Do Public Banks Offer an Alternative to JETPs?
July 25, 2023
|        BULLETIN #

Bulletin 136: Do Public Banks Offer an Alternative to JETPs? 

This bulletin is the second of a three-part series that highlights discussions from the TUED South Regional Policy Meeting in Johannesburg, South Africa, that took place May 16-18, 2023. 

The session Beyond Green Structural Adjustment: Just Energy Transition Partnerships (JETPs) and the Financing Challenge first looked at the problems of JETPs and the dead end of “blended finance.” It then went on to consider how public banks might offer a potential alternative model of financing.  

Video of the session

JETPs have been hailed as a new model of climate financing where wealthy Global North countries help fund decarbonisation in the Global South. The first JETP was announced in November 2021 at COP26 in Glasgow with South Africa. JETPs have since been announced with Indonesia, Vietnam, Senegal, and India. The JETPs use  “blended finance,” believing that development aid and other sources of public money can leverage and mobilise private investments. 

The following questions framed the discussion: What have been trade union responses to the JETPs? What are the elements of a public finance model that offer an alternative to blended finance?          

Presenters included: 

  • Introduction by Trevor Shaku, South African Federation of Trade Unions (SAFTU)
  • Dr Basani Baloyi, Institute for Economic Justice (IEJ) of South Africa 
  • Andy Wijaya of Persatuan Pegawai Indonesia Power (PPIP). View his presentation.
  • Mathurin Sagna of the Syndicat National Des Travailleurs du Pétrole, du Gaz et des Activités Connexes du Sénégal (UDTS) of Senegal [presentation in French]
  • SungHee Oh, Korean Public Services and Transport Workers’  Union (KPTU). View her presentation.

Following the panel, Dr Thomas Marois from the University of London joined the meeting on line and spoke on the subject of Exploring Public Banks and Alternative Financing.  View Dr Thomas Marois’ book and presentation.

“The Results Speak for Themselves” 

Opening the session, Trevor Shaku, spokesperson of the South African Federation of Trade Unions (SAFTU), provided updates on the JETP with South Africa. Citing resolution sections from the JETPs with Indonesia, South Africa, and Vietnam, Shaku also illustrated how common language is indicative of the dominance of neoliberal ideas that reflect the interests of the multinationals. 

Shaku noted how money from the North mostly comes in the form of loans that need to be repaid. This model adds to the debt burden of the recipient country. The conditions of the loans require an “enabling environment” for the private sector.  JETPs, therefore, reflect a new wave of structural adjustment using climate change as political cover for further privatisation agenda.

As with South Africa, both Vietnam and Indonesia are on the receiving end of a “green structural adjustment” agenda. Shaku shared examples of the consequences of this agenda in South Africa: 

The idea embedded in the JETPs that we must ensure competition in the energy market is already very visible in South Africa. The introduction of independent power producers (IPPs) a decade ago opened the door to privatisation. Once you have allowed IPPs to enter into power generation, you then need an independent system and market operator (ISMO) to ensure the public utility buys power from the IPPs even when the power is more expensive and sometimes not even needed. The World Bank and the IMF have pushed this policy for three decades, and the results speak for themselves. In South Africa, enabling the private sector has left the public company incapacitated.  But there is no competition; the IPPs are protected by power purchase agreements (PPAs) that last for 20 years. We are told that IPPs will have a deflationary impact on energy prices. But we have not seen low prices,” he said.

The Financing Gap

Dr Basani Baloyi, Program Director at the Institute for Economic Justice (IEJ), underscored that heavy reliance on private finance created by the Just Energy Transition Investment Plan (JET-IP) exposes the South African state to a range of risks that undermine the stated objectives of the JET-IP. “The JET-IP has 8.5 billion USD in committed financing, but nearly $99 billion is the current financing gap. The question is: will the current approach of a private pathway be able to generate the needed 99 billion? And will they also be able to address the fiscal, legal, and policy risks that surround the current approach?  If what we want is a just energy transition, the first takeaway is that the current approach adopted by the JETP will fail to raise the necessary financing required,” she said. 

