US Retreat Sparks New Push to Save $45 Billion Climate Deals

Nations including Germany and Japan are working to shore up programs aimed at delivering about $45 billion to help developing countries abandon fossil fuels as the US pulls back from a leadership role.

Talks between international partners are taking place seeking to sustain momentum in Just Energy Transition Partnership deals agreed under President Joe Biden’s administration that target Indonesia, Vietnam and South Africa, according to people familiar with the details.

Germany will replace the US as co-leader of efforts to secure about $20 billion to support coal-reliant Indonesia’s energy transition, the Federal Ministry for Economic Cooperation and Development said in a statement. Global backers of JETP programs plan to assess the potential financial impact if the US withdraws all support, said the people, who requested anonymity to discuss private deliberations.

A meeting is being scheduled for either this month or March to review the outlook for the wider initiative, which includes Vietnam’s roughly $15.5 billion deal and South Africa’s $9.3 billion package, one of the people said. Discussions will also consider the implications for possible future funding pacts with nations like Colombia, the person said.

“The impact is manageable, provided the other countries continue,” said Putra Adhiguna, Jakarta-based managing director at the Energy Shift Institute, an Asia-focused think tank.

President Donald Trump last month halted some US financial aid aimed at helping developing and middle-income countries respond to the threats of climate change and began the process to withdraw from the Paris Agreement for a second time, signaling the nation’s intention to relinquish a role in driving global emissions reduction.

A retreat of the US from climate diplomacy, and as a source of funding, is threatening to add new complications to the JETP plans. The programs were initially hailed as a breakthrough when they were first conceived in 2021 because they, in theory at least, solved a crucial problem: How to bring together public and private money to make it economically feasible for large developing nations to wean themselves off fossil fuels.

Yet, the JETPs have struggled to deliver many of the intended objectives so far because of slow progress in financing efforts, political leadership changes in Indonesia and Vietnam, and the complexity of shuttering power plants that often have many decades of remaining operational life.

The programs also only represent a fraction of the total financing required. Annual energy transition investment topped $2 trillion globally last year, yet that was only about 37% of the total that’s needed to put the world on track for net-zero emissions by 2050, BloombergNEF said in a Jan. 30 report.

Looming elections in Canada, Germany and France threaten to add further obstacles to the prospects for the JETP deals.

“The EU remains committed, even if a major partner of this JETP — the US — is no longer with us,” Diana Acconcia, director for international affairs and climate finance at the European Commission’s Directorate General for Climate Action said Wednesday in Jakarta, referring to Indonesia’s deal.

Japan will continue to support Indonesia’s decarbonization and energy transition, the Ministry of Finance said in an emailed statement.

Nations outside the US and global banks are “still committed to encouraging global emission reduction,” said Paul Butarbutar, head of Indonesia’s JETP Secretariat, which oversees the program in the country. “It is unfortunate that Trump took such a policy, but the others remain committed.” The US had pledged to contribute about $2.1 billion in public financing for the Indonesia deal, almost one-fifth of the total for that segment, according to a 2023 investment plan.

Indonesia’s President Prabowo Subianto has suggested the nation could hit net-zero emissions as soon as 2050, a decade earlier than previous targets. The nation is holding talks with the World Bank, Japan and other partners on how to continue its JETP program, Coordinating Economic Minister Airlangga Hartarto said Wednesday.

Vietnam is finalizing a list of dozens of priority projects to be implemented under its JETP, according to the government.

South Africa “remains fully committed” to implementing its JETP, launched in 2021, and has not been informed about any US plans to end participation, the country’s presidency said. Germany and France have already provided €1.5 billion ($1.6 billion) to South Africa’s Treasury through their development banks, and with other partners have paid out $630 million in grants, of which $55 million came from the US.

A separate €2.5 billion JETP deal for Senegal struck in 2023 doesn’t involve the US.

Uncertainty over the US position is a concern, though won’t necessarily impact the ability of other nations to continue their financing efforts, said Rémy Rioux, chief executive officer of Agence Française de Développement, the agency through which France’s contribution to South Africa’s JETP is being channeled. “It’s a huge stress for the whole system,” he said.

Source: norvanreports.com