Committee for the Abolition of Illegitimate Debt

Introduction
In 1965, Ho Chi Minh described United States President Lyndon Johnson’s $1 billion gift to the Vietnamese – and simultaneous threat of endless bombing – as a “rotten carrot and broken stick.” [1] The National Liberation Front’s aim was to achieve full-fledged sovereignty in a unified country by defeating the world’s most powerful army, an awesome task yet one completed within a decade (though at the cost of two million dead compatriots and 50,000 brutal U.S. invaders).

From 2021-23, other carrots and sticks appeared in an historic standoff with the West involving a country even more symbolic for its liberation ideals: South Africa. The terrain was not a physical warzone, but a process even more far-reaching and ultimately devastating to all life: catastrophic climate change. The importance of the carrot-and-stick deals under negotiation was immense, because among countries with 10 million or more inhabitants, only two others – Kazakhstan and the Czech Republic – had economies more vulnerable to decarbonisation, measured as the emissions required for a per capita unit of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. growth. South Africa’s 500 megatonnes of annual CO2-equivalent emissions reflected the economy’s reliance upon coal-fired power plants for nearly 90 percent of energy generation.

That was because a “Minerals Energy Complex” had arisen over the prior century. [2] Starting in 1922, the parastatal electricity generation-transmission-distribution firm Eskom was supplied by a handful of major coal companies and in turn supplied 40 percent of its power to what became known as the “Energy Intensive Users Group” (EIUG) of 27 corporations. The EIUG used Eskom power to generate less than 5 percent of South Africa’s jobs, just 20 percent of GDP and a far lower proportion of national wealth (since the firms’ mining, smelting and processing of non-renewable resources were net-negative contributions to welfare once depletion and pollution costs were included).

But the MEC was also dominant in supply of fossil fuels. Until the 2010s, Eskom’s leading coal suppliers included multinational corporations Anglo Coal (London), Glencore (Baar, Switzerland) and BHP Billiton (Melbourne). Subsequently they diversified to include “Black Diamond” firms which benefited from international fossil fuel divestment campaigns (hence fire-sale prices to the new buyers, especially in AngloCoal’s case). That in turn skewed South Africa’s post-apartheid class structure, with exceptionally wealthy black mining magnates giving support to the government’s main coal advocate, Mineral Resources and Energy Minister Gwede Mantashe, who was the ruling party’s general secretary from 2009-18 and subsequently party chairperson. Before President Cyril Ramaphosa entered the government in 2014, he had chaired a coal company, Shanduka, which in the early 2010s was closely allied to Glencore (a firm convicted in 2022 for extensive bribery and corruption across Africa). [3] One of his Finance Ministers, Tito Mboweni, had - before returning to government from 2018-21 – chaired SacOil Holdings, and his successor Enoch Godongwana had in 2019 threatened bankers that if they engaged in coal company divestment (under pressure from activists), he would impose prescribed assets to force them to lend. [4]

In this context, a full-fledged decarbonisation was unlikely. Hence in 2021, it appeared likely that South Africa would face the European Carbon Border Adjustment Mechanism, aimed at preventing CO2 leakage through the import of high-carbon mining, smelting, petrochemical and capital-intensive products. To enter Europe they would be expected, starting in 2026, to pay an additional import tariff, a form of climate sanctions given South Africa’s exceptionally high embedded and direct emissions.

At the same time Ramaphosa was beginning to express concern about inclement climate sanctions, in October 2021, a carrot suddenly appeared. Led by the U.S. State Department, the main Western governments’ climate deal-makers visited Johannesburg and wielded incentives and punishments in negotiations with Eskom, the state-owned power company that at peak was the world’s fourth largest. At the time, its notional capacity was more than 45,000 MegaWatts, mostly based on coal-fired electricity, but typically less than two thirds was available due to ongoing breakdowns of the generators. By 2023 that figure dropped below 50 percent, and the society and economy suffered from power cuts (“load shedding”) of more than ten hours daily.

With the grid’s available renewable energy of less than 6000 MW, it was urgent to rapidly provide Eskom sufficient climate financing to retire older coal-fired power plants – nearly all built during the 1960s-80s – more rapidly so as to lower greenhouse gases embedded in electricity used by South Africa’s main exporters. The carrot on offer – a Just Energy Transition Partnership (JETP) decarbonisation deal worth $8.5 billion in mainly concessional loans – was negotiated by Eskom chief executive officer Andre de Ruyter, who was then fired in February 2023 for whistle-blowing about electricity-generation corruption involving the ruling party.

The risk, however, is that both the climate-financing carrot and stick as applied in South Africa will provide only a continuation of – rather than break from – a future of rising greenhouse gas emissions, massive loss and damage due to extreme weather, and the polluters’ refusal to acknowledge, much less reimburse, the historic climate debt they owe. [5] The case study considered in the pages below is illustrative of both great potential and counter-productive implementation. As a result, climate financing and carbon pricing will be seen, potentially, as having done more harm than good.

Both cases provide important lessons for the way the West treats not only South Africa in supplying strings-attached climate financing, of the sort that locks in underdevelopment and ineffectual decarbonisation, instead of the reverse. These models will, at the time of writing in early 2023, also be applied in Senegal (the carrot) and Mozambique (the stick), two examples of states whose elites are subject to hypocrisy by the West, especially Europe. Both are also receiving generous financing and ideological support for gas extraction from the German and French governments, respectively. Indeed, they have more general implications for the rest of the world, given the high priority that both market incentives and disincentives enjoy at a time climate policy remains profoundly neoliberal, and climate finance is a profoundly contested concept.

