LONDON: Climate Investment Funds, a leading multilateral investor in developing countries, said it will allocate $1 billion to help South Africa and Indonesia move away from coal to clean power.
The move comes ahead of the next round of global climate talks in Egypt in November, at which emerging markets are set to once again push for more financial help from richer countries to help them make the transition to a low-carbon economy.
Getting countries to give up cheap coal energy in favour of greener alternatives is a key aim of the talks, yet who pays for it has proved harder to nail down, particularly in developing countries.
Under the agreement, South Africa and Indonesia will be able to access $500 million each in cheaper, risk-bearing capital from CIF’s Accelerating Coal Transition (CIF ACT) investment programme, CIF said.
The hope is that the two countries can then attract more money from multilateral lenders such as the World Bank as well as private sector investors to help fund their climate plans.
With the CIF investment, South Africa would be able to retire several coal-fired power stations and replace them with renewable energy and energy storage systems, whilst helping local communities with resources, including jobs.
The CIF funding is expected to help encourage other lenders to give at least $2.1 billion to help fund the country’s Just Energy Transition Partnership (JETP), an $8.5 billion plan to move the country away from its reliance on coal power announced at climate talks in 2021.
“There is no winning our fight against climate change without a rapid, just transition away from coal,” said Climate Investment Funds Chief Executive Mafalda Duarte.
“With these new investment plans, South Africa and Indonesia are stepping up and striving to show the world a new path forward.”
Decommissioning the South African coal plants could help to avoid around 71 million tons of greenhouse gas emissions, equivalent to taking nearly 14 million cars off the road for a year, CIF said.
The vast majority of South Africa’s electricity, some 87%, comes from coal-fired power stations, which make up around half of the country’s carbon emissions.
In Indonesia, CIF’s investment would help state utility Perusahaan Listrik Negara and other investors to retire up to 2 gigawatts of coal-fired power between five and 10 years ahead of schedule.
The country’s plan would also see pilot schemes launched to try and convert decommissioned coal assets into use as renewable energy ventures such as solar farms or battery storage.
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