We are all hoping that Africa鈥檚 COP can be a pivotal moment in bringing certainty on climate action. But can the climate emergency truly be given the attention it merits in Sharm-el-Sheikh?听听More than ever, we are in an era of turbulence.听
Are we at risk in focussing on smoothing things over as quickly as possible, rather than fundamentally addressing the slow burning climate emergency?
This COP is being held in an environment characterised by geo-political tensions, and advanced economies are likely to focus efforts to secure energy and food supply chains and controlling ballooning inflation.听听Measures to combat inflation mean that the flow of finance to the world鈥檚 most vulnerable is likely to be further curtailed.听
Africa needs COP27 to deliver on 鈥榓genda setting finance鈥� - resources that are specifically tailored to deal with the urgent needs of the most vulnerable.
This is particularly critical, because in the African context, the achievement of climate goals are inextricably linked to development outcomes.
Delivering on climate finance
If we are to break down what is needed on finance, perhaps the first priority will be to focus on more clarity on the specific types of finance needed.听听
While the $100 billion promise, which has not been realised, included all forms of finance, it may prove more productive to have clear goals on the amounts of grant finance needed, the amounts of concessional loans required and complemented by the opportunity in terms of investment from the private sector.听
A more realistic costed figure would be well over $1 trillion.听听But such a figure should not scare us.听听We should rather have the transformative impact such investment will bring.听听
In terms of private sector investment, we must recognise that the current environment is characterised by capital flight from markets perceived as being riskier to established havens.听
Africa already had the least private sector-driven climate finance than any other region at only 14% of flows, according to听the听Climate Policy Initiative 2022. South Asia has the second least private finance able to mobilise almost two and half times more private finance than Africa.
The current environment is even less conducive to private sector investment, and this is why the sector needs to be supported and accompanied.听听
At the recent pre-COP27 meeting convened by the Egyptian presidency in Cairo, the need for听predictable and affordable green finance听mechanisms was underlined, with emphasis on the need for deployment of blended finance to allow this to happen at scale.
The Pre-COP meeting, as well as the recent IMF-World Bank meetings also underlined the importance of听debt sustainability听to allow countries to invest in climate resilience.听听
African countries face a looming debt crisis as they are scheduled to repay $64 billion in debt repayments in 2022, a sum which is twice the amount available as bilateral aid, according to听The One Campaign- Data Dive: An urgent plan to avert the debt crisis.听
Debt for climate investment refinancing听could provide an additional mechanism to help better manage existing debt and create fiscal space for investment in climate action, as recently recognised in an IMF paper听(2022) 鈥�Debt-for-Climate Swaps: Analysis, Design, and Implementation鈥�.听听
Looking ahead at COP27, we should encourage countries to proactively seek to refinance existing expensive debt, and potentially with the support of blended finance resources, reinvest in priority areas of climate action. 听
The听听provides an interesting example of such opportunities, with possibilities to undertake similar deals in Africa. 听
At COP27, we hope an agreement can be reached to link debt issuances to Key Performance Indicators aligned with climate goals- for example African countries鈥� nationally determined contributions (NDCs). 听
It is also hoped that climate disaster standstill clauses can become the norm - whereby a climate related shock can allow countries to pause repayments while addressing the impact of disaster.
Strengthening Africa鈥檚 project pipeline for implementation
One of the challenges in delivering real investment into climate action in Africa is the availability of an appropriate project pipeline.听听This issue is sometimes overstated - there are significant projects across the continent which are already mature in terms of preparation.听听But it is a reality that funding that is available from global funds such as the Glasgow Financial Alliance for Net Zero, often does not automatically flow towards the most vulnerable countries, because the experience of these funds does not exactly correspond with the opportunity available across the continent.听听
The UN Economic Commission on Africa (UNECA), UN Climate Champions and the COP27 presidency have recognised the importance of working听听to help channel resources into the most transformative projects.听听Many of these projects are ideally placed for private sector investors, while several also are not classically attractive to such investment.听听But the focus of the initiative has been to unlock additional resources for truly transformative projects.