Amsterdam revelations
Climate injustice was on display during a debate in Amsterdam (at the cultural venue De Balie) late in 2022. [6] The lead Dutch climate diplomat, Jaime De Bourbon, attempted to defend the recently-concldued Sharm El-Sheikh meeting of the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) – was palpable: “If we don’t make steps back from the Glasgow Agreement, we’ve already won… standing still was an achievement already.” [7]

But as the world burned, dried, melted and drowned at record rates in 2022, the adverse balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of forces at COP27 was witnessed in the proto-fascist host Egyptian government’s relegitimation, and justified Greta Thunberg refusal to attend: “The COPs are mainly used as an opportunity for leaders and people in power to get attention, using many different kinds of greenwashing.” [8] Naomi Klein suggested that for the subsequent COP28 in the United Arab Emirates (whose leader would be Abu Dhabi oil company chief executive Sultan Al-Jaber), “Civil society should announce a boycott and instead hold a true people’s summit.” [9] Former Bolivian climate negotiator Pablo Solon had in mind the use of Colombia as a site for a 2023 event similar to the 2010 climate justice conference that attracted 35,000 participants.

On the positive side, however, the COP27 did succeed in adopting a much-celebrated new “Loss & Damage Fund” to compensate victims of extreme weather. But De Bourbon admitted that this source of climate finance was an empty box – like so many the UNFCCC has provided poor countries – and that it was pushed through only after the U.S. and China “freaked out.” The lead European Union diplomat heroically persevered against the top two historic polluters, according to De Bourbon:

Frans Timmermans had a beautiful moment during the negotiations, where he realised we have to go forward after discussion with EU ministers that were there. He decided, let’s go for it and he didn’t have time to talk to the U.S. or China or anybody else. He went to the meeting and said, ‘Guys we’re going to do this but we have two conditions.’ And by the way when he said it, the U.S. went freaked out. They said, ‘what’s happening, why are we moving on this, why didn’t we know about this? China freaked out, because Frans Timmermans put two conditions. He said, one, it has to go to the most vulnerable states, so not the rich states which already have access to finance, like Egypt or others. But it has to be those states that have difficulty accessing finance and are ultra-vulnerable.

De Bourbon described Timmerman’s second condition:
“The funder base has to change. We’ve decided in the 1990s which countries in the world at that time were developed countries, and which were developing countries, and that – within the UN structure of climate – has remained exactly the same in the last 20 plus years. In the meantime, do you think that South Korea is a developing country now? you would say, ‘no way, it’s one of the top economies in the world.’ But at that time, they were a developing country. Now they’re a developed country. I would say, in fact, same for Saudi Arabia. Is that a poor country? Qatar. Is that a poor country? There’s many countries that are still labeled developing country, that should be labeled as industrialised countries, and they’re contributing to climate change, and should should also contribute to the efforts for the solutions for it. And the big one is China. China is right now the biggest polluter. Then you think, well but historically they weren’t. Well if you look at historical data they are the third biggest polluter. And then you say, well, it’s a huge country so per capita it’s probably not that bad. But per capita they’re just above the average of Europe. So there’s no way the second economy of the world – with huge tech advantage nowadays – so he couldn’t say that China nowadays is still a developing country. But that’s still in the mindset and in the organisation. So they’re smack in the middle of developing countries. And when Timmermans said the funder base needs to be brought into all industrialised countries, he meant all these. So China got really nervous because of that, but it came, because the decision was made. And I would say that’s progress”." [10]

There was a degree of climate financing progress unveiled in Egypt, to be sure. For not only would Western societies be considered likely donors, but potentially also China and others in the high-emissions Brazil-Russia-India-China-South Africa (BRICS) bloc. In mid-2023, there was an anticipated BRICS expansion at the South African-hosted summit, to include Saudi Arabia, Iran, Kazakhstan, the United Arab Emirates, Indonesia, Algeria, Nigeria and Egypt, which along with a few other major middle-income emitters are considered climate debtors not only in terms of absolute emissions, but also if we correct for trade-related ‘emissions outsourcing’, per capita responsibility and historic pollution levels. [11]

But South Africa is a particularly difficult case, being both villain and victim of climate change. At times strikingly frank, De Bourbon remarked about one of his main 2021-22 negotiating partners from Pretoria, Mantashe:
“The minister of energy in South Africa calls himself ‘minister of coal,’ just to tell you where the mentality is. Not the minister of energy: ‘We say, I don’t care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. where it comes from, as long as it delivers energy.’ He calls himself the minister of coal. So it is a very difficult thing, if you look at South Africa, the emissions are so huge, the largest in Africa. So it’s not a victim. It’s part of the problem as well. So that’s why we need to work with South Africa. That’s why the finance is going that direction.” [12]

That latter point contradicts the earlier one: i.e., funding must “go to the most vulnerable states,” not those with access to finance already – which South Africa does thanks to extremely deep credit markets, including the world’s highest national ratio of stock market capitalization to GDP, the so-called “Buffett Indicator.” [13] And another dilemma of climate financing for South Africa arises, because Europeans had lent Eskom far more – as explicitly fossil fuel loans – than is represented in grant-equivalent finance over the prior dozen years.

