By Zhou Xiaozhu
Chinese international cooperation mechanisms, such as the Belt and Road Initiative, could fill the gaps left by the US withdrawal.
On the day he became president again, Donald Trump signed an executive order to take the US out of the Paris Agreement on climate change. That was followed by a termination of US funding pledged during the Biden administration to programmes that support South Africa, Indonesia and Vietnam to shift their economies away from coal dependence.
The move brings uncertainty to the renewables transition in those countries. The US had committed USD 4 billion, according to funding documents for the programmes, which are known as Just Energy Transition Partnerships (JETP). This accounted for 12% of South Africa’s initial JETP funding, 18% of Indonesia’s and 13% of Vietnam’s – more than any other state funder. The loss has already caused the cancellation of projects and exacerbated funding gaps.
It is worth noting, however, that the three countries are all key partners in China’s Belt and Road Initiative, and so have plenty of experience in working with China on infrastructure and energy. China’s expertise in energy planning, market investment and clean-energy technology could help them redraw their plans and roadmaps for the energy transition and economic development, and in doing so, deepen China’s cooperation with Africa and the Southeast Asian nations.
The impacts of the US withdrawal
In March, South Africa’s government announced the cancellation of US-funded projects that were in the planning or implementation stages. It also said that, along with its partners, it would “evaluate the implications” of the US withdrawal. Shortly afterwards, the other main JETP funders – the UK, Germany, France, the EU, Denmark and the Netherlands – which together are known as the International Partners Group, issued their own statement.
It reiterated full support for South Africa’s energy transition and pointed out that South Africa’s JETP now has USD 12.8 billion in funding pledges from non-US donors, higher than the USD 8.5 billion originally pledged in 2022.
Still, the US moves rocked confidence in global climate governance. Argentina was the first to say it might not stick with the Paris Agreement. Indonesia’s climate envoy, meanwhile, suggested that if the world’s second-largest emitter was pulling out of the agreement, it would be unfair to expect countries like Indonesia to stay; although the country’s environment ministry later said it would continue to contribute to the fight against global warming. In any case, the loss of USD 2 billion in funding from the US is likely to further hamper Indonesia’s already delayed JETP programme.
South Africa and Indonesia have seen some progress since their JETPs began, though. As of November 2024, South Africa’s programme had spent about USD 2 billion, with specific plans for a further USD 7.3 billion. It’s Just Energy Transition Investment Plan, published in 2022, had listed six priorities: electricity, green hydrogen, new energy vehicles, transitional justice, skills and capacity building, and municipal energy transitions.
The International Partners Group decided to spend 27% of the USD 9.3 billion pledged so far on the electricity sector, as this would empower work in all other fields. However, the group has not yet made any concrete plans for funding new-energy-vehicle projects, and coal phase-out plans are also behind schedule: South Africa’s national electricity company, Eskom, has delayed the planned decommissioning of three coal power plants until March 2030, citing energy security concerns.
As of June 2024, Indonesia had only published details of how approximately USD 300 million in donations and technical assistance was to be used. This makes up just 2.6% of its total JETP funding, and even that is now under threat because it included a USD 60 million commitment from the US. There is also uncertainty around the remaining 97.4% of the funding, the majority of which is made up of concessional loans, which Indonesia may struggle to pay back.
Priority coal decommissioning projects under Indonesia’s JETP programme include the 660-megawatt Cirebon-1 plant and Pelabuhan Ratu. Cirebon-1, which belongs to an independent power firm, will have its debt paid off using preferential loans and its power-purchase agreement shortened. Pelabuhan Ratu is owned outright by Indonesia’s national power company, PLN, and plans for its decommissioning are still being worked on.
At the 2024 G20 summit, Indonesia’s president said the country would phase out coal by 2040, earlier than previously planned. However, given the condition of the country’s existing grid infrastructure and progress so far both on renewables and coal decommissioning, this may be overly ambitious.
Energy transitions in South Africa and Indonesia face similar problems: growing demand for electricity, reliance on coal for a large part of that power, and slow development of power networks and renewable generation. While renewables can be ramped up in short order, coal decommissioning can only take place when two conditions are met: that there will be no major impacts on regional power supplies, and that the electricity infrastructure can cope with the renewables coming online.
South Africa already suffers from frequent power outages and its grid is aging. Indonesia, being an archipelago, has numerous small power grids. Both are in urgent need of grid expansions and upgrades.
Can China fill the gap?
