JETPs have been generally well received by North-based environmental nongovernmental organizations (NGOs), liberal policy groups, and some unions. In 2022, at COP27 in Sharm El-Sheikh, Egypt, then International Trade Union Confederation (ITUC) general secretary Sharan Burrow praised South Africa’s JETP deliberations as “a model that should be emulated everywhere” because unions had been given “a seat at the table.”⁹ The Overseas Development Institute stated, “There is currently no other mechanism which would unlock the scale of international [development] finance needed to retire South Africa’s multiple coal-fired power plants, reskill fossil fuel workers and support local economic development in coal mining regions.”

But support for JETPs, while frequently tentative and provisional, is misplaced, for several reasons.

First, while JETPs are expected to lead to an “accelerated decarbonization of large emissions-intensive middle-income countries,” they are unlikely to reduce coal use significantly. Global coal use is today at its highest point in history and is the largest single source of CO2 emissions. Reducing coal use would likely yield climate benefits, but the three main JETP countries — South Africa, Indonesia, and Vietnam — together account for just 4.3 percent of global annual coal consumption, whereas just two of the IPG countries, Germany and the United States, together account for 11.5 percent. If the rich countries really want to reduce global coal use, they should stop shipping it abroad. Australia exports 80 percent of its coal, mostly to India, Japan, and Korea. The United States, too, is a major exporter. In 2022, the United States exported about 80 million metric tons of coal — equal to about 14 percent of US coal production. The United States is ranked fourth-largest exporter behind Indonesia, Australia, and Russia.

Second, the just transition dimension of the JETPs lacks substance. International labor had helped ensure that the principle of just transition was in the Paris Agreement, and in South Africa and Indonesia, unions and civil society groups were invited to participate in discussions on their implementation. However, a seat at the table could hardly stop the push toward energy privatization. In South Africa, for instance, in early February 2019, almost three years before the JETP was announced, President Cyril Ramaphosa declared that his government would “lead a process with labor, Eskom [the public electricity utility] and other stakeholders to work out the details of a just transition.” However, in the very same speech, Ramaphosa announced the breakup, or “unbundling,” of Eskom, “to raise funding for its various operations much easily [sic] from funders and the market.”

Aware that unbundling is normally step one in the process of World Bank–driven privatization, unions opposed the government’s decision, and continue to do so. The National Union of Mineworkers (NUM) called for the cancelation of power purchase agreements with private wind and solar companies that, they said, were costing Eskom ZAR93 million (roughly $5.2 million) a day. South Africa’s labor movement has urged Ramaphosa to consider an alternative approach, one that allows Eskom to become a renewable energy producer.

But union objections were brushed aside. Keen to support Ramaphosa, the IPG made the $8.5 billion in the JETP, contingent upon the creation of “an enabling environment through policy reform of the electricity sector, such as unbundling [of the public utility, Eskom].”

In Indonesia, in a similar union-led battle against privatization, energy unions successfully appealed to the country’s Constitutional Court in 2016 to halt the expansion of privately owned electricity companies (independent power producers, or IPPs) in the country’s electricity sector. Unions argued that the expansion of the IPPs violated Article 33 of the country’s constitution, which ensured that energy and other vital services would remain controlled by the Indonesian state. The court agreed, but the government was not about to give up. A 2020 omnibus law endorsed the presence of private and cooperative energy producers alongside the state-owned power utility, PLN (Perusahaan Listrik Negara). The language in the law was innocuous enough, but the implications of the law were anything but.

Following the announcement of the IPG-GFANZ JETP deal with Indonesia, unions were invited to provide input. As with South Africa, the JETP itself was not on the table for discussion and neither was the push for energy privatization; rather, the labor movement was described as the “stakeholder” that “monitors and ensures that the JETP implementation abides by the principles of just transition.”

A third reason for being skeptical about the JETPs concerns the actual status of financing. Despite the hype, financing for the first tranche of JETPs is still nowhere to be seen.

Several reports have attempted to explain this. One pointed to the “lack of follow through” from both IPG and “host countries” which “risks souring the spirit of cooperation.” The Financial Times cites “a lack of consistent support from multilateral development banks (MDBs) and the premature announcement of deals by political leaders before funding had been secured.”

It is therefore tempting to dismiss the JETPs as another sign of rich-country indifference and stinginess. Alternatively, a Brookings Institute paper describes it as “forces within both labor and business who are attached to the old carbon economy.” Either way, JETPs have been all dressed up but, in the end, might have nowhere to go.