These projects in many cases are also truly regional in nature covering multiple countries and leveraging the African Continental Free Trade Area (AfCFTA).听听To cite two examples:
- Regenerate 30: A farmer and agri-business initiative to mobilise $500 million in regenerative agriculture and sustainable value chains.听听Each action is built on locally owned climate resilient solutions from production to processing of agricultural products.听听
- Africa鈥檚 Great Blue Wall: an initiative aiming to develop marine protected areas in Africa鈥檚 oceanic spaces and connecting these protected areas to sustainable economic opportunities around increased value addition of fisheries and eco-tourism.听听In particular, the initiative seeks to raise resources through a regional blue bond which will facilitate the provision of affordable finance to micro, small and medium-sized enterprises (MSMEs) in this space.
Continued efforts to ensure there is a viable pipeline of projects available for investment will be an important component of truly delivering on implementation.听听
Africa needs COP27 to deliver on 鈥榓genda setting finance鈥� - resources that are specifically tailored to deal with the urgent needs of the most vulnerable.
Just and equitable energy transition- from transition to transformation
African negotiators have consistently pointed to the fact that Africa鈥檚 low relative emissions, and the low access to electricity in African countries means that Africa requires more flexibility in implementing transitions towards net zero as agreed at COP26.听听
The African Union has recently defined听, which re-affirms that achieving accessibility goals in line with SDG7 and the objectives of Agenda 2063 will mean that many African countries will need latitude to make use of their fossil fuel resources.听听
The common position provides for the听gradual phasing out of coal and oil听but recognises that gas will play an important role in the transition as part of addressing baseload generation needs and hence allowing more intermittent renewables to be added to the energy mix.听听There is also the recognition of the role of gas in delivering clean cooking solutions to the almost 900 million Africans who currently do not have access to such options.听听
Many partners have expressed concern that the use of gas, and in particular the development of new gas fields, will render the 1.5 degrees maximum warming target unachievable.
African countries have remained committed to the net zero commitment of Glasgow, and the common position should not be interpreted as deviating from this goal.听听African countries have rather sought to define the pathway that is the most credible based on existing resources.听听
In almost all scenarios, renewables, in particular solar and wind, represent the most cost-effective option.听听But to unlock this opportunity, base generation capacity has to be significantly reinforced and large scale investment into renewables needs to be front loaded.听听Many African countries have underlined that the promised investment through NDCs has not materialised.听听
Hence the critical role that Just Energy Transition Platforms are likely to play in the context of a successful COP27 outcome.听听
Perhaps most importantly, the concept of a transition should be viewed through the lens of economic transformation.听听Hence Just Energy Transition Platforms should focus on access to energy, and the scale of energy investment required for the diversification of the economy and for the establishment of resilient and sustainable value addition.听听
Based on least cost scenarios, for the vast majority of countries, assuming the appropriate investment is possible, the benefit of accessible and affordable energy will be achieved through renewable means.听听
Loss and damage
The scale of climate change impact on the daily lives of African citizens is rising.听听African countries are already spending between 2 and 9 percent of their budgets in unplanned allocations to respond to extreme weather events, according to estimates by UNECA鈥檚 African Climate Policy Centre.
Global frameworks to respond with the speed required are coming up short.听听And the combined impact of COVID-19, the food and energy crisis associated with the war in Ukraine and climate related disasters means that African countries have limited fiscal space to respond.
African negotiators have continued to emphasise the urgency of delivering a financial mechanism to deal with loss and damage which is additional to existing flows of climate finance.听听In the majority, developed country partners have resisted making commitments to this end.听听
Notable exceptions were the symbolic gesture by the Scottish Government at Glasgow on the occasion of COP26, and most recently听听of $13 million for loss and damage.
UN Secretary-General Antonio Guterres has urged that a windfall tax on fossil fuel profits in these exceptional times be considered to raise additional resources which can be used to compensate the most vulnerable countries for the immediate impacts of climate change.听听
A move in this direction would set a positive precedent in applying 鈥榩olluter pays鈥� principles to compensate those most vulnerable.
Further practical action to address loss and damage is possible by supporting the most vulnerable countries to access successful regional insurance mechanisms such听as Africa Risk Capacity.听听ARC have successfully supported risk reduction associated with climate related disasters, but additional financing support is required to ensure full coverage of the most vulnerable countries.听听
The benefit of providing such a 鈥榮ubsidy鈥� far outweighs the cost of having to respond in the aftermath of a disaster and also allows more timely support.听听Such initiatives should not be viewed as a substitute for additional loss and damage financing but as part of the range of options to address the impact of climate damage.听听
Carbon markets and the AfCFTA
The development of carbon credit markets represents a significant opportunity for African countries to leverage their significant natural capital as a means of mobilising additional resources.听听UNECA has worked with partners to illustrate that using nature-based sequestration alone, African countries can provide up to 30 per cent of the world鈥檚 sequestration needs, according to听Climate Action Platform Africa.