South Africa, Indonesia and Vietnam are all part of China’s Belt and Road Initiative. China is also their biggest trading partner, and for Indonesia, the second biggest source of outside investment. I suggest teams of Chinese experts be dispatched, as soon as possible, to participate in studies of power sector transitions taking place under the JETP framework in these countries.
China has valuable experience and support to offer: in power system planning, in energy-efficiency upgrades for coal-power plants, and in low-cost and environmentally friendly renewable technology and investment. It could help these countries make accurate predictions, plan accordingly, and set realistic and achievable transition targets.
Teboho Makhabane, the head of ESG (environment, social and governance) at Sanlam Investments in South Africa, said China may plug some of the gaps left by the US, which in both South Africa and Indonesia was focusing on renewable-energy development, hybrid-financing mechanisms, rail transport, energy planning, demand-side management and energy saving, and a just transition.
China could use the BRICS group, South-South cooperation and the Belt and Road Initiative to provide assistance in those fields, as well as in the electric-vehicle and critical-minerals sectors.
The 2024 Forum on China-Africa Cooperation, held in Beijing, set up a CNY 5 billion (USD 690 million) “China-Africa Green Supply Chains Fund” as part of China Development Bank’s China-Africa Development Fund. Work on its first project, South Africa’s TFC solar farm, started in November 2024.
The China-Africa Development Fund states that as of the end of 2024 it had committed to USD 7.6 billion of investment across 39 African countries, leveraging over USD 32 billion of Chinese private investment. Almost USD 1.2 billion of that money has gone to South Africa, it added. And South Africa is just one example of China’s cooperation with Africa in green sectors: by 2027, China plans to have set up 30 clean-energy and green-development projects on the continent.
As a major coal producer and exporter, and the largest economy in Southeast Asia, Indonesia is at the heart of the region’s energy transition, and China is already set to play a crucial role in its transition. In November, the two countries published a joint statement agreeing to cooperate on new-energy vehicles, lithium batteries and PV solar; strengthen mutually beneficial and sustainable cooperation in the mining industry; and strengthen global partnerships for the energy transition.
China and Indonesia already have a long history of successful cooperation in these fields, with China investing USD 35 billion in Indonesia over the last 17 years, mainly in the energy sector and city transport. There are also joint venture industrial parks and economic cooperation zones.
Thanks to Chinese investments, both Malaysia and Vietnam manufacture solar power components for the global market. In the future, Indonesia’s advantages in raw materials and Chinese investment could be leveraged to help the country become a hub as manufacturing across Southeast Asian nations becomes more integrated.
In November 2023, the Cirata floating-solar power plant, built by PowerChina, was fully connected to Indonesia’s power grid and became the largest such installation in Southeast Asia. In March 2024, Chinese power company Guodian Power Development won a tender to build a 100-megawatt floating solar project at Karangkates, also in Indonesia.
Deep strategic cooperation with China isn’t just helping Indonesia realise its Golden Indonesia 2045 Vision – the country may also become the driving centre of the low-carbon transition in Southeast Asian nations.
Lessons from JETPs for the Belt and Road Initiative
JETPs are multilateral partnerships between governments and, therefore, a very political undertaking, led by developed nations vying for influence and leadership on global climate change issues. The bulk of JETP’s financial commitment is concessional or commercial loans that fall short of what is needed to match the ambitious targets for coal decommissioning and the wider transition, in countries that lack cheap and efficient electricity infrastructure.
If the transition is done too quickly, developing nations already facing electricity shortages could be thrown into even more serious situations.
However, JETPs also offer valuable lessons. In particular, when it comes to market investment risk for coal decommissioning and renewable-energy development, bilateral interventions can reduce risks and barriers. These development plans, jointly produced and agreed upon, create a favourable environment for JETP investments.
China could take this approach when working with other developing countries, drawing up national plans and bilateral cooperation frameworks with its partners, reducing investment and financing risks, and pushing actual projects forward.
In Indonesia, for example, there are strict controls on the size of stake overseas investors can have in a renewable-energy project. This limits overseas investment, making it less likely that decommissioned coal-power sites will be repurposed for renewables and so reducing transition outcomes.
I recommend that China learns from the JETP mechanism and work with host-country governments on measures to protect the legal interests of Chinese firms, while looking for support from multilateral funding organisations, expanding financing channels and undertaking win-win cooperation on energy and electricity in Belt and Road nations.
Zhou Xiaozhu is an analyst with the Rock Institute for Global Decarbonisation Progress, working on climate change and energy transition issues.
First published in Dialogue Earth.
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