But neither of these explanations fully account for what is happening (or not) with the JETPs. For this, a deeper analysis of climate finance is required.

Under the principle of “common but differentiated responsibilities and respective capabilities” adopted in the early 1990s negotiations around the UNFCCC, rich countries accepted “the urgent need to enhance the provision of finance, technology and capacity-building support” from the North to the developing South. This clear obligation was subsequently reworded, although not officially. Instead of providing finance, rich countries began to talk about providing access to finance — which is a different proposition altogether. This not-so-subtle shift became visible in late 2009 at COP15 in Copenhagen, when US secretary of state Hillary Clinton announced that rich countries were going to jointly “mobilize” $100 billion a year by 2020 from “a wide variety of sources, public and private.” In other words, rich countries did not want climate finance to become an extension of “overseas development assistance” (with a heavy emphasis on grants); they wanted it to take the form of loans.

By the time the Paris Agreement was adopted in 2015, it was clear that climate finance flowing from North to South was so minimal that it was becoming a diplomatic embarrassment for the rich countries. The World Bank pivoted toward using development loans to spur additional private investment — so-called blended finance — to reach both climate and sustainable development goals. Billions of dollars of development finance would, the Bank believed, “unlock” trillions of dollars from private investors.

It is this “billions to trillions” blended finance model that lies at the heart of the JETPs. It mixes commercial loans (issued at market rate), “concessional” financing, and grants. Concessional loans offer below-market interest rates, and sometimes grace periods where the borrower is not required to make debt payments for several years — a form of “JETP discount.” Mix these two forms of financing together and, voilà — stand by for the great unlocking of private investment. The local elites in South Africa and Indonesia believe in this model and have embraced the JETPs with as much enthusiasm as the rich countries.

But at COP26 in Glasgow, six years after Billons to Trillions was launched, a UN-commissioned study revealed that the flow of money was considerably below $100 billion per year and — revealingly — for every $4 committed by development banks, less than $1 was added by the private investors.³¹

In 2021, the International Energy Agency (IEA) calculated that “emerging and developing economies” (EMDEs) account for “two-thirds of the world’s population but only one-fifth of investment in clean energy” due to “persistent challenges in mobilizing finance.” But these “persistent challenges” boil down to one thing: not enough profit. In the words of one analyst, “For any private sector actor, the investment climate is critical. . . . Often, as we know, in low-income countries the risk profiles versus the returns just aren’t there.”

This explains why the JETPs are languishing. From the perspective of private investors, on a project-by-project basis, the levels of profit must be comparable to returns on investments that they make in the Global North. Why incur more project risk when there are less risky investment opportunities in the rich countries?

The World Bank, and now the IPG and GFANZ, hope that concessional loans might make clean energy projects more “bankable,” but the evidence suggests that the gap between profit levels in the North and those in the South is frequently far too wide. In other words, the “enabling environment” is unlikely be enabling enough. This likely explains why the MDBs have also been reluctant to turn pledges into cash, because without the private sector stepping up, the MDBs know that already indebted developing countries will struggle to carry the financial burden of the transition on their own balance sheets.

As originally conceived, climate finance was intended to help settle the North’s ecological debt to the South, not add more financial debt to their balance sheets. In Indonesia’s case, roughly 20 percent of the $20 billion financing is expected to take the form of commercial loans and around 70 percent in concessional loans. But even cheap loans must be paid back, with interest. Commenting on the JETP with Indonesia at COP28 in Dubai, Jakarta-based Tiza Mafira from the Climate Policy Initiative (CPI) noted, “Concessional loans will need to be channeled via MDBs, and MDBs will require sovereign guarantees, and so Indonesia may have to set aside $8.4 billion in sovereign guarantees in order to access those concessional loans [in the JETP].”

However, in South Africa’s case, no less than 80 percent of the proposed JETP finance will take the form of commercial loans, thus imposing considerably more debt on a country whose government is pursuing a full-on austerity agenda when the unemployment rate, in February 2024, stood above 32 percent. Vietnam fares little better. Close to 70 percent of IPG financing is in the form of commercial loans, and concessional loans account for less than a quarter of the IPG package.

Faced with these realities, it is wrong to blame (as some progressives do) developing country governments for the fact that the JETPs are currently in trouble. Any policy that requires developing countries to incur more debt is not “just,” especially when the result is intended to produce a “global public good” in the form of lower emissions. If reducing coal use is indeed a global public good, then why must South Africa, Indonesia, and Vietnam be financially responsible for its delivery?

