Three proposals that should have been adopted at COP27

By Rafiq Raji

Introduction

Africa’s energy requirements in the face of a world transitioning to renewable energy to keep the global temperature below 2 degrees Celsius above pre-industrial levels tops the agenda at the 27th United Nations Climate Change Conference (COP27),^[1] in Sharm El Sheik, Egypt.^[2] The hypocrisy of the rich world in asking that poor countries similarly adopt cleaner energy technologies when even for dirty fuels, they are yet to be self-sufficient, is writ large. Even so, the opportunity of adding renewable sources into an African energy mix that has barely made much use of its vast fossil fuel reserves is widely acknowledged.^[3] In the almost three decades of COP summits, there has been a trend of shifting goal posts. Pledges have been made routinely with little to show for. Estimates of the costs of successfully transitioning developing countries to renewable energy sources by 2050 range from US$1-2tn.^[4] Rich countries fell short of their annual US$100bn climate financing commitment made to developing countries by as much as US$17bn in 2020, according to data by the Organisation for Economic Cooperation and Development (OECD).^[5] Africa contributes less than 4% to global carbon emissions (see Figure 1) and yet, it suffers most as a result of climate change. Thus, it is imperative that global stakeholders agree on concessions for Africa at COP27 that ensure that the continent is able to make the transition as painlessly as possible. Climate reparations and compensation by rich countries to their poor counterparts, which are most affected by the effects of carbon emissions from the rich world’s pollution, is on the agenda at COP27, the first time it will be formally tabled since the first COP meeting in Berlin, Germany, in March 1995.^[6] In the face of its longstanding energy poverty, what should Africa’s position be at COP27? This is the key question I address in the research paper. 

COP and the African energy dilemma

Sufficiency in fossil fuels, which are relatively abundant and cheaper, for their energy requirements has eluded most African countries thus far. It is hard to imagine that renewables will be any different for Africa, as the world aims for net zero carbon emissions by 2050. It is unrealistic to expect African countries to give up fossil fuels within such an ambitious timeframe.

Yet, many African governments have made energy transition plans well ahead of COP27, where they expected to secure concessions for continued usage of fossil fuels as well as financing to successfully transition to greener energy sources. In August 2022, Nigeria launched a US$410bn energy transition plan that aims to achieve net zero emissions by 2060, with an annual US$10bn financing requirement, for instance.^[7]A shift to renewable energy will come at significant costs to many African countries. First, there will be redundancies in the traditional extractive industry even as new jobs get created in the green economy. Second, there is the real possibility that much of fossil fuel assets could remain stranded – thus denying governments much needed revenue. It is simply unrealistic to expect that rich countries will fund the annual US$1.3tn financing requirement that is estimated Africa will need from 2025 onward to meet its climate action goals, when an earlier commitment of U$100bn a year turned out to be just hot air (see Figure 2).

Thus, while plans by poor nations under the aegis of the Climate Vulnerable Forum to push for compensation from rich countries as loss and damage they are suffering as a result of extreme climate conditions triggered by climate change at COP27 are justifiable. While the agreement to set up a fund to compensate poor countries for loss and damage caused by extreme climate is welcome, it is unlikely to materialise into action if the past antecedents of rich countries on climate financing is anything to go by.^[9] It is still not clear who will pay how much. Several ideas are being mooted about how rich countries could better fulfill their climate financing commitments. For example - Oxfam suggests that bumper profits made by oil and gas firms could be taxed to pay for the negative externalities of their industry.^[10]

This time there was some evidence of increasing global convergence on the issue of “fair, just and equitable” energy transition for Africa. At the 6th EU-AU summit in Brussels in February South Africa clicked a 5-year US$8.5bn climate financing deal with the European Union, France, Germany, UK, and the US to phase out coal from its energy mix. 96% of the entire package, however, comes as loans and guarantees, with only 4% as grants.^[12] On their part, African countries will have to dedicate much more of their fiscal budgets to climate finance actions than the 3-9% that they currently provide for if they are to meet their own commitments. But their efforts alone are unlikely to move the needle in the absence of significant international financing. That has not been forthcoming as expected (see Figure 3). Annual climate financing flows into Africa (US$30bn) are just about a tenth of the US$277bn it requires.^{[13], [14]} It is unfair to ask African countries to do more when rich nations have themselves reverted to coal to avoid facing cold winters this year.^[15] As the effects of the Russia-Ukraine war hit gas supplies even Germany has decided to delay phasing out coal. Between January-August 2022, European coal imports increased by 35% as compared with the same time last year. ^[16] The African Union (AU) therefore insists that the continent be allowed to continue using ‘all forms’ of energy sources available – including fossil fuel. Of the 770 million people in the world without access to electricity more than 70% live in Africa.^[17] They cannot simply afford to blindly join the global bandwagon of climate action. Yes, the imperative of climate action is an exigent one but it is a luxury that Africa can ill afford in its current form. Evidence that African leaders now see the need to be masters of their countries’ energy destinies came soon enough in early October 2022, when Felix Tshisekedi, the president of the Democratic Republic of Congo (DRC), rejected calls by the United States to halt a bidding round for crude oil exploration blocks in the ecologically sensitive Congo Basin – one of the largest carbon sinks in the world.^[18] Nonetheless, there is some dissension in the ranks of African leaders on the position of African Union in favour of natural gas as a transition fuel at COP27. This could compromise negotiations. Kenya’s newly elected President William Ruto wants Africa to avoid the errors of rich countries by going all-in with renewables. His country after all meets 90% of its energy demand through green sources.^[19] Even so, African governments have been reiterating their position on the need for more climate finance.

