How money could soon flow from countries such as Canada to the developing world to help fight climate change

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When G7 leaders wrapped up their summit last week, they offered an indication of how they will try to ramp up their governments’ underwhelming efforts to help developing countries fight climate change.

It came in their closing statement’s commitment to pursue Just Energy Transition Partnerships, or JETPs – an emerging mechanism that has thus far received little attention, in this part of the world at least, but could transform the way that dollars flow from richer nations such as Canada.

The idea is that, rather than just pooling money into large funds that are then widely dispersed, donor countries partner directly with specific recipient countries to support their strategies to reduce greenhouse-gas emissions.

The first such arrangement was announced at last November’s COP26 climate summit, with an agreement that the United States, Britain, France, Germany and the European Union would direct US$8.5-billion to South Africa to accelerate its transition off coal power.

Now, per the G7 communiqué, similar deals are now being sought with India, Indonesia, Senegal and Vietnam – even before the South Africa money has started to flow. (While Canada was not part of that first JETP, it’s expected to contribute to the coming wave of them.)

It’s effectively a response to the failure of more formal efforts – especially the inability of developed economies to make good on a longstanding collective pledge through the United Nations of US$100-billion in international climate financing, despite that total being far short of what is generally considered to be needed.

And it has the potential to either mend or worsen increasingly broken trust in places that stand to disproportionately suffer climate change’s consequences and are under pressure to reduce their own emissions, despite having cumulatively emitted far less than richer countries.

“It’s a reflection of declining multilateralism,” says Zainab Usman, the director of the Africa program at the Carnegie Endowment for International Peace in Washington. “Smaller initiatives with fewer actors, that are more targeted and precise, seem to offer more promise of actual action.”

Ms. Usman and other experts on this sort of financing generally welcome JETPs’ emergence – not just because of their potential to speed things up, relative to clunkier processes through the UN and other global bodies.

They also appreciate that the country-specific approach could enable investments more directly tailored to recipients’ needs. The process with South Africa involved negotiations around targets before it was announced, and that country’s government seems to have a high degree of agency in now determining where the dollars go.

At the same time, the partnership model should allow developed countries to directly share energy-systems expertise rather than just dollars, potentially to the advantage of their own domestic private-sector interests.

But advocates also point to some early causes for concern that could cause this new approach to go awry in ways that instead fuel the mistrust, while actively impeding climate-change responses.

The most obvious of those is that, more than a half-year after the first JETP was announced, there are still no details as to how much each of South Africa’s partner countries is contributing. Nor is it yet known what form the US$8.5-billion will take, such as how much will be in the form of grants versus loans. That’s despite South Africa proceeding in good faith, including by advancing regulatory legislation and establishing governance bodies to steer the intended transition of its electricity system.

Joe Thwaites, who specializes in international climate finance for the Washington-based Natural Resources Defense Council, expressed concern about the U.S. in particular holding up its end of the bargain, given President Joe Biden’s difficulty getting climate funds through Congress. That risks providing “yet another example of [developing countries] being asked to jump through a lot of hoops and then the money not being there at the end of the day,” he warned.

Moving swiftly could become even more challenging as the model is expanded to other countries, starting with the ones mentioned in the G20 statement. While the South Africa JETP may serve as a template, each will have its own unique energy-transition challenges – not to mention different combinations of partner countries – that could complicate reaching agreements and following through on them.

There are also concerns, expressed by environmental groups, about whether the “just” aspect will be sufficiently emphasized alongside the emissions-reduction push, particularly if money is flowing to governments with shaky human-rights records. Eddy Perez, the international climate diplomacy manager for Climate Action Network Canada, mentioned Vietnam – which recently sentenced a prominent environmental activist to two years in prison – as an example of somewhere that caution will be needed in that regard.

The biggest fundamental worry about JETPs, though, is its narrow targeting relative to other types of international climate financing.

A lot of that other money, including through the promised US$100-billion, is meant to help countries build resilience to natural disasters, extreme weather and other climate-change impacts – in some cases a more pressing need than reducing their emissions, which is the sole purpose of JETPs. So there is an imperative for governments to ensure the new model is supplemental, rather than replacing the other forms.

Similarly, unlike more traditional development funds, JETPs are currently being geared mostly toward larger economies.

“Say a number of these deals are negotiated with 10 major developing countries,” Ms. Usman said. “What about the smaller ones? They could fall through the cracks. I think that is a major, major problem.”

To her, though, that means that after JETPs are struck with bigger countries, the model should be adapted to smaller ones – not that it should be foregone altogether, when fresh approaches to climate finance are so badly needed.

In other words, the perfect shouldn’t be the enemy of the good – which is something one hears a lot right now, from those who work in this space.

They have qualms about JETPs. But they’re tired of waiting for money to flow one way or another. And it’s hard to deny the upside of speeding the energy transition and creating clean-energy jobs in places that otherwise could be responsible for a growing share of global emissions.

Now, the partners who are supposed to be delivering the funding need to get on with it, while getting enough details right to avoid setting bad precedents.

And countries such as Canada that are expected to take leadership roles in supporting the developing world’s climate transition need to be watching the South African test case closely – and draw lessons so that this model might evolve to make up for some of the lost time and lackadaisical effort to date.

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