Western climate hypocrisy
Most importantly for the sake of this chapter’s analysis of flawed climate finance, two European states – Germany and France – and the EU as a whole, plus the UK and U.S., decided in 2021 to promote the JETP. De Bourbon was ebullient when it came to the potential for the JETP escaping the dead-end United Nations process: “We made a deal already in the last year with South Africa for $8.5 billion, on the energy transition. And the same happened during the COP with Indonesia: $20 billion for the energy transition. So then you see that shift of money, and there’s a new way of working. We’re seeing it’s going to happen with India, perhaps maybe Vietnam, maybe Senegal. We’re seeing if we can have these kind of things separate” from the UNFCCC itself. [14]

Ironically, South Africa was not decarbonising, but at Europe’s urging, the opposite: attempting to transition from coal-fired power to methane gas-fired power with 44 percent – or $5.7 billion – of Eskom’s anticipated JETP funds. [15] In mid-2021, French president Emmanuel Macron had visited Ramaphosa and persuaded him to deploy more than 1000 South African army troops to defend TotalEnergies’ $20 billion methane gas facility in northern Mozambique (the closest operative site to South Africa), which was at the time under such intensive attack that Total declared force majeure and left the area after several of its contractors were murdered by Islamic guerrillas a few weeks earlier. [16] Even Moscow’s Wagner Group had retreated from the area due to the intensity of fighting, including the beheading of many of the mercenary firm’s soldiers. [17] And in May 2022, German chancellor Olaf Scholz visited Ramaphosa immediately after similar trips to meet the Senegalese and Nigerian leaders, requesting more coal, gas and oil, respectively, in the wake of sanctions against Russia and the urgent need to diversity fossil fuel imports. [18]

In early 2023, U.S. Treasury Secretary Janet Yellen visited South Africa. Her meeting with Mantashe – a strong critic of Western pressure and the JETP itself [19]– was at least superficially successful, for he announced, “We agreed to a transition from high-to-low carbon emissions. Our policy is that of mixed energy technologies to address energy poverty while transition[ing] to a low carbon economy.” [20] Yellen’s statement included a remark that suggested the JETP financiers were well aware of one underlying problem: “We agree that it’s really critical to address corruption in order to have an effective government that South Africans can have confidence in, and it’s a critical part of the business environment.” [21]

None of these remarks was believable. Mantashe was ANC chairperson, and even at the height of the Covid-19 pandemic in mid-2020, his party was already committed to amplifying energy poverty. Its Economic Transformation Committee’s “Economic Reconstruction” presentation during Covid-19 called for a “a shift in household energy use, in particular with changing cooking and heating methods from electricity to natural gas and liquefied petroleum gas” – so as to lower the state’s obligation to make power available, notwithstanding evidence that such micro-gas supplies are extremely dangerous fire and internal-pollution hazards. [22] Likewise Yellen’s statement on corruption was uninformed and unconsciously ironic, because not only was Mantashe himself facing potential state charges for graft – with the 2022 Zondo Commission on State Capture recommending further investigation and prosecution – but his wife was accused in court of conniving with a company aiming to dock $12 billion worth of Karpowership methane-gas generators at three ports. [23] The Zondo Commission uncovered massive levels of graft that took place during Jacob Zuma’s 2009-18 presidency, when Mantashe was the ruling African National Congress (ANC) party’s Secretary General, hence party to a great deal of the once-proud liberation movement’s degeneration.

Because of the worsening load-shedding crisis, in December 2022 Mantashe forced De Ruyter out of his job by accusing him of “agitating for the overthrow of the state,” i.e., treason, and he was poisoned the next day with cyanide in his coffee as a result – he claimed – due to his anti-fraud crackdown within the firm. De Ruyters claimed he had “underestimated the extent to which Eskom was in the grip of crime and corruption. I already knew there was a lot of corruption at Eskom, but that this was active sabotage [by Eskom employees].” [24] (The typical Public-Private Partnership procurement model was abused to the extent that an incentive to sabotage infrastructure was built in, so that the same firm would receive the repair contract.) [25]

Eskom desperately needed funds for the coal-fired stations’ maintenance, repairs and return to service. But the parastatal utility was perpetually unable to repay its $22 billion in debts. (After the JETP was concluded, more than half the utility’s debt was taken on by taxpayers in Godongwana’s February 2023 budget, so as to improve the Eskom balance sheet.) In urgent search of funding in November 2021, at the outset of the Glasgow COP26, De Ruyter announced the $8.5 billion JETP side deal, with partner government climate financing agencies from Paris, Berlin, London, Washington and Brussels. The final JETP package, finally unveiled a year later in Sharm El-Sheikh, aimed to not only begin closing down the coal-fired power plants more rapidly, but would also subsidise production of electric vehicles and green hydrogen.

However, looking more closely at this climate-finance pilot, there were clear reasons for a rethink – just as there are for the climate-finance punishment in the form of a carbon pricing strategy the EU also threatened to impose over the same period: the Carbon Border Adjustment Mechanism.

Was the carrot rotten?
The core idea of the West’s JETP carrot reflects a long-standing demand in the climate justice movement to leave fossil fuels underground in exchange for Western financial aid, an idea originally developed mainly by civil society and the indigenous people of eastern Ecuador in 2006 in order to preserve the Amazon forest’s Yasuni Park. The threat of both Ecuadorean and Chinese state oil drilling hung over the area. On the one hand, in 2013 the campaign failed in spite of a positive national referendum, due to lack of Northern grant payments and Ecuadorean President Rafael Correa’s side deals. [26]

On the other, this strategy remains absolutely necessary for the survival of humanity, and would make most sense if grant funding is considered a downpayment on climate debt owed by the high-emitting countries to extreme-weather victims for loss and damage and climate proofing-expenses, and low emitters for not using atmospheric space by emitting greenhouse gases into the already-saturated global sequestration sink.

To the latter end, there was potential for the JETP to be a crucial pilot, insofar as the Pretoria government’s Environment Minister Barbara Creecy offered, in the March 2021 Nationally Determined Contribution (NDC), to leave coal underground in exchange for funding: “The just transition in South Africa will require international cooperation and support… by the international climate and development and finance community for non-fossil-fuel development in Mpumalanga…” [27] When activating that offer through JETP negotiations in 2021-22, however, several problems surfaced: non-participation of affected communities and workers; bad-faith South African negotiators, insofar as decarbonisation of Eskom coincided with a last-gasp search for more fossil fuels and methane-gassification opportunities; Eskom’s propensity to redirect 44 percent of incoming JETP funding towards methane gas plants; ongoing repayment of loans by Eskom that had financed corrupt coal-fired power plants, by the same lenders who would add more JETP liabilities Liabilities The part of the balance-sheet that comprises the resources available to a company (equity provided by the partners, provisions for risks and charges, debts). ; and implicit endorsement of Eskom’s many objectionable business practices, including racist disconnections and ongoing corruption.

Non-consultation by South African and Western elites
The JETP was established top down, without meaningful civil society consultation. A close observer, Richard Halsey, remarked in September 2022 that “The international donors have developed their finance offers and the SA task team has been involved in producing an investment plan” without working groups being made public, and “the first official stakeholder consultation only took place nine months after the partnership was announced. The public also hasn’t had a chance to consult these documents yet, nor have representatives of affected communities been directly involved in their development.” [28] In February 2023, the largest union in the energy sector complained to the Presidential Climate Commission of being ignored: “Now that [the plan] is finished you rope in organised labour. The manner in which this is being done is not conducive for us to even call this a consultation.” [29]

Indeed the one major prior opportunity for the South African government to enforce a Just Transition strategy on a state-owned company, PetroSA, was completely lost when it closed a refinery (Mossgas) and fired nearly 1000 workers in 2021. Two other major privately-owned oil refineries in Durban also closed in 2020-22, without any attempt at Just Transitions. There were no efforts by JETP to engage the main trade unions (metalworkers and mineworkers) or adopt the Million Climate Jobs or Green New Eskom strategies offered by the Alternative Information and Development Centre and Climate Justice Coalition, respectively.

Eskom never took seriously the Just Transition agenda. Indeed, ultra-polluting coal-fired power plants and mines were, since the 1960s, killing thousands of nearby community residents annually due to particulate pollution. De Ruyter refused to comply with court orders to either close the generators or install anti-emissions scrubbers, resulting in what are among the world’s most noxious hotspots of SO2 and NO, and among the worst sites of Particulate Matter 2.4. [30] Once power outages became ubiquitous in early 2023, Ramaphosa’s State-of-Disaster regulations were issued, and appeared to pave the way for tens of thousands of pollution-related deaths. [31]

Bad faith negotiating from South Africa
At the same time JETP negotiations were beginning, the South African state was encouraging two Big Oil firms – London-based Shell and Paris-based TotalEnergies (and several local smaller partners) – to explore offshore for methane gas in water more than 4 kilometres deep, i.e., to become the “game changer” for South Africa’s energy fortunes, according to Ramaphosa in a 2019 speech. [32] Consistent with Mantashe’s ideology, Pretoria was also promoting ongoing coal digs and spending hundreds of millions of dollars to improve rail transport for coal exports, with further plans and budgets for Liquified Natural Gas (LNG) generators, offshore Karpowership generators, a national gas pipeline and other gas infrastructure – leading one network of climate justice advocates to openly call for a Western climate-finance boycott of JETP until Pretoria’s high-emitting projects were canceled. [33]

As negotiators took their time through most of 2022 figuring out how $8.5 billion would best be raised and allocated, business-as-usual marked the shallow post-Covid recovery: ongoing reliance on coal and diesel for more than 90 percent of energy generation; passenger transport based entirely on internal combustion engines as commuter rail lines broke down; an upturn in electricity-guzzling mining, smelting and industrial production, all with high greenhouse gas emissions, thanks to the commodity price boom; a revival of long-haul (high-emissions) tourism; fertilizer-intensive agriculture; renewed construction of sprawling suburbs, commercial office space and truck-centric transport-logistics nodes; and landfills whose non-sorted organic waste spews methane. Other fossil-centric megaprojects continued during and after the JETP was signed: a $10 billion Chinese metallurgical Special Economic Zone, and nearby, a $50 billion expansion of the coal-export rail line to the Richards Bay port terminal, where the main coal customers are now European, Chinese and Indian. In addition to large-scale methane gas generation (introduced through Karpowerships), a World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

-promoted LNG terminal, two Eskom gas-fired power plants costing $5 billion, and a $10 billion port-petrochemical expansion in Durban were all underway – raising major questions about whether “fungible” (easily-diverted) climate financing going into South Africa would inadvertently generate even higher greenhouse gas emissions. [34]

