Political leaders, the private sector, parliamentarians, development experts and young people from around the world will gather in Doha, Qatar, during 5 -10听听March 2023, to once again discuss ideas on how to tackle development challenges bedeviling the听Least Developed Countries听(LDCs).听
It will be the Fifth UN Conference on the Least Developed Countries. The UN touts the Doha event as 鈥渁 once-in-a-decade opportunity to accelerate the sustainable development in places where international assistance is needed the most.鈥�
There are 46 LDCs globally, 33 of these are in Africa.
Poverty-related issues will take centre stage in Doha and the focus will be on how to transform economies with the help of international trade, structural transformation and science and technology.
Continuing from the COP27 climate talks in Egypt last November, African delegates in Doha will likely continue their advocacy for finance for听loss and damage. Africa鈥檚 case is straightforward: the continent contributes the least to greenhouse gas emissions but suffers the brunt of climate change.
Yet, from beneath the usual canvassing for support for Africa鈥檚 development may pop up an issue that is yet to gain currency in development conversation, namely the unintended consequences of low-carbon transition for LDCs.
The issue is the focus of the latest UN Conference on Trade and Development (UNCTAD)鈥檚 signature annual LDC听听titled听The low-carbon transition and its daunting implications for structural transformation.听
Released in November 2022, the report maintains that LDCs are facing 鈥渁dditional headwinds because of the environmental policies of their trade partners.鈥�
It warns that trade partners鈥� policies targeting the carbon emissions generated in the production of exported goods could hit LDC economies.听
Polluting industries could be displaced 鈥渙ut of developed countries and into LDCs鈥� because the countries transitioning to low-carbon emissions want to meet their climate commitments.
Unintended consequences
In an interview with听Africa Renewal,听Paul Akiwumi,听Director of UNCTAD's Division for Africa, elaborates on the report: 鈥淭he intention to deal with carbon emissions using trade policies is a good idea, but there are unintended consequences,鈥� he says.
听鈥淲hat I mean is that LDCs are in a commodity-dependent trap, and they are trying to diversify and add value to the products.
鈥淏ut at the same time the world is trying to deal with the climate agenda and tackle greenhouse gas emissions using trade policies.鈥�
Unlike the advanced economies, low carbon transition in commodity-dependent countries is difficult because of a weak industrial base. Therefore, developed countries taxing companies that import commodities from Africa will hurt the continent鈥檚 economies.
鈥淭ake sectors like fertilizer, steel and cement. You say you want to know how much carbon is associated with any imports coming into the European Union, how much carbon emission was created as a result of fertilizer or steel being manufactured in Mozambique and then trying to link it to carbon tax鈥攖hat's the direction we are heading.听
鈥淭he听EU has Carbon Border Adjustment Mechanism,鈥� says Mr. Akiwumi. The EU says its aim is to 鈥減ut a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.鈥�
Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Togo, Uganda, Tanzania and Zambia.
UNCTAD鈥檚 annual LDC听听titled:听The low-carbon transition and its daunting implications for structural transformation, released in November 2022 says LDCs are facing 鈥渁dditional headwinds because of the environmental policies of their trade partners.鈥�
The intention to deal with carbon emissions using trade policies is a good idea, but there are unintended consequences. LDCs are in a commodity-dependent trap, and they are trying to diversify and add value to the products. But at the same time the world is trying to deal with this climate agenda and tackle greenhouse gas emissions using trade policies.
US and Japan听
America and Japan are thinking of establishing a similar mechanism, says the UNCTAD director.
鈥淲hat it means is that the LDCs that export to EU are going to become less competitive because the importer in Europe will tell the exporter in Mozambique 鈥榶ou tell me how much carbon was emitted to make a product.鈥欌��
鈥淥n top of that, the imposition of carbon credits will be additional cost on the products.鈥�
He laments that the LDCs lack the technology currently to reduce carbon emissions in key exports to make them competitive in the global marketplace.
听鈥淪o, many LDCs will simply just export the raw commodity鈥攖he lithium, the cobalt, the copper鈥� the way they're doing it now because they cannot add value to them.鈥�
Mr. Akiwumi is pained that 鈥渨e talk about leaving no one behind, but we will be leaving LDCs further behind because they will not have the necessary technology. They don't have it now. They will not have it in the near future.鈥�
Polluting companies
On polluting industries being displaced out of developed countries and moving to LDCs, a highlight of the UNCTAD report, Mr. Akiwumi calls it 鈥渃arbon dumping,鈥� which must concern the LDCs.
He explains: 鈥淏y 2030-2035, most European new vehicles will be electric. So, we will be buying second-hand cars in Africa that use petrol or diesel. That is the beginning of carbon dumping. Without a doubt, I see it with vehicles straight away.鈥�
Solutions
It's a conundrum: that countries are encouraged to transition to low-carbon emission, yet the transition could hurt a continent that is already reeling from the devasting effects of climate change. Are there solutions?
Yes, says Mr. Akiwumi. 鈥淔irst, is for the听developed countries to recognize this problem,鈥� he stresses.听
鈥淪econd, they must be able to provide听financial support for the LDCs听to address this issue. If, for instance, there are new technologies that reduce the CO2 emissions in steel production, they must be able to help LDCs get that technology.鈥�
Third, he says听local companies must take some responsibility. 鈥淲e need national firms that are embracing and absorbing the relevant technology. It cannot be only the international firms because if the international firms leave, the country is in a mess.鈥�
Fourth, Mr. Akiwumi maintains that 鈥淟DC economies must be careful not to stay in the听commodity-driven model. The green structural transformation to produce batteries, solar panels, wind turbines, electric vehicles is ongoing.
鈥淭he demand for hydrocarbon fuels will be going down and the value will be going down as well. So, you're going to have stranded assets in these countries if the value depreciates so much or if there is no value over time.鈥�
LDCs are going to be more or less an African issue. And what is critical for Africa is to make the African Continental Free Trade Area work. Africa needs to trade within itself.
Mr. Akiwumi says countries like Zambia and others need to adapt. 鈥淎dd value to copper; manufacture the copper wires needed in Europe for charging cars.鈥�
The fifth solution is听an increase in intra-African trade. 鈥淟DCs are going to be more or less an African issue. And what is critical for Africa is to make the African Continental Free Trade Area (AfCFTA) work. Africa needs to trade with itself.听
鈥淭he AfCFTA has many mechanisms to enhance intra-African trade, such as the听Pan-African Payment and Settlement System.鈥澨鼳lso known as PAPSS, this is听a platform that facilitates instant cross-border payments in local currencies between countries, and听could save Africans $5 billion annually, according to the Afreximbank.听听
The last solution is for African听governments to enact policies听that help the domestic private sector because, in many instances, 鈥渕any policies do not really help the domestic private sectors; they focus on the international private sector.鈥�
At Doha, Mr. Akiwumi expects countries to pay attention to key elements of UNCTAD鈥檚 LDC report.听
The unintended consequences of low carbon transition are real. 鈥淲e hope that somebody in Doha will recognize them and say these are the things we need to do to address the situation.鈥�
