INTERVIEW: Africa needs up to $1.6 trillion in climate finance until 2030, says AfDB VP

Doaa A.Moneim , Thursday 23 Jun 2022

Kevin Urama, the acting chief economist and vice president for economic governance and knowledge management at the African Development Bank (AfDB), attended the third edition of the Aswan Forum for Sustainable Peace and Development that was held in Cairo earlier this week.

AfDB vice president

 

The forum discussed Egypt’s preparations to host the UN Climate Change Conference of the Parties (COP27) and explored ways to deal with the ongoing global challenges that affect the peace and security in the continent.

Urama told Ahram Online on the sidelines of the forum that as the world prepares for COP27, slated to be held in the Red Sea resort city of Sharm El-Sheikh in November, there is a need for climate finance that is dedicated specifically for adaptation efforts in Africa.

He explained that significant targeted investments are required to build climate adaptation and resilience capacity in Africa, while the benefits and co-benefits of climate resilience are many times higher than the costs.
 
“Adapting to climate change is projected to cost the continent at least $50 billion annually by 2050 to adequately implement its national determined contributions (NDCs). Africa will need a cumulative climate finance of up to $1.6 trillion between 2020 and 2030. This translates into an average of $128 billion annually during that period,” Urama explained.
 
He added that the African Economic Outlook 2022 the AfDB released in May shows that the structure, flow, and scale of the current global climate finance mirror the present global finance architecture, making it difficult for the most vulnerable African countries to effectively tap climate resilience opportunities.
 
“The structure is complicated and loosely defined, with multiple, and rapidly evolving sources, instruments, channels, and financing mechanisms. Several development finance instruments are therefore increasingly deployed as climate finance in Africa. For instance, debt instruments constituted two-thirds of all climate finance to African countries between 2011 and 2019. Some 33 percent of this was non-concessional. This raises concerns about further debt vulnerability rise in Africa and potential trade-offs with other sustainable development goals (SDGs) financing commitments and mechanisms,” Urama added.

There is a compelling need for a clearer definition, better coordination, and harmonisation of climate finance requirements, while the climate finance commitments should be new and additional, he noted. 
 
Moreover, the current scale of climate finance is misaligned with nationally determined contributions and SDGs financing requirements in Africa, according to Urama.
 
“To adequately implement its NDCs, Africa will need a cumulative climate finance of up to $1.6 trillion between 2020 and 2030. This translates into an average of $128 billion annually during that period. Currently, Africa receives about $18.3 billion per year in global climate finance. In addition, climate finance received by Africa from developed countries would be even smaller if multilateral development banks (MDB) resources are deducted. In total, MDBs committed about $66 billion in climate finance in 2020 – of which $50 billion (or 76 percent) are directed towards mitigation. 
"This leaves an average climate financing gap of $108 billion per year during this period. With the current trends, Africa’s conditional nationally determined contributions will not be delivered. The implications of not achieving the NDCs in Africa for global sustainability are obvious – the global climate goals will not be achieved,” he pointed out. 

Africa’s historical share of global emissions is below 3 percent, with an average carbon footprint per capita of 0.95 tCO2eq. This is well below the 2.0 tCO2eq required to achieve net-zero transitions target. 

Other regions have per capita carbon footprint of up to 14 tCO2eq, 15 times higher than that of Africa by 2020. 

In other words, in per capita terms, Africa has significant headroom for additional carbon emissions while remaining within the global carbon budget, while advanced countries have carbon debt and negative headroom.

Urama affirmed that African countries need to coordinate monetary and fiscal policies to contain inflation while safeguarding economic recovery and protecting the vulnerable with a clear policy targets reducing imported inflation.
 
He also said that Africa needs to build and strengthen regional value chains in key sectors to reduce external dependence especially with the challenges the coronavirus pandemic and the Russia-Ukraine conflict have imposed.
 
“The continent also needs scaling up investments in renewable energy and green technologies while maintaining a balanced energy mix to support industrialisation and structural transformation. The green transition presents an opportunity for Africa to recalibrate how it engages with industrial transformations. With the dominance of green development minerals in Africa, the continent has an opportunity to lead in the development and deployment of green technologies rather than operating at the low levels of the value chain which locks countries to low incomes,” Urama said. 
 
He urged African countries to invest in institutional capacity development for green transitions, along with regulatory and other policy reforms that foster energy efficiency and create jobs for youth and women in key sectors.
 
African countries need to expand and deepen the utilisation of innovative financing instruments, such as green bonds and loans, sustainability or sustainability-linked bonds and loans, debt-for-climate swaps, blended finance, more efficient and better-priced carbon markets, realignment of perverse subsidies and other progressive tax instruments, as well as financial stability mechanisms to protect their economies from future climate shocks, according to Urama.

“Africa, like the rest of the continents, has faced significant headwinds in recent decades. Some of these challenges have been complex and overlapping, and they often share similar characteristics. They are global challenges which, though not caused by Africa, impact significantly on Africa’s social and economic progress, as well as global sustainability, peace, and security. Among the most recent of these challenges are climate change, pandemics, and geo-political tensions that threaten the sustainability of global supply chains, international trade, and are driving consumer price inflation beyond historic levels,” Urama said.

He added that climate change is the most pressing existential threat to economic development, social progress, peace, and security in Africa, which is the second most climate vulnerable region of the world, next to South Asia. The continent also shows the least climate readiness and is the least climate-resilient region in the world.

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