For example, in neighbouring Mozambique, more than 1000 South African army troops were deployed by Pretoria in mid-2021 in the Cabo Delgado region next to the world’s fourth largest methane-gas field, to fight a guerrilla army known as Al-Shabaab. The troops were, in effect, facilitating “Blood Methane” extraction by TotalEnergies, ENI, ExxonMobil and China National Petroleum in a region where already one million people had in 2020-22 been displaced by the war, with at least six thousand deaths. Increasingly devastating cyclones hit northern Mozambique, including one in 2019 (Kenneth) that ravaged Cabo Delgado with winds of 225kph. [35] From 2000-19, the country was considered the world’s fourth hardest hit by climate loss and damage. [36] One noticeable aspect of that war was the complete lack of South African public and policy discourse regarding the impact of gas on the climate crisis (whether local, regional or global), and the lack of self-consciousness among advocates of the war regarding the militaristic sub-imperialist stance Pretoria had taken on behalf of fossil imperialism. [37]

De Ruyter was not alone, for one of the most influential corporate lobbies Lobby
Lobbies A lobby is an entity organized to represent and defend the interests of a specific group by exerting pressure or influence on persons or institutions that hold power. Lobbying consists in conducting actions aimed at influencing, directly or indirectly, the drafting, application or interpretation of legislative measures, standards, regulations and more generally any intervention or decision by the Public Authorities. , the National Business Initiative, vocally supported more methane. [38] So too did the Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University, which called for $18 billion to be spent on 30 GW of methane gas through 2050. [39] De Ruyter promoted his own plan for coal-to-LNG replacement – using 44 percent of the JETP funds – using the spurious argument that the massive gas facilities represented transitional arrangements. But nowhere in the JETP is any of South Africa’s high-carbon strategy prohibited.

Against a rotten EU carrot and resulting methane addiction, protests surge
Resistance simultaneously emerged in South Africa, with one progressive network – the Climate Justice Charter Movement – calling on international allies to pressure the U.S., Britain and the European to defund the JETP. [40] And as for attempt by Shell, Total and local allies to push the offshore-gas agenda, more than one hundred protests occurred on the beaches, at petrol stations and at the allies’ other companies (a television station and hotels) just at the time the JETP was announced. A unique combination of coastal villages, subsistence fisherfolk, marine conservationists, eco-tourists, surfers and climate activists kept offshore seismic blasting in the news all along the Indian and Atlantic Ocean shorelines.

Aligned with protesters, public interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. lawyers filed court injunctions against offshore gas exploration on seven occasions in late 2021 through September 2022, winning six of them. The cases culminated when Shell and Impact Oil&Gas – led by local casino-hotel-media-transport entrepreneur (and ex-Marxist labour leader) Johnny Copelyn – were banned by a High Court from further offshore blasting. The grounds were partly due to Copelyn’s flawed local consultations (e.g. no notices in the main local language, isiXhosa), and partly to the anticipated disruption to black shoreline communities’ spiritual connections to the Wild Coast ocean, and also partly because of the firms’ flawed climate and environmental reasoning. (In late 2022, Shell and Copelyn went to court again to appeal the case, which is to be heard by the Supreme Court in mid-2023.) [41]

Meanwhile, thanks to revelations by whistle-blowers in both the ruling ANC party and President Cyril Ramaphosa’s specific 2017 leadership campaign, it became clear that critics were up against not just the oil firms’ claims that would bring South Africa energy security and economic development – hotly contested in the Shell case. [42] There were also substantial oil company gifts to both the ANC party coffers (Shell’s $1.1 million) and to Ramaphosa’s campaign (Copelyn’s $140,000). Ramaphosa’s own 2020-22 mishandling of his financial affairs – specifically $600,000 in animal sales at one of his ranches – also threatened to result in the first impeachment of a South African president. Ramaphosa was reportedly on the verge of resigning in December 2022 after a parliamentary inquiry confirmed that he had a case to answer in relation to hard-currency stuffed into ranch house sofa cushions, but Mantashe – who was also elected ANC Chairman in 2017 and reelected in 2022 – reportedly persuaded him to stay in his job. Indeed he soon won re-election to the party leadership: his members of parliament and other leaders like Mantashe recognised that without him, the chances the ANC could hold onto power in the 2024 national elections were extremely low. [43] Ramaphosa owed Mantashe so much that in early 2023 he put Eskom under his wing, removing it from the Public Enterprises Ministry. [44]

But Eskom continued to suffer from profound ethical decay, as De Ruyter testified in a February 2023 interview that led to his formal firing the next day: “Corruption unfortunately is the gift that just cannot stop giving and it is with us to this day,” in spite of the fact that “Eskom advocated for a long time for increased law enforcement, increased intelligence gathering and increased assistance.” [45] As a Financial Times reporter observed, “the entrenched position of coal has been solidified by outright criminality. When coal was dominated by a few big mining companies, power stations were built next to coalfields. Coal was transported via conveyor belts. Now, as De Ruyter recently explained, it is trucked from small mines often hundreds of miles away. On the way, it can be stolen. Good coal is sold abroad at a premium. Bad coal, including discard and scrap metal, is fed FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ into power stations, reducing generation capacity and causing breakdowns. When De Ruyter tried to fix this and other problems, he was sabotaged from within – presumably by Eskom employees profiting from malpractices, including corrupt procurement.” [46]

Hidden loan costs and conditions do economic harm
In this context, many concerns were being raised about whether the world’s pilot JETP was appropriately directed mainly into an agency with such problems. But those concerns should not lead to others being ignored. For example, one durable problem with international climate finance in general and the JETP in particular, is that it will pile on nearly entirely hard-currency debt: initially $8.245 billion, with only 3 percent of the funds in the form of grants. While U.S. ($1 billion) and British ($500 million) loans are to be provided by for-profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. banks at market rates, the European state credit agencies will offer slightly ‘concessional’ debt. However, because the loans are in hard currency and South Africa’s currency is declining, Eskom will face onerous repayment in coming years. In April 2022, the Rand/$ rate was R14.3/$ but by the time of the COP27, had fallen to R18.4/$, where it was in March 2023 (the time of writing).

