietnam, said “the work completed [on JETPS] has helped deepen all stakeholders’ understanding of the challenge ahead and how to expedite change with further collaboration, necessary policy adjustments and public-private finance solutions”.
The US state department said rethinking a “decades-old development model” and “reforming markets to catalyse investment” would take time. “The test of success is not whether specific projects have gotten off the ground in a short period of time but whether we see sustained political will and aggressive, continued effort to turn the envisioned reforms into reality,” it added.
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