What is Africa’s Role in the Global Race to Net-Zero?
Extract from The Africa Debate 2022 Report
Africa contributes less than 4% of global greenhouse gas emissions and yet is suffering some of the most severe impacts of climate change. The continent’s rivers are drying up, rain patterns are changing and crop yields diminishing – all of which threaten lives and livelihoods in the region. As Sanjeev Gupta, Executive Director for Financial Services at the Africa Finance Corporation (AFC) highlighted, in Africa, “climate change is not a theoretical discussion”. Going into COP27 in Egypt in November 2022, the continent needs to prioritise outlining what a just transition looks like for a region that has a “long road to run in terms of human and economic development”, according to Dr. Christopher Marks, Managing Director and Head of Emerging Markets at MUFG Bank.
Continental Climate Leadership
“Africa boasts 60% of the best solar resources available globally and has only installed 1% of its total solar capacity.”
As Africa looks to continue progress towards its development goals, expand access to energy and contribute to the global fight against climate change, panellists emphasised the importance of a coordinated approach, which aligns with Africa’s own priorities and specific market conditions. In addition to the 600 million people who do not have access to electricity in Africa, around 900 million people also rely on dirty fuels such as wood and charcoal for domestic use – a situation which poses both health and climate risks: as the region’s forests act as global carbon sinks absorbing between 1.1 billion and 1.5 billion tonnes of carbon dioxide annually. Meanwhile, Africa’s installed solar capacity is only 1% of the region’s full potential which includes 60% of the best solar resources available globally. The continent is also home to one third of all remaining global mineral reserves, which will be essential to the global energy transition. With the world facing interlinked strategic challenges of energy security in the wake of the Russia-Ukraine war and accelerating progress towards net-zero, Africa’s leaders should focus on building a continental approach to unlocking the region’s full energy potential.
Boosting Investment in Renewables
Accelerating investments in renewable energy and leveraging Africa’s natural resources to create prosperity on the continent emerged as core priorities from the discussions. Jennifer Boca, Head of Environmental Social Governance at Lekela Power, a renewable power generation company which delivers utility-scale projects across Africa, acknowledged the importance of investing in a range of technologies, including renewables, to meet Africa’s development goals. Given diversity in resources across the continent, panellists emphasised the importance of setting out country specific strategies with clear policy frameworks in place. In Kenya, for example, 70% of energy production is already from renewable sources with geothermal energy alone accounting for 39%. Senegal, Tanzania, and Uganda, meanwhile, are more reliant on gas as a transition fuel. For those countries with significant mineral deposits, investing to develop processing capacity closer to mines should be a priority, and will significantly reduce emissions from unnecessarily shipping raw minerals.
Mobilising Natural Capital panel discussion, The Africa Debate 2022
The Russia-Ukraine conflict is pushing energy security up the global agenda, offering gas and mineral rich countries an opportunity to plug the gap. The UK has already begun seeking coal supplies from Zimbabwe while Italy has Algeria, Egypt, Angola, and the Republic of Congo to make up its lost Russian supply, and the EU is considering Senegal, Algeria and Angola as potential partners. According to Joel Kibazo, Senior Adviser at C-Pesa, this renewed focus on gas calls for a more nuanced approach focused on stages of development rather than blacklists, to give investors clarity and countries the ability to optimise their energy mix.
Leveraging Green Finance for Africa
Marc-Andre Blanchard, Executive Vice-President, CDPQ
The challenge for Africa remains leveraging finance to develop new sources of power at the scale the continent needs to meet its growth targets. The funding gap for emerging markets, including Africa, to meet net-zero by 2060 is $94.8 trillion, while 95% of financing needed to meet the Paris Agreement will need to come from the private sector. As Daniel Hanna, Head of Sustainable Finance at Standard Chartered Bank explained, harnessing the resources of wealthier countries to plug this gap makes financial sense as much as it is equitable. If emerging markets are expected to secure financing themselves, they will be $2 trillion a year worse off whereas leveraging global capital will support global growth.
Expanding carbon markets, green bonds and blended finance mechanisms offer opportunities to significantly expand green investments in Africa, with democratising access to sustainable finance set to be a central topic at COP27. Several recent developments in this area point to pathways to scale up the flow of global capital into adaptation and mitigation projects in Africa. In November, Standard Chartered Bank has placed a 3 billion ZAR fixed rate green bond on behalf of DBSA, the first in the UN-backed SDG 7 Programme to fund green energy in Africa. MUFG, FinDev Canada and the Quebecois pension fund, CDPQ, have developed a $1.2 billion blended finance platform for lending in 25 emerging markets, including ten in Africa, which promises to provide a template to de-risk green investments in Africa for institutional investors.