Not only are the interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. expensive when considered in ‘real effective’ terms (i.e., incorporating currency decline), but the hard currency is not necessary for many components of the JETP (such as wages), now and especially in future. The ideal arrangement will entail local manufacturing replacing imported renewable energy components. Eskom should build its own internal renewables capacity and energy storage, and should not continue to privatise electrification via outsourced contracts for solar and wind power. It should shake the 2010s’ reliance upon multinational renewable energy corporations which repatriate profits and dividends to their home countries.

JETP also funded Eskom’s switch from coal to methane
On the one hand, a JETP is necessary – in grant form not loans – to support Eskom’s shift from coal over-reliance and ensure a genuine Just Transition for adversely-affected workers and communities. On the other, one immediate danger is that de Ruyter proposed a methane gas investment programme – for which he anticipated using 44 percent of JETP funds – including 1000 MW at the site of the decommissioned Komati coal-fired power plant. On November 6 2022, World Bank President David Malpass – who six weeks earlier had been told by Al Gore he should resign out of shame for his climate denialism – gave Eskom a $500 million loan to speed the process and visited Komati. [47]

Eskom’s other proposed gas plant, 3000MW strong, is proposed for the coal export city of Richards Bay, with a World Bank LNG terminal processing Mozambique’s Blood Methane. The South Durban Community Environmental Alliance, with a new Richards Bay office and backed by the NGO groundWork and the Centre for Environmental Rights, is already in the courts challenging the plant. [48] What all of this means, in short, is that the use of EU money ostensibly deployed for decarbonisation will instead assist the financing of methane gas.

JETP funds Eskom’s repayment of corrupt coal power loans
It is also certain that Eskom’s existing hard-currency debt will be serviced using EU climate finance funds. That debt is nearly entirely due to just two oft-broken coal-fired power plants: Medupi and Kusile (at 4800 MW each, the largest coal-fired power plants under construction anywhere). Their lead construction contractor, Hitachi, donated 25 percent of its local subsidiary to the ANC in 2007. As a result, in 2015, Hitachi was successfully prosecuted under the U.S. Foreign Corrupt Practices Act, paying Washington a $19 million fine (and none to South Africa where the Tokyo firm has so far escaped prosecution). [49] Because of Pretoria’s prosecutorial incapacity, instead of paying the $19 million FCPA fine to local taxpayers and electricity consumers in 2015, Hitachi settled out of court (so the U.S. state received the fine). Eskom consumers had to cover the costs of corruption, along with repayments of principal and interest.

The Bank’s lack of political will to take Eskom corruption seriously was again revealed in 2015, when its ‘Vice President-Integrity’ was none other than a South African, Leonard McCarthy. As head of the country’s lead investigating unit (the ‘Scorpions’) just before Zuma took office in 2009, his incriminating ‘Spy Tapes’ phone calls in 2007-08 meant prosecutors plausibly claimed he was biased, and in turn that allowed Zuma to be let off the hook for 783 counts of corruption. [50]

Then in 2015 after Hitachi paid its fine, and without acknowledging his own conflict of interest (having failed to bring Eskom to book during years running the Scorpions), McCarthy flippantly dismissed a complaint against Hitachi by the main opposition party, the Democratic Alliance. Subsequent evidence of an additional $10 billion worth of Eskom corruption, in large part implicating other Bank-financed activities at Medupi, went uninvestigated by McCarthy and his successor, or any other Bank unit. [51] As early as 2008, the Hitachi scandal went public and in January 2023, when News24 investigative reporters published formerly secret documents, clarification emerged on the process of corrupting the ANC, which in turn ensured Eskom hired Hitachi for a massive job it could not manage (e.g. with 7000 welding errors). [52]

From a financing standpoint, in order to pay for Medupi and Kusile, not only did Eskom borrow beyond its means, but also raised the real price of electricity by more than 620 percent from 2007-22. [53] Eskom is also in the process of privatising, and as a result, its leadership aims to end the small extent of cross-subsidisation that assists low-income users. [54]

Yet Eskom lenders soon included the West’s main export-import banks and the World Bank, which made its largest-ever loan for Medupi in 2010, for $3.75 billion (a small part of which was also meant to fund renewable energy). There was extensive lobbying by civil society and even big business against that loan, in part because by 2009, the Eskom chair at the time, Valli Moosa, also served on the ANC’s Finance Committee. He was officially condemned by government’s Public Protector – and trade union allies as well [55] – for his ‘improper’ conflict of interest. [56] Eskom’s new JETP debt allows it to repay older loans, in turn legitimising Medupi-Kusile corruption. It is immoral for creditors not to take a ‘haircut’ on these loans. [57]

Protest against World Bank coal and climate finance, October 2022

ETP neglects needed electricity demand rationing
Eskom urgently needs new renewable supply, but the “demand side” of the utility’s electricity grid is just as vital. The largest consumer, using more than 5 percent of grid supply, is BHP Billiton subsidiary South32 (based in Melbourne, Australia). Its Richards Bay aluminium smelter imports the main ingredient (bauxite), processing it with coal-fired power at a price just 10 percent of what ordinary consumers pay. The product and profits are exported. Similar abuse of electricity occurs at Sasol’s Secunda plant – the world’s highest CO2 emissions point source – where an apartheid-era refinery squeezes coal to produce liquid petroleum (which would otherwise be imported, at far lower environmental cost). The guzzlers should immediately be shut, with Just Transition support provided affected communities and workers. But the JETP ignores the demand side and thus legitimises extremely destructive, wasteful use of power. [58]

