🏭 Just Energy Transitions, Climate Crisis And The ‘wall Street Consensus’: The New Dictates Of International Development 🌍

The Just Energy Transition Partnerships (JETPs) were unveiled at Glasgow’s COP26 with the inaugural Partnership signed between South Africa and the International Partners Group (IPG) of financiers including the US, UK, European Union and others. Two further Partnerships were signed with Indonesia and Vietnam at the G20 summit and COP27 respectively, while a smaller Partnership was agreed with Senegal at the Paris Summit for a New Global Financing Pact in 2023.

There has, therefore, been a concerted effort to position the JETPs as a key part of the emerging mainstream of climate and development policies tailored for the Global South. But the reality is that the JETPs represent the worlds of international development and international finance at an historical inflection point, whereby the need to address - and be seen to address - climate crisis has become undeniable, while attempts to move meaningfully beyond a neoliberal paradigm remains undesirable for the players of international finance.

📢 Climate Action At An Inflection Point ⚖️

This dichotomy is reflected in the curious mix of innovation and ‘business as usual’ found in the JETP frameworks - whereby calls for Just Transition, popularised by the 2016 Paris Agreement, and the supposed conversion to ‘green’ causes by the likes of major multilateral development institutions, sit alongside old orthodoxies of public-private partnership, energy liberalisation and private sector-led approaches to development.

As Dr Basani Baloyi & Jezri Krinsky of South Africa’s Institute for Economic Justice point to in their briefing paper on South Africa’s Just Energy Transition, the JETPs reflect the ‘Wall Street Consensus’, the latest articulation of 'green capitalist' strategies which ‘recognises that the climate crisis impinges on the stability of the global financial system but seeks an alternative to a more interventionist ‘green developmental state’...[and] seeks ways to exploit the climate crisis for profitable opportunities that benefit financial markets and financial institutions’.

According to scholar Daniela Gabor, the Wall Street Consensus is a new paradigm of financialised development led by multilateral development banks in which ‘the private sector commits to finance, construct and manage public services as long as the state, with multilateral development bank (MDB) support via blended finance, shares the risks by guaranteeing payment flows to PPP operators and investors’. It is designed to open up new frontiers for international finance by reorganising the state as an agent to ‘de-risk’ an expanded array of state sectors and functions in order to attract, secure and protect international and private investment and finance flows in them.

🌿 The Shifting Landscape Of International Development 📊

Designed in part as a counter to the threat of more radical climate justice campaigns which centre on a more interventionist or developmentalist role for the state, this model of a ‘de-risking’ state is intended to narrow the role of the state in order to protect the international financial system, creating a more amenable environment for investment, while state policy is reduced to overseeing public-private partnerships.

The machinations of this financialised Wall Street Consensus has become increasingly prominent in recent years, and is evident in the JETPs themselves. The G7’s 2021 communique outlining the ‘Build Back Better World’ agenda, forerunner to the Partnership for Global Infrastructure and Investment, sketched out the framework for climate development that would later feature in the JETPs.

The prominent role played by the Glasgow Financial Alliance for Net Zero in the Indonesia and Vietnam JETPs is a salient example of this apparent alliance of international finance with climate action, while many of the development finance institutions being deployed to deliver public-private partnerships in South Africa’s JETP, such as USAID, France’s AFD and British International Investment, have committed to new climate strategies, often centred on commitments to refuse coal financing, decarbonising economies and/or moving towards ‘net zero’ emissions.

Recent developments on the international level also confirm the growing convergence of international finance, climate policy and development. In October 2022 the US’ Treasury Secretary Janet Yellen outlined the need for reforms to the World Bank, of which the US is the largest shareholder and de facto leader, to enable it to better respond to challenges such as climate change and to better support middle income countries. Accordingly, the World Bank produced a discussion document titled Evolving the World Bank Group’s Mission, Operations, and Resources: A Roadmap, in late 2022, which identified support for climate action and other long-term threats to development as core objectives for which it would need to expand its mission.

Following the early resignation of World Bank president David Malpass, widely considered a climate denier, in 2023 his successor Ajay Banga launched immediately into a climate and development drive, including by moving to streamline project financing process in order to help overcome the 'trust deficit' between the Bank and developing nations, and trialling a loan repayment pause for vulnerable countries struck by natural disasters.

💸 Financial ‘reforms’ Fail To Rise To The Task 💼

These developments have come amidst increasingly vocal displeasure among countries of the Global South towards the existing development and finance model provided by multilateral institutions, a brewing debt crisis facing Southern nations, as well as the emergence of alternative lenders to less developed countries, such as China.

These misgivings assumed centre stage at the Paris Summit for a New Global Financing Pact in June 2023, hosted by French President Emmanuel Macron off the back of Barbadian Prime Minister Mia Mottley’s Bridgetown Initiative for overhauling global finance and climate financing. There, concerns about debt, the availability of financing and the lack of flexibility by the Global North were expressed particularly forcefully by African leaders, as was a proposal for the formation a new global green bank ‘separate from the World Bank and IMF [as] traditional multilateral lenders were “hostage” to rich world interests and unable to solve the climate crisis’, underscoring the depth of feeling on the matter.

Yet, these reforms have come alongside emphatic statements on the importance of attracting private investment for development. Notions floated in 2022/23 by the US for increasing the Bank’s lending capital fell victim to fiscal tightening by the US government and geopolitical concerns, and by March 2023 the emphasis by the US Treasury had turned to ‘stretching the bank's existing resources, adopting innovative financing policies and mobilizing private finance’ in order to tackle climate change and development needs.

The World Bank’s 2023 Roadmap committed to its ‘Cascade’ model of finance model of prioritising private over public finance wherever possible, arguing that its role was to ‘help countries maximize their development resources by drawing on private financing and sustainable private sector solutions, while reserving scarce public financing for those areas where private sector engagement is not optimal or available.’. This deference to private capital was echoed in a July 2023 speech to the World Bank and IMF’s Caucus of African Governors by Andrew Mitchell, the UK’s Minister for Development and Africa. While speaking on the needs for reforms to international financial institutions, Mitchell stated that ‘[The World Bank] cannot do this alone. That is why we also need it to mobilise much more private capital for your countries.

🔥 Just Energy Transition Partnerships As Market Capture 🚨

The model of international finance being advanced under the Wall Street Consensus is clearly present in the JETPs, which marry development and climate action under a heavily financialised framework. Moreover, the JETPs have been critiqued for operating a ‘donor-driven approach to climate finance that maintains unequal global power relations, picks winners and losers, and serves geopolitical interests’. This explains the enthusiasm with which IPG members, hailing from the Global North, have promoted the JETPs, despite the deeply inegalitarian prospects of the Partnerships and with the underlying neoliberal model being increasingly challenged and discredited.

The evident lack of political will on the part of the developed world to see through meaningful changes in international development finance - either through a thorough democratisation of multilateral development banks, or improving the availability and conditions of finance - also severely hinders the potential of the JETPs to offer a new model, or to protect host countries from the dangers inherent in the prevailing model of privatisation, PPPs and market-determined policies.

As such, the dangers presented by the JETPs and this model of development finance go beyond ‘greenwashing’, and represent increasingly assertive efforts to capture climate action by the very companies and private actors that have brought the world to the brink. A truly just transition must directly confront any efforts to preserve the primacy of private interests in the battle against climate crises.

#UnjustTransition