SungHee Oh, director of international relations of the Korean Public Services and Transport Workers’ Union (KPTU), broadened the discussion on international climate finance beyond JETPs. She presented the results of a case study of the Green Climate Fund (GCF) and its structural shortcomings. Oh also shared public pathway alternatives put forward by the Korean trade union movement in the Public Services International-Korean Confederation of Trade Unions study on the GCF.

The GCF has only raised $62 million USD in 2020, which pales in comparison to the findings of a 2022 UNEP report indicating that at least $4-6 trillion USD per year is needed to transition developing countries to a low-carbon economy. (...) Beyond the insufficient size of the fund, the real problem with international climate finance, including the GCF, is that it operates within the neoliberal framework of “green growth,” packaged as green and driven by private rather than public pathways, with public funding limited to de-risking and ensuring the profitability of private investments through public-private partnerships or blended finance,” she said. 

Oh highlighted three issues identified in the study with the Green Climate Fund: 

  1. The concentration of funding through international access entities has resulted in projects being led by implementing entities rather than by the governments in the countries where the projects are implemented;
  2. Inadequate support for adaptation projects, with more current funding going to mitigation (which is easier for the private sector to monetise than adaptation). Less funding is currently going to Small Island Developing States (SIDS), where the impact of the climate crisis is more severe. A response to the climate crisis based on this dominant neoliberal approach will further entrench socio-economic inequalities between the North and South;
  3. A higher proportion of loans, equity investments, and other forms of finance than grants, and a higher proportion of blended finance. Loans are the main form of financing that ensures profit for the lender. This increases the already high debt burden of developing countries.

To this end, the PSI-KCTU study makes the following recommendations: 

  1. International climate finance and the GCF should embrace universal quality public service provision as a key principle and include safeguards against privatisation or corporatisation of essential services.
  2. Developed countries should actively embrace historical justice and provide their fair share of international climate finance to meet the needs of developing countries.
  3. The GCF needs to strengthen its position on climate finance as a public good and abandon its continued emphasis on the role of private capital.
  4. The GCF must engage public sector workers and service users as key parties and stakeholders.
  5. The global tax system should be reformed to raise important revenues to fund climate finance as a public good.

Public Banks & Tasks for Trade Unions 

Finally, Dr Thomas Marois from the University of London presented on Exploring Public Banks and Alternative Financing. Excerpts and highlights of his intervention include:

“There’s a key point I want to make about public banks and energy transitions: there is no pathway to financing energy transitions that will not go through public banks. That doesn't mean they will necessarily be ‘just’, but it positions public banks as a central moment of struggle in the financing of energy transitions.” 

“There is a huge world of public banks out there that are already existing. Public banking needs to be thought of as a public-purpose institution; this is not a neutral thing. There are very strong examples, such as the Dutch Water Bank, where its mandate and mission are very much of bank for and by the public sector that enjoys good relationships with local authorities and the central government. 

By contrast, in Canada, where I'm originally from, a new public infrastructure bank was created under the guidance of BlackRock investors. The purpose of that bank is to invest and seek private investment; this is exactly the opposite of what we want. Both are public banks, but with very different mandates. We must be attentive to this as a global labour movement concerned with Just Energy Transitions building a public pathway.”  

“The key point I want to make here is: public banks are not necessarily good but can be made to operate as a policy-maximising entity, rather than a profit-maximising entity. Profit maximising should not be the guiding policy for banks, private or public, in a Just Energy Transitions. This is not a given.  Public banks are contested institutions.  The private sector wants to exert control over them and control the ways in which public banks function and operate. 

Public banks are not essentially good or bad; it really depends on the social forces that shape the institutional functions that give meaning to that bank being public. The bottom line is that they are only ever as good as we make them to be. 

Finally, Marois proposed the following tasks for trade unionists to build power alongside public banks: 

  1. Identify if there are public banks in your region and if they are engaged in funding energy infrastructure. If there are, meet with the public bank. 
  2. Discuss shared and differing priorities for funding Just Energy Transitions and report back to your comrades on what works best, worst, and what isn't working for public banks and energy transitions. 
  3. Begin shaping public banks in the public interest, in a pro-public way. Begin to claw back some of the capture that we're seeing from the World Bank and from private finance over the future tasks of public banks and energy transitions.