The African continent wants to exploit its potential for renewable energies – and the international community should help with money. Because the debt burden severely restricts your own scope.
by Marina Zapf
As a continent, Africa wants to consistently focus on green growth for its further development, but for this it needs better access to finance – ideally through international CO2 taxes. With this message, the first African climate summit of all 54 states formulates its expectations for the next world climate conference COP28, which will take place at the end of November. With a view to the upcoming summit of the 20 leading industrialized and emerging countries in India, the final declaration in Nairobi called for urgent relief from the debt burden that is weighing on the continent. Only then can the unique potential for promoting green energy be exploited.
At the start of the conference, the Kenyan host, President William Ruto, emphasized the Africans’ willingness to largely abandon fossil fuels in their industrial development in favor of renewable energy sources. Thanks to a high proportion of geothermal and hydroelectric power, Kenya is already ahead in the energy mix. However, according to the will of all participants, renewable energies across Africa should be expanded from the current 56 gigawatts to at least 300 gigawatts by 2030.
This is with the aim of eliminating the domestic energy shortage as well as “strengthening the global supply of green and profitable energies,” it says, alluding to the international hunger for raw materials, for example for the construction of car batteries or green hydrogen ambitions.
Production of new oil and gas reserves
Countries like Nigeria, Senegal and Mozambique are also planning to develop new oil and gas reserves. The chairman of the International Energy Agency (IEA), Fatih Birol, pointed out that increasing domestic gas consumption in Africa would not make a noticeable difference in achieving international climate goals. The IEA also advocates expanding solar power to address Africa’s persistent energy poverty. Almost every second African has no access to electricity.
Of all investments in energy supply worldwide, only around three percent were made in Africa, it was said on the sidelines of the conference. At the same time, investment in renewable energies on the continent fell to an eleven-year low in 2021. Private investors shy away from risks without sufficient government protection. African countries themselves are struggling with tax burdens that are at or beyond their sustainability limits.
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Between 2008 and 2021, government external debt in sub-Saharan Africa rose from $138 to $471 billion. As part of a World Bank initiative, Western creditors have put claims on hold in order to prevent debt crises. The summit declaration makes it abundantly clear that from an African perspective this is far from enough.
Equal treatment and new tax
It calls on the international community to renew the international financial architecture – which was created in and for a different era with the International Monetary Fund, the World Bank and regional development banks. “We want a regime that treats everyone equally,” said Ruto. Modernized institutions would have to respond more closely to African concerns for economic development, especially over-indebtedness: What is specifically called for is debt restructuring and debt relief in the form of breaks in the event of extreme climate events and a ten-year deferral of interest payments.
In order to facilitate the flow of money for energy development in Africa, there was a lot of talk in Nairobi about innovative financial instruments to increase sparse investments. Finally, Africa appealed to the global community to adopt the proposal for a global CO2 tax, which should cover both fossil fuel trade as well as aviation and shipping, as it was said – “and also through an international levy on financial transactions”.
As Ruto announced at the end, financial commitments for green energy worth $23 billion were made in the Kenyan capital in three days. The United Arab Emirates (UAE), the chair of the World Climate Conference in Dubai, took the lead. Sultan Ahmed Al Jaber, climate ambassador and also head of the national oil company ADNOC, announced that the state-owned renewable energy company Masdar would support the expansion of 15 gigawatts in Africa with $4.5 billion.
German debt conversion as an example
Germany, which was invited as a guest in Nairobi, also came forward with financing commitments of 450 million euros to support African projects – of which 200 million euros were as a follow-up contribution to the one on the sidelines of the World Climate Conference in Glasgow with the USA and other EU countries initiated “Just Energy Transition Partnership” (JETP) with South Africa. On the subject of financing, State Secretary in the Ministry of Development (BMZ) Bärbel Kofler highlighted the “smart instrument” of debt swaps with African governments – with which liabilities can be canceled in exchange for targeted public investments.
Although Germany only plays a minor role as a creditor in Africa – the leading lender is the People’s Republic of China – the federal government agreed with Kenya on a debt conversion of 60 million euros, which will now flow into the promotion of energy and rural development. The contribution could send a signal at the international level, said Kofler, to see where the instrument could still be used. But of course it is crucial to have the G20 on board in the creditor landscape.
The climate representative at the Foreign Office, Jennifer Morgan, also described the conversion initiative as an example and inspiration for countries like China. Solutions that would give African governments financial leeway for climate policy would have to be found in collaboration with other countries.
Positive impulse for COP28?
Both Kofler and Morgan praised the Nairobi Declaration as an important step and a basis for the upcoming debates in Dubai. The fact that a continent that is suffering so badly from climate change due to droughts and weather events is now setting out to introduce its own sustainable solutions to the climate crisis in a new tone is unprecedented – and hopefully a positive impulse for the COP debate.
Further impetus for the climate summit is expected from the replenishment conference for the Green Climate Fund (GCF) in October under the German chairmanship in Bonn. Germany has pledged a 33 percent increased contribution of 2 billion euros for the years 2024 to 2027 – and is now expecting generous donations from other countries.
The fund is considered a key pillar of the global architecture for climate financing for the avoidance of greenhouse gases and for adaptation to climate damage in developing countries. Its administration has an equal representation of donor and recipient countries, strives to ensure fair access and promotes the countries’ personal responsibility. According to experts, concept papers and approval applications for the protection of the climate and local communities worth around $20 billion are already in the pipeline for the new period.
Note: This text first appeared by our colleagues at CAPITAL