Freddie Daley is a research associate at the University of Sussex, and Charlie Lawrie is an independent consultant and a PhD student at the University of Sussex.
First announced at COP26 in 2021, the Just Energy Transition Partnerships (JET-Ps) were hailed as a breakthrough in the complex and ever-expanding world of climate finance. Finally, wealthy nations were putting real financial weight behind the idea that they should help facilitate energy transitions in the Global South, given their disproportionate responsibility for planet-heating emissions.
Through the JET-Ps, wealthy industrialised nations known as the International Partners Group (IPG) have pledged significant amounts of investment to middle-income, coal-dependent states including South Africa, Indonesia, Vietnam and Senegal. With the help of multilateral development banks (MDBs) and private finance institutions, the JET-Ps have generated around $46 billion in investment pledges.
But just four years on from their launch, our research for Recourse shows that the JET-Ps appear to be faltering. Interviews we conducted with stakeholders across all four JET-P countries with civil society and those close to JET-P policy development indicated a whole host of problems.
Coal-reliant South African provinces falling behind on just transition
Issues ranged from conflicting mandates between the IPG, the recipient states and the MDBs over the shape and trajectory of energy transitions to a lack of transparency over the financial arrangements and the very real risk that the JET-Ps would deepen debt crises. Many of our interviewees voiced concerns over the current trajectory of the JET-Ps and their viability in the current global context.
What the climate doctors ordered
The JET-Ps cannot be accused of lacking ambition. What sets them apart is their recognition of a twin challenge at the heart of climate action: the need to phase out coal-derived energy generation while scaling up renewables in countries whose growing populations are driving up energy demand. Unlike many climate finance initiatives, the JET-Ps proposed to address this twin programme in tandem, phasing in the new while phasing out the old. They are, in fact, exactly what the climate doctors ordered.
Instead, the fragility of the JET-Ps should be attributed to the means by which they seek to achieve these objectives, the institutions tasked with delivering them, and the global context in which they operate. War, tariffs, climate upheavals and a global financial system that pulls more money out of developing nations than it puts in have all contributed to a situation in which half of the world’s poorest countries are now poorer than they were before the COVID-19 pandemic.
Why rich countries are “reluctant” on additional JETP coal-to-clean deals
The JET-Ps are an example of multilateral ‘blended finance’ known as ‘derisking’ whereby IPG states and MDBs deploy public and multilateral capital to catalyse further investment from private investors. This approach has become the dominant strategy in development and climate finance, despite its patchy record of delivery.
Derisking’s proponents believe that public cash can reduce the cost of capital for private investment in middle- and low-income countries while reducing the fiscal burden on states imposed by mounting sovereign debt. Through this process, the role of the state is relegated to creating ‘investable assets’ and ensuring profits for private investors, rather than determining the scope, scale and ambition of domestic energy transitions and scaling up public infrastructure.
Losing control of the energy transition
While it sounds good, derisking gives rise to a chicken-and-egg situation where profitability determines which projects are invested in and where priority infrastructures are passed over in favour of more palatable projects. In practice, derisking means that governments cede control to private investors regarding the shape and scope of their energy transition, the technologies deployed and their spillover effects, the structure of national energy systems and industrial strategy.
The JET-Ps are a case in point. Indonesia’s JET-P, for instance, has financial commitments spread across more than 50 funding packages, ranging in size from $700,000 to just shy of $2 billion. Each funding package has to be negotiated with individual IPG members and has specific conditions and requirements. What’s more, many of the funding packages were agreed before Indonesia published its JET-P strategy, the Comprehensive Investment and Policy Plan (CIPP).
This fragmented and complex approach to funding is reflected in how stakeholders engage with the JET-Ps. For MDBs, for instance, there is a lack of clarity on how to participate effectively in the JET-Ps as well as conflicting mandates, financial structures and investment criteria. This means that despite their warm words and enthusiasm, MDBs are limited in their ability to contribute to the goals of the JET-Ps. In some cases, MDBs may actually be working against the goals of the JET-Ps by enabling continued investment in coal and other fossil fuel infrastructures.
US withdraws from coal-to-clean JETP deals for developing nations
All this is taking place against a backdrop of unceasing global turbulence, with supply-chain bottlenecks, climate upheavals and the expanding frontiers of war and violence continuing to frustrate efforts to build green industries and adapt to accelerating climate impacts. The United States’ departure from the JET-Ps (and other multilateral initiatives) in early 2025 is just the latest challenge to fragile commitments to finance climate action in the Global South.
Can development banks save the day?
Indeed, the current ‘macroeconomics of discontent’ where stagnant growth, soaring interest rates, debilitating debt burdens and stubbornly high inflation have pushed millions into poverty and stoked political and social tensions threaten the feasibility of delivering basic public goods, let alone achieving ambitious climate action.
Concerningly, international financial markets are hindering development and climate action, not stimulating them: since 2022, private creditors have extracted almost $141 billion in additional debt service payments from developing countries than they disbursed in new financing.
Given these circumstances, a reformed approach from MDBs could help revive the JET-Ps and turn the tide on the dominance of extractive forms of development financing. MDBs can and should increase their share of grants and highly concessional finance, which they are in a unique position to provide due to their exceptional credit ratings.
Comment: Donors were supposed to step up, not step back on climate finance
MDBs should also adopt an economy-wide approach, working to ensure that investments promote national green industrial strategies, equitable labour practices and just transitions for fossil fuel sector workers. The JET-Ps could be a perfect vehicle for testing such an approach given the centrality of coal phase-outs. Perhaps most importantly, MDBs must avoid using the JET-Ps to promote privatisation and recognise the value of working with affected communities to deliver public investment in energy and industry.
Fresh thinking is needed – not only to salvage the JET-Ps, which continue to attract widespread support, but also to reignite collective efforts to phase out fossil fuels and decarbonise the global economy at the requisite pace. And there are signs that there is real appetite for this change.
