Akinwumi Adesina, president of the African Development Bank (AfDB) pulled no punches at the Bank’s annual meeting in May. “Africa is being short-changed in climate finance. Africa is choking,” he told journalists.
“Anywhere you look in Africa today, climate change is causing havoc,” Adesina said. “In the Sahel, hotter temperatures are drying up limited water, causing water stress for crops and livestock and worsening food insecurity.”
Combating the climate change impacts that are ravaging the continent, along with developing the energy and green infrastructure to make sure that African economies are part of the solution rather than adding to the problem, would require private sector climate financing to increase by 36% annually, he said. According to AfDB estimates, Africa will require $2.7tn by 2030 to finance its climate change response.
One of the most significant attendees at the Bank’s annual meeting was Sultan Ahmed Al Jaber, president-designate of the United Nations (UN) COP28 climate talks which start in his home country, the United Arab Emirates (UAE), at the end of November. Al Jaber is also CEO of the Abu Dhabi National Oil Company (ADNOC) and chairman of the government-owned renewable energy company Masdar.
According to Al Jaber, the limited availability of accessible and affordable financing was undermining efforts to achieve the UN Sustainable Development Goals.
“This is a clear threat… and responding to this challenge is one of the priorities of the COP28 presidency. I look forward to working with all partners to make tangible progress towards ensuring that such funds are provided for the areas where they need to be available, affordable and sustainable,” he said.
Financing shortfall
Despite the encouraging words, African nations seeking to facilitate more investment to increase electricity access, clean energy production and other green ambitions may not be overly optimistic that COP28 will deliver what they are looking for.
The last edition of the talks, COP27, may have been held on African soil, in Egypt, at the end of 2022, but it has been evident for some time that some leaders on the continent were losing patience waiting for an adequate multilateral response to the climate crisis and were seeking to make their own way on sustainable development, signing up for bespoke arrangements.
There was no shortage of pledges to boost financing for climate adaptation at COP27, along with the creation of a “loss and damage” fund to provide finance for vulnerable countries hit hard by climate disasters. But African leaders know from experience that ambitious international pledges to ramp up public funding or “mobilise” private investment for sustainable development have not been met in the past.
Rich countries pledged to provide $100bn a year in all types of climate support to developing countries at the 2009 COP15 summit in Copenhagen, but were still around $17bn short of that annual total in 2022, albeit with a hope that the target may be hit imminently.
Policy rethink
In terms of the energy transition, many African countries are now choosing a course that prioritises their own imperatives, allying job creation and economic growth to sustainable development.
As Christopher Vandome, a senior research fellow with the Chatham House Africa Programme, put it in a note on the outcome of COP27: “The reality of under-disbursement and delivery of promised funds is causing many African leaders to rethink their engagement with multilateral climate initiatives.”
He said South Africa’s policy of developing its own plan to work with partners on shifting away from coal for its energy supply while protecting the incomes of those reliant on coal-related industries, showed a willingness to adopt a more bilateral approach to green financing than could be emulated by other African countries.
South Africa developed a Just Energy Transition Partnership (JETP) with its international partners, which unlocked commitments of $8.5bn from the US, the UK, France, Germany and the European Union at the 2021 COP26 in Glasgow.
JETPs are a G7-led initiative that use blended finance – a mix of public and private funding – primarily to help emerging economies shift from coal to a greener energy mix while addressing the social ramifications of the change.
The JETP with South Africa is expected to prevent up to 1.5 gigatonnes of emissions over two decades, according to the EU. Indonesia and Vietnam have followed suit, announcing JETPs in late 2022. Senegal could be the next African country to follow South Africa, having been in JETP negotiations for some time, though a concrete announcement has yet to materialise.
The West African country is distinct from other nations involved in the JETP so far, in that it is not a major coal consumer but must instead balance the use of its newly exploited gas reserves with renewable energy to realise its aim of providing universal electricity access in the next few years. Various other sub-Saharan African countries that are also significant upstream oil and gas players, such as fellow gas producer Mozambique, face similar quandaries over how to balance the economic opportunities provided by exploitation of fossil fuels, while embarking on the energy transition.
COP28 challenges
How to build successfully on blended finance initiatives such as JETP is likely to be a key concern at COP28. The $8.5bn pledged to South Africa is a start, but it needs to stimulate a lot more funding to meet the huge upfront capital requirements needed for its energy transition.
In November, President Cyril Ramaphosa of South Africa put a figure on the task. He said the country would need more than $80bn over the next five years to realise its plans to cut carbon emissions, benefit economically from the energy transition and support affected sections of its population.
Sultan Al Jaber, the COP28 president-designate, has been making all the right noises over the need for the summit to be a success. However, doubts have been expressed over whether a climate summit held in the UAE, one of the world’s largest hydrocarbons producers, is the ideal setting to achieve the sort of major climate policy breakthroughs that have proved challenging at the best of times. The fact that increased use of fossil fuels has been seen by some as a short-term partial fix for the global energy security crisis triggered by the Russian invasion of Ukraine won’t help the mood either, analysts say.
But there are rays of light – a notable one being an effort by several influential players to get an agreement at COP28 on specific targets for global renewable energy capacity expansion.
The hope is that setting an ambitious target for 2030 will send a signal to markets that investors should be serious about funding the sector, allowing renewable energy production to scale up and lowering the cost of upfront capital.
No one is putting figures on potential targets yet, but if they are to match the scale of the climate change problem, they need to be spectacular. Francesco La Camera, director-general of the International Renewable Energy Agency, said earlier this year that annual renewable energy capacity growth of 1 TW globally would be needed to meet climate goals.
Given that Africa has some of the world’s best climatic conditions for renewable energy production, such a scale-up would benefit a continent already in the process of embracing solar and wind power. However, African leaders would probably prefer to have concrete arrangements in place to mobilise funding for the energy transition, rather than relying on setting build-out targets and hoping for a market response.
