COP27 and Africa

Recent reports confirm that Africa receives less than 6% of climate finance globally and that  the impact of climate change combined with the shift from fossil fuels will significantly affect countries across the continent.

Will the fact that COP 27 is hosted in an African country make any difference to the approach that will be taken, and will this mean an increased focus on the impact of climate change across Africa itself?

In the approach to COP27, there has been considerable expectation about issues including:

• the setting of climate goals for African countries and making Nationally Determined Contributions a reality under the guidelines of COP 26;
• access to climate finance and increasing private investment levels;
• further transparency and the enhancement of standardised and simple ESG criteria in order to foster greater levels of confidence in climate-related investments in Africa; and
• just transition and cooperation with developed countries, bearing in mind the funding goals necessary for making climate ambitions a reality – and noting that those funding goals have not been complied with so far. (The goal is a $100bn annual amount for contributions by developed countries to developing countries, a pledge made in 2009!)

The climate change conundrum

Looked at through the lens of the UN’s Sustainable Development Goals, the expectations mentioned above relate particularly to SDG 13 (climate action), 16 (peace, justice and strong institutions) and 17 (partnerships for the goals).

But other SGDs, involving energy (SDG 7) and infrastructure (SDG 9 and SDG 11), remain at the crux of the climate change conundrum for Africa. The lack of private investment in the renewable sector is not only a concern but also a huge contrast with the level of investment in oil and gas projects. However, revenues from natural resources, including oil and gas, are key for the national budgets of some of Africa’s largest economies. The fiscal reliance on those revenues needs to be addressed, bringing about a true decoupling of economic growth from the environmentally damaging exploitation of natural resources. But this will only possible through innovation, which itself will come at a financial cost. 

While it is certain that energy companies, themselves in the process of reducing their dependence on fossil fuels and becoming lead players in the energy transition, will have an important role to play in funding and investing in transformative energy projects across Africa, more is needed. For example, financial support is required in order to increase the attractiveness of projects, in particular from a bankability perspective. Legal certainty and security for private investors in the energy sector as well as attractive and balanced fiscal regimes also need be reviewed and addressed.

The power of power

The creation of stable electricity systems with improved grid access would have many advantages, including reliable refrigeration, improved transportation, and enhanced options for forestry and agriculture (where lack of infrastructure to facilitate going to market is also of concern).

Other synergies resulting from stability in electricity – such as the valorisation of carbon capture in sustainable farming and forestry, and fertilisers created as by-products in green hydrogen hubs – would present additional opportunities to boost the African economy.

And access to reliable power is also a valuable tool in addressing other development goals, such as poverty (SDG 1), hunger (SDG 2) and education (SDG 4).

Looking forward, it is also worth considering the possibilities that may open up for Africa in the context of the consolidation of a worldwide carbon market or consolidated and standardised voluntary carbon markets. Such a market could create increased value for continent-changing initiatives such as the Great Green Belt in the Sahel, whilst also facilitating offsets for projects that ensure much needed revenues for a just transition.

Related CMS resources: