The Covid-19 crisis has highlighted the importance of macroeconomic policy in the climate change discourse. As countries design and implement their stimulus packages, they determine the kind of recovery that will be achieved.
With climate change posing a big threat to most African economies, the crisis has provided an opportunity for countries to use macroeconomic policy to move towards sustainable economies.
According to the African Development Bank, it is estimated that Africa will need investments of over $3 trillion in mitigation and adaptation finance by 2030 to fully implement its commitments for climate-resilient and low-carbon economies as per the nationally determined contributions set out in the Paris Agreement. Therefore, the large stimulus packages required to successfully tackle the Covid-19-induced economic crisis can and should be designed to adequately incorporate these much-needed climate investments.
The need for proactive action against climate change cannot be overstated for Africa. Although the region has low greenhouse gas emissions, it remains the continent most vulnerable to climate change. Extreme weather and climate events on the continent have become more frequent.
The Covid-19 Macroeconomic Policy Responses in Africa (COMPRA) research conducted by the Centre for the Study of the Economies of Africa and the South African Institute (SAIIA) analyses the fiscal policy measures adopted by African countries in response to Covid-19 and how these impact progress on their climate change actions of the countries.
Specifically, it analyses the climate-friendliness of the immediate fiscal responses that were adopted by six African countries namely: Nigeria, South Africa, Senegal, Tanzania, Uganda and Benin Republic, when the pandemic first hit.
The analysis focuses on measures that were included as part of the fiscal stimulus packages designed to address the economic fallout from the Covid-19 pandemic.
These packages have provided countries with an opportunity for climate change action by aiming to build back better by means of green recovery. However, the stimulus measures adopted by the six countries thus far have been by and large climate neutral – focused on helping ailing businesses and vulnerable individuals.
Nonetheless, while the focus has been on minimising macroeconomic vulnerabilities and welfare losses, some of the policy measures adopted have implications on the climate action of the respective countries. Nigeria, the only country among the six with clean energy spending in its stimulus package, had an overall green stimulus package. South Africa on the other hand, the biggest polluter, adopted a neutral package. Uganda, the least polluting country adopted a climate unfriendly package owing to its acceleration of the construction of industrial parks. Lastly, Tanzania, Senegal and Benin all adopted climate-neutral packages.
Given the respective compositions of the packages, there are still opportunities for these countries and others in Africa to move towards a fully green recovery. These include expanding the packages to include clean energy projects financed through green financing facilities, imposing carbon taxes to help consolidate their deteriorating fiscal positions while simultaneously reducing pollution, and contributing to the development of green finance segments by putting in place a regulatory framework that incentivises players in the financial markets to develop and issue green products.
A research by Centre for the Study of the Economies of Africa and the South African Institute (SAIIA)