But the crisis of climate finance — whether blended or not — has global implications. As the prophet of “green growth” Lord Nicholas Stern and his cothinkers highlighted in a 2022 study, Secretary Clinton’s $100 billion per year finance target was negotiated by politicians and diplomats; “it was not deduced from analyses of what is necessary.” In other words, a lot more money will need to be “unlocked” if energy transition targets are going to be reached. The study pointed out that “developing countries other than China will need to spend around $1 trillion per year by 2025 (4.1 percent of gross domestic product [GDP] compared with 2.2 percent in 2019) and around $2.4 trillion per year by 2030 (6.5 percent of GDP).” Furthermore, “Around half of the required the financing can be reasonably expected to come from local sources” but “around $1 trillion per year of external finance will be required by 2030 to meet the scale of the investment needs.”

The trillion-dollar question, therefore, is this: If blended finance has until now not been able to mobilize private investment in the Global South, how can it be expected to do better in the future?

This brings us to the issue of privatization and the “conditionalities” associated with the JETPs.

One of the misconceptions that have accompanied the JETPs is the idea that the money from the rich countries is, as it were, on the table, and that host countries would be foolish not to use it to accelerate their respective energy transitions. But the JETP agreements are clear: host countries must first develop an investment and implementation plan before the finance, which is based on donor pledges, can be accessed.

South Africa, Indonesia, and Vietnam have already complied with this IPG requirement, and the contents of each of the implementation plans are revealing. First, in each case, JETP financing amounts to a fraction of what’s needed. According to the respective plans, South Africa will, by 2030, need $65 billion in investment for the power sector alone. In the case of Indonesia, “approximately $97.1 billion of cumulative power sector investments are required by 2030 under the JETP scenario.” Vietnam’s plan estimates that the country will require $134.7 billion from domestic and international sources by 2030.

Second, host country elites, contrary to the evidence, seem to believe that JETP financing can “catalyze” private sector investment. According to Daniel Mminele, head of the Presidential Climate Finance Task Team, the JETP package “is insufficient to fund our [South Africa’s] transition” but JETP dollars will be “dwarfed by what is available in the private capital markets — we need to develop mechanisms to mobilize these forms of finance to invest in South Africa’s just transition.”

But what are the “mechanisms” (beyond prayer) that will allow $8.5 billion in mostly commercial loans to “unlock” more than ten times that amount to cover the costs of the transition to 2030? Similarly, Indonesia’s implementation plan sees the US$20 billion JETP as “an important catalyst.” But how will $20 billion in loans “crowd in” almost five times as much investment?

Third, the IPG-GFANZ axis has made it clear that access to JETP finance is contingent upon the host country being able to create an “enabling environment for the private sector,” and pursue a “policy reform strategy in both the energy and financial sectors to catalyze investment” in a “market-driven manner.” As noted above, in South Africa’s case, the JETP agreement calls for the unbundling of the public utility (Eskom) — a clear precursor to privatization. But similar language is used in the agreements with Indonesia and Vietnam. Getting in on the act, the GFANZ group sees private sector finance as contingent on “continued policy reform” and “a robust pipeline of competitively tendered projects.” Then, and only then, will the $7.75 billion become real. Rather than being a “game changer,” the JETPs extend the existing climate financing game deep into overtime.

It is therefore unfortunate that progressive opinion has been critical of unions for opposing the JETPs. For example, Adam Tooze turned on the South Africa’s NUM for not thinking of the greater good. The union, wrote Tooze,

represents 50,000 workers with a strong voice and a stranglehold on the existing, derelict system. There are 2.5 million people living in communities closely tied to coal mining. But South Africa is a nation of almost 60 million desperate for [electrical] power. Renewables are the cheap future.

JETP financing invites poor countries to borrow money to finance an energy transition and thus incur more debt than they would have if they had done nothing at all. Meanwhile, the MDBs, private investors, and rich country governments are making financing contingent on poor countries creating an “enabling environment” for the private sector, including commitments to privatize their energy systems. But what if the enabling environment isn’t enabling enough? What happens if, as seems likely, the private sector does not show up?

These questions have yet to be answered because there are simply no convincing answers available. The evidence strongly suggests that the JETPs will not pass the “mobilize” test; they will not “catalyze” anything significant. The sad story of climate finance — blended or not — will continue. For developing countries, the risks to both energy sovereignty and energy security are considerable. For the world, the risks may be even greater.