International support for TAFF extends beyond finance to technical assistance, institutional reform, macro-fiscal tools and reducing the cost of capital.
Participants reflected that Global North countries need to provide finance for TAFF in countries in the Global South. In particular, TAFF roadmaps need to come with finance attached. Support is particularly needed to identify and support alternative economic clusters in fossil-fuel-dependent economies. Participants noted concern that public finance levels are falling. Others noted the “disappointing” level of disbursements in relation to JETPs. There was not a lot of appetite among fossil fuel producing Global South countries for “yet another plan” that is not accompanied by resources for implementation.
Access to finance was underscored as difficult; countries are asked by international funds to provide a lot of documents or guarantees, including when they are plagued by conflicts and other problems. Meeting requirements for concessional finance is often impossible. Participants stressed MDBs should act as a catalyst, including to de-risk projects.
Some government participants highlighted that they are planning for revenue from fossil fuel production to fund economic diversification and electrification. Others called for debt cancellation. International cooperation to reduce the cost of capital is needed.
There is a concern that donor conditionalities could override national strategies or impose uniform pathways that would erode the political legitimacy of transition plans.
Participants highlighted existing programmes for technical assistance to fossil fuel producing countries to build resilient economies but stressed that more needs to be done in this regard.
Views on technology transfer differed: some Global South country representatives said that technology transfer was not needed in their case, while others stressed its necessity. Knowledge regarding recycling and repair of batteries and solar panels is critical. Some countries have natural resources such as gold, uranium, and critical minerals, but do not have the technology to themselves develop the use of those minerals for clean energy sources. Concerns were therefore raised that the Global South will carry out the extraction of critical minerals for e.g. solar panels, and bear the associated social and environmental burdens, but that the profits will accrue to the Global North.
Theme 2 recommendations
- Donor governments have the opportunity to create a common international framework to coordinate donor approaches and improve alignment, while using the Brazil COP30 TAFF Roadmap process to better coordinate the offer of donor support. Donor support can be shifted towards early-stage project development, not just existing pipelines.
- Producer governments should work with the IMF, MDBs and other IFIs to develop a stronger fiscal and macroeconomic toolbox for managing energy transition risks, such as revenue volatility, debt, subsidy reform, and stranded assets, and to lower the cost of capital in fossil fuel dependent countries. International support needs to move beyond traditional climate finance to also unlock economic diversification. Donors should provide finance for development programs so that recipients can increase their fiscal space for industrial policy. Public finance levels should increase.
- Donors and funds should not impose conditionalities that would override national strategies or impose uniform pathways, but should rather be open to supporting the implementation of national TAFF and development plans.
- Governments should use their bargaining power to create conditions such that the private sector has the incentives for technology transfer.
- IFIs and MDBs should coordinate and align better and engage in transition risk more systematically, moving where pressures will be felt earliest.
- The macroeconomic dependencies and fiscal policy workstream of the Santa Marta forward process, led by IISD, should take into account dependence on fossil fuel revenues, cost of capital issues, and fossil fuel subsidies.