Eskom policies and practices need an overhaul – missing in JETP climate finance
To contemplate Eskom’s agenda as having any sort of “Just Energy” component is truly impossible. Eskom remains riddled with staff corruption, by all accounts. The two main CEOs during the 2010s – Brian Molefe and Matshele Koko – were arrested for billions of dollars’ worth of graft in October 2022. And the disconnection policies De Ruyter imposed on black neighbourhoods in mid-2020 (during winter amidst the initial Covid-19 pandemic lockdown) – which he terms “load reduction” and critics call “energy racism” – were amplified by his mid-2022 proposal to end electricity cross-subsidisation for poor people. The JETP implicitly supports these backward policies. [59]

Other much smaller JETP components are also poorly conceived. Subsidies for electric vehicles – provided via Western (especially German and Japanese) car companies – will be unaffordable to most South Africans, and there is no refueling infrastructure in place. The JETP also provides funding to boost Sasol’s green hydrogen hype. But this is very likely to redirect South Africa’s future renewable energy capacity – e.g. solar chimneys which should feed the national grid – into the firm’s proposed Saldanha export-oriented H2 production facility, instead of meeting local needs. [60]

The single most important component of climate finance is carbon pricing, given the enormous externalities associated with greenhouse gas emissions. In the U.S., the Obama Administration set the price of damage associated with a tonne of CO2 at $51. Donald Trump reduced it to $1 in 2017. Joe Biden raised it to $51 in 2021 and in 2022 a $185/tonne price was recommended by his environmental administrators. [61] More rigorous scientists who incorporated feedback loops and low adaptation potential raised the “Social Cost of Carbon” to $3000/tonne. [62] In Europe, the main carbon pricing technique was based upon the Emissions Trading Market activities
trading Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit. Scheme, which was haywire in 2022 due to the Russian invasion of Ukraine, zig-zagging between $70 and $100 per tonne, and regrettably Europe’s Carbon Border Adjustment Mechanism (CBAM) price will be tied to that scheme. The highest carbon tax in 2022 was $130/tonne required per tonne to cover the Swedish carbon tax. [63]

Source: https://tradingeconomics.com/commodity/carbon

Carbon pricing is a form of reverse climate finance – i.e., sanctions against high-emissions industries – that bears close consideration. For example, it often appears that South Africa’s rulers are really only adopting renewable energy grudgingly, because of climate sanctions bearing down on the ruling party’s allied exporters. There is enormous potential for sanctions to take the form of a sharp, sustained beating from the proverbial South African sjambock (whip) – but it is becoming clear that EU officials would rather use a broken stick, indeed a twig.

International commerce was once absolutely vital to a South African capitalism whose trade as a share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of GDP had reached 73 percent in 2008, when the commodity super-cycle peaked. But that ratio shrunk in South Africa (to a low of 51 percent in 2020) and nearly everywhere else during the era of “deglobalisation” (or as The Economist puts it, “slowbalisation”), [64] with a combination of capitalist overreach, China’s turn to inward infrastructural investment, Western protectionism (such as rose in 2016 with Donald Trump and Brexit) and environmental lobbying that has increased the likelihood of widespread climate sanctions against high-carbon exporting countries. Imposition of climate sanctions will mainly come from the U.S., Europe and the UK, responsible for buying around half of South Africa’s experts. The EU will be first, with its CBAM launching in October 2023, even if actual price penalties are only imposed in 2026.

Although it reeks of Western imperialist power, CBAM as an environmentally-sensitive trade policy does make perfect sense. Without it, higher CO2 levels from dirty-energy countries would logically “leak” into the EU as firms outsource their production once they face serious climate regulation and, to stay competitive, search for less expensive industrial and raw-material inputs from abroad. South Africa and other exporting economies with very high shares of CO2 embedded in their products – either directly or via dirty energy and transport – should be incentivised to more rapidly shift to renewable sources. One way is through higher EU tariffs imposed on SA exports to Europe, and during the 2020s also to other Western economies which will adopt CBAM. [65]

The main affected SA exports will initially be aluminium and steel, but many others – other mined and smelted products, petrochemicals, automobiles and high-carbon production systems – will all eventually be brought into the CBAM net, both due to their direct and indirect emissions. [66] The only defense mechanism for South Africa is raising its own carbon tax to the level of the EU carbon market, i.e. from what Eskom and Sasol (by far the two largest polluters) now pay – a tokenistic $0.35/tonne of CO2 emitted – to European levels. Pretoria won’t achieve anything close to this rate in time, given power relations in South Africa epitomised by the extremely influential EIUG at the core of the Minerals Energy Complex. [67] Joining forces with a larger network – Business Unity South Africa – the energy mega-consumers argued in September 2022 that “business and the SA economy cannot accommodate the steepness of the carbon tax rate increase” that was then scheduled. [68] Yet that particular rise was a gradual one that would only reach $30/tonne in 2030, 1 percent of what the 2021 Social Cost of Carbon estimates by University College London researchers suggest it should be. [69]