Depending on price points, up to $82 billion per annum could be mobilised from nature-based carbon credits in Africa.听听
But African countries often have limited capacity to effectively access voluntary carbon credit markets.听听It is also essential that Africa鈥檚 engagement in carbon credit markets is built around the high integrity of its carbon credits.
To support this aim, the UNECA has supported the Congo Basin Climate Commission to develop a regional and harmonised protocol and the establishment of a regional registry.听听The regional registry is underpinned by the development of pipeline of potential investments in sectors which have meaningful impacts on communities that depend on the forests of the Congo Basin, by creating sustainable livelihoods and incomes, and by rehabilitating degraded lands.听听
Developing this regional approach is aimed at creating a common regional understanding of the true value of Africa鈥檚 carbon sequestration potential, and also providing opportunities at scale for potential investors.听
Such a regional approach also allows us to look forward to potentially implementing regional carbon markets within the African continent to incentivise climate action and provide a flow of predictable resources.听听
The regional approach could also be built into the AfCFTA as a means of stimulating intra-regional investment in climate resilience.听听
Climate action has not been effective because the institutions of development remain ill equipped to deliver it.听听A successful COP will hopefully allow all partners to truly 鈥榙eliver as one鈥� on climate action.
While concerns may be voiced about the potential for increasing the overall costs of trade, by designing a bespoke carbon credit trading system situated within the continent, African countries can channel investment to where it is needed the most, for example in climate smart agriculture.
While full operationalisation of article 6 at the global level brings both risks and opportunities, African countries should embrace the opportunity to听incentivise climate action听through internal mechanisms, while also dramatically improving options for raising of resources.
Adaptation
African countries have the least resources available to invest in adaptation.听听The pledge at Glasgow to double adaptation financing, while a step in the right direction, remains woefully short of the overall needs for investment.
Analysis by Tufts University in partnership with UNECA has identified the declared adaptation costs in African NDCs and adaptation plans totalling听around $438 billion by 2030.听听In contrast, between 2000 and 2020, only $24 billion flowed into adaptation in Africa from official climate finance sources.
Therefore, even if the Glasgow pledge is honoured, the gap remains dramatic.
Large scale investment in adaptation has to be led by grants and concessional finance from development partners to further incentivise and create the conditions for potential market-based investment.听听
The operationalisation of the International Monetary Fund鈥檚听听is a key step in this direction, but we need to further ensure the increased resources available to it.听听听The African Development Bank鈥檚 Africa Accelerated Adaptation Programme, aiming to mobilise $25 billion of adaptation specific investment within five years can further catalyse these types of investment.
Conclusion
COP27 will take place against one of the most difficult backdrops. With the huge impact of inflation being felt across the world and slowing economies, the risk is that multilateral action becomes harder to achieve.
The counter-point is that it is in moments of extreme risk where cooperation and partnership can also bring the most rewards.
Certainly, in Africa, the challenge of climate change is wrapped up in the opportunity of economic transformation.听听
But this does not change the reality of dependence on external finance which has been underlined by Africa鈥檚 vulnerability to the triple global shock of the COVID-19 pandemic, the war in Ukraine and the ongoing climate crisis.听听
Three key levers which can allow significant progress to be achieved at COP27 and beyond include:
- Large scale availability of 鈥榓genda setting鈥� finance to invest in climate action through development finance institutions and multilateral development banks, aligned to needs as expressed in NDCs.
- The rapid financing of credible just energy transition plans developed by African countries.
- Support for de-risking of climate linked investments by the private sector through the provision of blended finance.
These levers depend as much on a reform of the global finance architecture as they do on the COP27 process. And this is perhaps the main point.听听
Climate action has not been effective because the institutions of development remain ill equipped to deliver it.听听
A successful COP will hopefully allow all partners to truly 鈥榙eliver as one鈥� on climate action.听听
Jean-Paul Adam听is the director of Technology, Climate Change and Natural Resources Division at the UN Economic Commission for Africa.
