The just transition is about more than moving from fossil-fuel to renewable energy; it is an economy-wide process to lower carbon emissions, improve livelihoods and enable greener, climate-resilient ways of working at all levels of economic output.
Therefore, workers and communities must be at the heart of the transition for it to be considered just.
The issues of climate finance, sustainable finance and a just transition are dotted among this year’s G20 priorities. However, the lack of momentum on meaningful discussions threatens the progress needed to address the growing impacts of climate change, poverty and inequality. The most recent meeting of G20 ministers of finance and central bank governors emphasised the “high public debt and fiscal pressures” across the globe, especially among Global South countries.
At present, this impinges on the ability of these countries, including South Africa, to finance just transition strategies, sustainable development goals (SDGs) or human rights obligations. These funding needs are often talked about in silos, but they are interconnected.
As Mariana Mazzucato’s G20 working paper recognises, no country can decarbonise and achieve sustainable growth on its own. The pursuit of long-term public value must be through shared global and multilateral goals. The Institute for Economic Justice’s (IEJ's) worker-centred framework, while based on South Africa, can be applied regionally, as well as globally.
Fiscal policies must move away from outdated and harmful austerity measures with a sole focus of lowering debt-to-GDP ratios. Instead, fiscal policy should identify opportunities to remove subsidies to high-carbon emitting sectors; raise carbon taxes in line with Paris Agreement targets; and implement more progressive policies focused on taxing high-net-worth individuals and large, profitable companies while supporting lower- and middle-income households and small businesses.
IEJ research estimates that more than R100bn can be directed towards South Africa’s climate response every year.
Central banks’ mandates and monetary policy should look beyond a narrow focus on price stability to how financial regulation, risk assessments, credit ratios and interest rates can be leveraged to fully account for climate change risks and deter investments in fossil fuel and dirty industries, while promoting greater investment in green and low-carbon sectors.
The G20 has indicated their support for using data to determine policy. It must go further to establish the importance of coordination between fiscal and monetary policy, and monetary policy’s role in driving financial markets towards lower-carbon outcomes.
The lack of public finance support for a just transition has led to an over-reliance on private sector funding
Multilateral development banks (MDBS), public development banks and national development finance institutions centre high-quality, low-interest-bearing finance on projects that carry risk but have high social returns. They can, therefore, have the greatest impact on transitioning economies.
In South Africa, however, the Industrial Development Corporation (IDC) is self-funded and no longer provides sufficient long-term finance for infrastructure and projects to enable green industrialisation and economic transformation. Instead, the IDC is profit-driven, behaving like a private commercial bank.
This can change through recapitalisation by the state, the coordination of fiscal and monetary policy, greater transparency, lowering aversion to risk in investment decisions and ensuring board representation includes civil society, organised labour and emergent green sectors.
The lack of public finance support for a just transition has led to an over-reliance on private sector funding. The private sector does have an important role to play in addressing the climate crisis, but using public finances will ensure social and sovereign ownership of infrastructure, and limit the scope for exploitation through high private sector markups and user fees.
By relying on private funding to fill the gap in climate financing, just transition costs and SDG resourcing, governments and MDBs are effectively pursuing profit over people, with benefits accumulating for only a few.
South Africa was one of the first countries to adopt the just energy transition partnership (JETP) with support from international partners. Current pledges total $12.8bn (R222.2bn), a fraction of the average R300bn required each year to transition the energy sector.
Grants (R14.2bn) make up only 6% of this, meaning most of the financing is in the form of loans — doing little to achieve fiscal policy’s objective of lowering debt-to-GDP ratios. This further burdens the state and taxpayers — for future repayment — while failing to address the existing challenges of low growth, poverty, inequality and unemployment.
Without a radical reconfiguration of macroeconomic policy and the role of DFIs, the JETP will likely exacerbate economic conditions, and lead to a superficial transition without addressing the long-term impacts of climate change on people and the economy.
South Africa’s G20 presidency is a key moment to foster greater social dialogue and public commentary to build consensus and ensure a worker-centred and socially-just transition.
The G20 ministers of finance and central bank governors meet again in October before the summit in November. Opportunity still remains for leaders to declare agreement on a shared vision for a just transition that places public value and prosperity at its centre.
• Stott is the senior programme officer for climate finance and resource mobilisation at the Institute for Economic Justice.
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