Even so, politicians and highly carbon-intensive businesses are apparently terrified by CBAM. Ramaphosa revealed deep worries about CBAM in an October 2021 presidential newsletter: “As our trading partners pursue the goal of net-zero carbon emissions, they are likely to increase restrictions on the import of goods produced using carbon-intensive energy. Because so much of our industry depends on coal-generated electricity, we are likely to find that the products we export to various countries face trade barriers and, in addition, consumers in those countries may be less willing to buy our products.” [70]

Source: https://static.pmg.org.za/210818_-_PC_EFF_-_NT_-_FINAL_Climate_Change_and_Carbon_Tax_Presentation_to_Parliament_NT_170821.pdf

The same fears were evident in big business. In late 2022, the National Business Initiative’s Joanne Yawitch wrote, “South Africa needs to make this transition work, or risk losing up to 50 percent of its export value as our trading partners, mindful of their own climate change pledges, align trade and commerce to reflect their net zero commitments. Next year, the EU is expected to impose significant tariffs on goods coming into the union from territories that have a high-carbon economy...” [71] Major firms like Anglo American have also begun looking for renewable energy sources so as not to fall afoul of export taxes. [72] Nerves were so fraught in November 2022, that the Brazil-South Africa-India-China group issued a stern critique of CBAM: “Unilateral measures and discriminatory practices, such as carbon border taxes, that could result in market distortion and aggravate the trust deficit amongst Parties, must be avoided.” [73]

The CBAM stick splinters
Given this fear, punitive CBAM sanctions will be helpful to environmental justice advocates, but only if they are advocated with integrity, especially when it comes to compensating workers and communities which undergo involuntary economic suffering due to the corporations’ inability to decarbonise. Instead, what appeared more likely in March 2023, was an anti-solidaristic, protectionist ‘Fortress Europe’ keeping out imports from South Africa without corresponding compensation. In 2026, when implementation is expected, $1.5 billion in “steel, aluminium, iron, cement, fertiliser, electricity and hydrogen exports to the EU – one of its major trade partners – are in jeopardy” (with organic chemicals and plastics to follow) representing 26 percent of South Africa’s output in these categories, and even higher levels of African exports (“30 to 35 percent”) were expected to be negated by CBAM. [74]

But this particular climate-finance stick is broken, because CBAM with integrity requires at least three reforms. First, the most absurd recent EU climate policy was the July 2022 decision to label methane gas and nuclear as “green” within the EU’s energy “taxonomy.” That stance must be immediately reversed, since, as Stanford University scientists have demonstrated, “Over the first two decades after its release, methane is more than 80 times more potent than carbon dioxide in terms of warming the climate system.” [75]

Second, another reform entails the setting of the CBAM carbon price. Unfortunately, the level of import penalties will, from 2026, be tied to Europe’s Emissions Trading Scheme (ETS), which has suffered exceptional price volatility since 2005. For example, in early March 2022, in the week after Vladimir Putin’s Russian invasion of Ukraine, the ETS crashed 40 percent, from near 95 to 58 euros per tonne, and again crashed over three weeks in August-September 2022, by 32 percent, as Putin cut off Europe’s gas supplies. To expect financial markets to provide a realistic price signal is foolish given that these markets are themselves chaotic and subject to global financiers’ whimsies. [76] A different way of setting the carbon price is required, one that is closer to the genuine Social Cost of Carbon.

Third, to counter charges of “imperialism!”, Europe should make a downpayment on its vast climate debt by sending CBAM revenues back to adversely-affected workers and communities whose exports are taxed – in some cases to the point of their companies’ closures. This would be consistent with not only solidarity ethics, but also with ideals of a Just Transition.

Conclusion: A movement to refresh the carrot and toughen the stick
Protests and court challenges against further fossil fuel extraction and combustion in South Africa will continue and so far are the most encouraging process within a progressive regroupment that has been hampered by labour movement divisions and social movement fragmentation. However, these will certainly slow down but probably not halt the variety of high-carbon projects, given the reluctance of courts to challenge private property rights and state economic policy prerogatives.

Hence a policy of campaigning to highlight the climate debt – including compensation for leaving fossil fuels undergroundl [77] – will aid Africans in their battles with national leaders (like Ramaphosa) and transnational oil, gas and coal companies. [78] Notwithstanding ongoing protests at African oil conferences from London [79] to Cape Town [80] and the activist appeal “don’t gas Africa!“ [81] – the continent’s elites ever more incessantly claim that oil industry “development” is due to the continent, and that fossil-fuel profits will trickle down to the citizenries, all evidence to the contrary. To repudiate Eskom’s Odious Debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. would dramatically reduce repayment pressure on the utility’s debt, and allow for a full-fledged reinvestment process.

Climate justice activists need further solidarity when facing relentless gas, oil and coal attacks. Western countries’ citizens of good will supported South Africans’ freedom struggle by imposing economic sanctions against firms making profits from a crime against humanity, which by 1985 reached a decisive stage in ending apartheid as the tight alliance of white business and the racist state was finally broken. The same logic applies: with South African climate justice, social and labour movements often exhibiting vibrancy and scoring small wins, nevertheless it is, once again, through international solidarity that the critical leaps forward will be made.

European elites have long celebrated their efforts at taking not only rhetorical but also genuine policy and programmatic leadership on the climate front, even if the results are tiny compared to the task at hand. At least in the case of South Africa, there may be a chance to offer a fresh – not rotten – carrot and pack a bigger stick, not the broken twig now on display. Otherwise, objective environmental historians will look at the South African case study of climate financing instruments aimed at both incentivising and disincentivising change, as an irredeemable failure.