• Thursday, May 23, 2024
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COP27: The Africa proposal (4)

Climate change: Takeaways from COP27

In light of these considerations, I suggest the following recommendations be adopted at COP27 for the specific African case:

1. Endorse natural gas as transition fuel for Africa

Natural gas is relatively cheap, ample and clean-burning, as well as a key source of baseload power in the energy mix of rich countries. As renewable energy sources are subject to the elements of nature, natural gas is a climate-friendly fuel that is used to smooth over the inevitable gaps in energy provision from renewables.

In fact, a report by the US 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.” Natural gas constitutes 32 percent of the energy mix of the United States, for instance, with renewable energy making up just 12 percent. 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 of Africa, which in fact has ample gas reserves for its energy needs and indeed for export, 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,

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. Should Africa properly take account of its potential carbon credits to bridge its climate financing gap, it could earn between $15 billion to $82 billion in annual revenue, the United Nations Economic Commission for Africa (UNECA) suggests.

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.” 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 $291 million to be sold in the carbon offsets market. Gabon is also creating its own national REDD+ carbon registry.

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. 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 $75 per tonne of carbon by 2030 is being discussed at COP27, as the current system of carbon prices ranging from $0/ton in many countries, $30/ton in the US state of California, to 76 euros a ton in the European Union, is simply too chaotic and unpredictable to drive adoption.

For instance, Gabon’s planned carbon credits issuance will fetch no more than a paltry $35 per token, a price that is widely agreed to be grossly poor and unfair. 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.

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 150 billion euro Global Gateway Africa-Europe investment package to accelerate the green and digital transition of African countries, as well as sustainable growth, decent job creation, stronger health and education systems.

This followed the UK’s launch of its “Clean Green Initiative” at COP26 in early November 2021, through which the UK will provide over US$3.4 billion in climate financing to developing countries over a 5-year period. African countries could easily lever such international climate financing to optimize for more far-reaching climate action. African development finance institutions (DFIs) are well suited for facilitating such leveraged finance measures, owing to their AAA credit ratings.

Read also: COP27: The Africa proposal (3)

In fact, the African Development Bank has offered to help lever international climate financing worth about $8.5 billion that South Africa has agreed with international partners to raise as much as $41 billion, almost five times, which if successful will serve as a continental template.

But there are other innovative approaches that rich countries could similarly facilitate for the financing of climate action measures by African countries. Debt-for-climate swaps, whereby indebted African countries would be forgiven debt they owe international creditors in exchange for using the savings for financing climate action projects, is one potentially effective way of doing so.

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. African public- and private-sector entities owe over $1 trillion in total external debt, with more than US$100bn in annual servicing costs, according to the Economist Intelligence Unit (EIU). 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.

Still, the idea is not entirely novel. The first debt-for-nature swap (DNS) agreement was done between Conservation International and Bolivia in 1987 and Seychelles agreed a DNS worth $22 million of its debt with external creditors to protect its marine resources in 2015. Thus, there is already a well-tested model for scaling up this approach across the continent.

An edited version was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References, figures and tables are in the original article.

See link viz. https://www.ntu.edu.sg/cas/news-events/news/details/three-proposals-that-should-be-adopted-at-cop27