Africa’s insistence that natural gas qualify as a transition fuel is also justified.^[20] Although a fossil fuel, it emits less CO2 into the atmosphere than oil. A significant volume of natural gas that comes along with crude oil production is simply flared in Africa. There is therefore a case to be made for its conversion into liquefied natural gas (LNG) and liquefied petroleum gas (LPG), which would help the energy-starved continent meet its requirements during the period of transition to greener energy. This argument was not well received in the West until they found themselves cut off from Russian gas. Now many of the same countries that used to lecture Africa on the need to make a quicker transition to green energy have found themselves scurrying to the continent for gas. The International Energy Agency (IEA), however, projects that fossil fuel demand will peak by 2030 as it expects the protracted conflict in Europe to accelerating efforts towards a quicker transition to renewables.^[21]

Still, some simpler, cheap, and innovative but potentially effective climate action measures like clean cookstoves deserve attention. The use of firewood and kerosene for cooking is said to be responsible for the killing of over half a billion people – mostly women – in the developing world. Dirty cooking emits as much carbon into the atmosphere as the global aviation industry.^[22] Thus, African countries should bear in mind some of the many other innovative and potentially effective climate action measures which are abundantly within their power to implement on their own. Besides, there is already an increasingly sizeable global philanthropic effort to ease the African climate action predicament. At the 2022 Sustainable Energy for All Forum held in Kigali, Rwanda, in May 2022, for instance, Bloomberg Philanthropies announced US$242m to support clean energy development in ten developing countries that included four African ones, which will be invested in partnership with Sustainable Energy for All, a United Nations programme, the International Solar Alliance, and others.^[23]

Recommendations that should have been adopted at COP27

Barring exceptions like South Africa and Morocco, Africa remains a predominantly agrarian continent. Almost all countries in the region are yet to industrialise. While industrialisation and climate action are not necessarily mutually exclusive, the stage of development does matter for the pace of making the transition to greener energy sources. If it took China 70 years to industrialise with fossil fuels,^[24] it can best be imagined how much longer African countries will take. The drift here is not about an abandonment of a green path to industrialisation for Africa but rather a recognition that a continent so under-developed as Africa should not be expected to make a switch immediately without due consideration for its developmental aspirations.

Africa’s energy transition to net zero emissions will have to be gradual and balanced - one that allows it to use its existing energy resources for development as it taps its abundant renewable energy resources in a manner and pace that lead to a sustainably rich and green future.^[25] African leaders simply cannot join rich countries in abandoning fossil fuels without tangible assistance that will help them make the transition to net zero carbon emissions. Nor should they have expectations that rich countries will ultimately do the heavy lifting for them. In other words, African leaders must not only own the continent’s energy agenda they must also ultimately learn to fend for themselves.^[26]

The 5-year continental green recovery action plan for 2021-2027 launched by the AU Commission in July 2021, which emphasises support for renewable energy, energy sufficiency as well as a just energy transition, remains a robust framework for driving the continent’s climate action measures.^{[27], [28]} There is agreement in this regard across most stakeholders. To articulate Africa’s case ahead of COP27, for instance, the Mo Ibrahim Foundation facilitated a forum of experts in May 2022 that recommended that Africa negotiate to secure concessions that balance net zero emission goals, energy access, and energy security and keep gas as a transition fuel in tandem with renewables.^[29]  In the same vein, the African Development Bank (AfDB) and the Atlantic Council facilitated a forum of experts in July 2022 to discuss how to make a robust case for a just energy transition for Africa at COP 27 with similar recommendations.^[30]

In light of these considerations the following recommendations should have adopted at COP27 for the specific African case:

1. Endorse natural gas as transition fuel for Africa

Natural gas is cheap, relatively clean and can deliver baseload power in a way that renewable energy sources (except hydropower) cannot. Assured baseload power is a pre-requisite for industrialisation. In fact, a report by the U.S. Department of Energy identifies natural gas as a key element of any energy mix in which renewables are dominant, “as natural gas serves as an important enabler for integrating, low-carbon intermittent renewables like wind and solar.”^[31] Natural gas constitutes 32% of the energy mix of the United States, for instance, with renewable energy making up just 12%.^[32] It is highly likely natural gas will continue to account for about a third of the American energy mix for the period of the planned energy transition to net zero emissions by 2050.

So if rich countries are already using natural gas as a transition fuel, why should the case for Africa which, in fact, has ample gas reserves be any different? An incremental energy transition that is gas-dominant initially, and subsequently relies on natural gas for baseload power, as renewables increasingly account for a greater portion of the energy mix, is the most practical approach for Africa, as is already clearly the case for developed countries like the United States. Thus, rich countries should actually not only endorse natural gas as a transition fuel for Africa at COP27, they should also commit to investing in gas production for as long as it would take for the region to make a successful transition to green energy, that is, even after they are finally able to bridge the Russian supply gap that is motivating their renewed interest in African gas.

2. Develop Africa’s carbon market

Africa remains a fringe player in the global carbon market owing to a dearth of verifiable emissions registries, energy transition plans that misrepresent African realities, and limited technical expertise for carbon valuations.^{[33], [34]}  Should Africa properly take account of its potential carbon credits to bridge its climate financing gap, it could earn between US$15bn to US$82bn in annual revenue, the United Nations Economic Commission for Africa (UNECA) suggests.^[35] This would require the establishment of a strong carbon credit system, however, especially carbon offset registries, which “track offset projects and issue offset credits for each unit of emission reduction or removal that is verified and certified.”^[36] While such registries largely remain lacking on the continent, there are already some developments in this regard.

Under the aegis of the United Nations Framework Convention on Climate Change’s REDD+ mechanism, for instance, Gabon, which has the most forests in the world after Suriname, plans to issue 187 million carbon credits, with about half of these worth about US$291m to be sold in the carbon offsets market.^[37] Gabon is also creating its own national REDD+ carbon registry.^[38] Similarly, CYNK, which is “Africa’s first verifiable emissions reduction platform,” according to Bloomberg, will at its launch in Q4-2022 use blockchain technology to trade tokens by Tamuwa, a Kenyan biomass firm, and thereafter onboard other firms with verifiable emissions reduction projects in the region.^[39] More such initiatives by African public and private institutions will help bring about what UNECA envisages.

That said, the global carbon trading system is fraught with myriad inconsistencies and irregularities, from overstatement of climate actions for credits by firms, greenwashing, arbitrary pricing, to inequitable carbon accounting. On the thorny issue of carbon pricing, a proposal of to fix US$75 per tonne of carbon by 2030 is being discussed at COP27. As things stand carbon price is simply too chaotic and unpredictable to drive adoption.^[40] For instance, Gabon’s planned carbon credits issuance will fetch no more than a paltry US$35 per token - a price that is widely agreed to be grossly poor and unfair.^[41] The African Carbon Markets Initiative (ACMI) launched in the early days of COP27 is a robust approach towards addressing some of the continent’s unique challenges in this regard.^[42]

3. Swap Africa’s external debt stock for climate financing

Rich countries announced varied investment packages in view of COP27. In early 2022, for instance, the European Commission announced a EUR150bn (US$150.32bn) Global Gateway investment package to accelerate the green energy transition. It also covered funding for digitalisation, health and education.^[43] This followed the launch of the “Clean Green Initiative” at COP26 in Nov 2021 by the UK through which it promised to provide over US$3.4bn in climate financing to developing countries over a 5-year period.^[44] African development finance institutions (DFIs) are well suited for leverage on such financial support and crowd in even more low interest funding for climate finance, owing to their AAA credit ratings. The AfDB has offered to help lever international climate financing worth about US$8.5bn that South Africa has agreed with international partners to raise as much as US$41bn, almost five times, which if successful will serve as a continental template.^[45]

There are other innovative approaches that could also facilitate financing of climate action measures by African countries. Debt-for-climate swap is one such mechanism where debt is forgiven in exchange for financing climate action projects.^[46] In other words, money that African governments would have used to service their foreign debt obligations will instead be applied to their respective National Determined Contributions (NDCs) as agreed in the Paris Agreement. The first debt-for-nature swap (DNS) agreement was done between Conservation International and Bolivia in 1987 and Seychelles agreed a DNS worth US$22m of its debt with external creditors to protect its marine resources in 2015.^{[47], [48]} African public and private-sector entities owe over US$1tn in total external debt, with more than US$100bn in annual servicing costs, according to the Economist Intelligence Unit (EIU).^[49] A working paper by the International Monetary Fund (IMF) published in August 2022 concurs with the idea of debt-for-climate swaps, albeit some argue it would still need to ease some of the stringency in its understanding of the idea.^[50] There is already a well-tested model for scaling up this approach across the continent.