As oil prices take a dive and African governments experience sharp drops in revenues this year, what does this mean for Africa’s commitments to combat climate change and develop renewable energy projects. EXX Africa unpacks the role of Africa in limiting the increase in global average temperatures, the opportunities for the private sector, and the consequences of failing.

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This year will mark an important milestone in the global fight against climate change in individual country pledges to the reduction in greenhouse gases. Five years since the Paris Agreement and studies have already indicated that current commitments will not prevent a rise in global average temperatures by 2°Celcius by 2100. As such, countries have been called upon to revise their pledges by the end of 2020.

Despite being a small contributor to global greenhouse gas emissions, sub Saharan Africa has already shown promising initiative in this regard, both in terms of previous pledges and stated intentions to review commitments this year. However, without a greater commitment from the global community, these efforts will be for nought, as the continent stands the risk of being the most impacted by global warming over the coming century.

Our analysis briefing explores the continent’s contribution to global greenhouse gas emissions and its pledges under the Paris Agreement. We also review both the economic impact of climate change in the region and the economic opportunity facing investors.

Africa’s contribution to greenhouse gas emissions

SOUTH AFRICA COAL-FIRED POWER STATION

The region’s overall contribution to global greenhouse emissions is comparatively small, amounting to around four percent of the world’s total in 2017. Having said that, the largest emitter across the continent, South Africa, is in fact the 14th largest contributor to global greenhouse gases globally. Other major emitters (excluding emissions from land use change activities) behind South Africa are Nigeria, Ethiopia, Sudan, Tanzania, Angola, Cameroon, Kenya, Chad, and the CAR. The highest contributing sectors across the continent (again excluding land use change activities which is the largest) are energy, agriculture, industrial processes, and waste.

Commitments under the Paris Agreement

In a promising development, all 54 African countries have signed the 2015 Paris Agreement and submitted ambitious Intended National Determined Contributions (INDCs). INDCs comprise the actions states intended to take just prior to the 2015 Paris Agreement to limit the increase in global average temperatures to well below 2°Celsius by 2100. Following the agreement, countries are required to submit ratified National Determined Contributions (NDCs) every five years beginning in 2020 to ensure that global efforts stay on track. However, 2020 is the first year that countries have been asked to submit new or revised NDCs following their original contributions in 2015, as all indications to date suggest that current commitments are already falling short of aligning with temperature thresholds as per the Paris Agreement. Indeed, under the current pledges globally, the world will warm by 2.8°Celsius by the end of the century.

How does Africa fare in terms of its pledges?

Africa has fared well in comparison to its global counterparts and particularly to larger emitters. Almost all sub Saharan African countries have submitted their NDCs with the exceptions of Angola, Senegal, and South Sudan. However, out of the already submitted NDCs, only the Gambia’s plans are deemed compatible with the limits set out in the Paris Agreement and all other states are encouraged to resubmit their plans in 2020. To this end, at least 30 African states have already indicated an intention to enhance their NDCs this year – including the major economies of South Africa, Nigeria, Ethiopia, and Kenya.

SOLAR ENERGY PROJECTS IN AFRICA

Despite being the continent’s largest emitter, South Africa, was highlighted as a positive case in the global update report of December 2019. This follows a decline in emissions from the country for the first time (largely as a result of a slowdown in economic activity) and the release of its Integrated Resources Plan (IRP2019) last year. Notably, this plan reduces the role of coal compared to previous planning and increases the adoption of renewables and gas over the long-term. The IRP aims to decommission over 35 GW (of 42 GW currently operating) of coal-fired power capacity by 2050; however, it would still see South Africa complete nearly 6 GW of coal capacity currently under construction and commission another 1.5 GW by 2030. Nevertheless, in September 2019, President Cyril Ramaphosa announced that the government would finalise a ‘Just Transition Plan’, including defining a vision compatible with the Paris Agreement.

Looking elsewhere, according to current policies, Kenya is already on track to meet or overachieve its Paris Agreement pledge but nevertheless plans to improve its commitments in 2020, along with submitting a long-term low carbon development strategy. This is largely facilitated by the fact that renewable energy makes up 85 percent of its installed generation capacity and the government has stated that it plans to be 100 percent green by 2030. However, proposed plans to build the first coal-fired power plants in East Africa (the 981 MW Lamu coal-fired power plant, due to be commissioned in 2024, and a 960 MW coal-fired power plant in Kitui, scheduled for 2034) may derail this trajectory.

SOLAR ENERGY PROJECTS IN AFRICA

The African Development Bank (AfDB) has also come to the table to ensure the continent stays on target. In this regard, it has unveiled plans to scrap coal power stations across the continent and switch to renewable energy. Specifically, the AfDB will be investing USD 20 billion in solar and clean energy that would provide the regioN with 10,000 MW of electricity. The Bank also has a USD 500 million green baseload scheme which will be rolled out in 2020 and is set to yield USD 5 billion of investment that will help African countries transition from coal and fossil fuel to renewable energy.

International partners have also stepped in to help finance green projects across the continent. As part of the United Nations Framework Convention on Climate Change (UNFCC) negotiations, the Green Climate Fund has recently started operations to channel climate finance to Africa. As of January 2020, USD 2.2 billion had been allocated to Africa for 49 approved adaptation and mitigation projects, with 24 such projects under implementation. However, as ambitious as this may seem, developed countries had originally pledged to mobilise USD 100 billion a year by 2020 to help developing nations. To date, around USD 9.7 billion has been raised.

Economic impact of climate change

As indicated above, Sub Saharan Africa does not house the biggest emitters globally, but its states have nevertheless taken worthy significant steps to combat the continent’s contributions to global greenhouse gases. However, without significant pledges from the rest of the global community – and particularly from the largest emitters – sub Saharan Africa’s efforts will be for nought.

According to the University of Notre Dame’s Global Adaptation Initiative programme, which compiles a vulnerability to climate change index, sub Saharan Africa remains the most vulnerable region to climate change globally. Out of the 20 most vulnerable states to climate change, all are located in the region, namely: Somalia, Chad, Eritrea, CAR, DRC, Sudan, Niger, Guinea-Bissau, Burundi, Liberia, Madagascar, Zimbabwe, Mali, Republic of Congo, and Ethiopia.

While the exact consequences of climate change across the continent over the long term are not known, mainly as a result of a lack of data, global warming above the target limit of the Paris Agreement will nevertheless affect numerous sectors – including agriculture, health, education, security, trade and industry – and ultimately the regional economy. This is particularly the case as temperature rises across the continent may be as much as 1.5 times more than the global average.

As reported by the Africa Growth Initiative of the Brookings Institution, assuming no major changes in global trends, climate change resulting in a 3°Celsius temperature increase will cause Africa’s GDP to contract by as much as 8.6 percent per year after 2100. If climate change is limited to 1.5° Celsius, GDP will still decrease per year but at a slower rate of 3.8 percent per year after 2100. The findings by the Initiative are illustrated in Figure 1.

Figure 1: The impact climate change on sub-Saharan Africa’s GDP

Much more so than any other region, Africa therefore has a vested interested in leading by example by updating its NDCs this year and committing to keeping on track with the Paris Agreement. The Africa Group of Negotiators (AGN), which represents a quarter of UN Climate Change parties, has already maintained its commitment to an effective start of the implementation of the Paris Agreement from January 2021. The AGN is also likely to put pressure on the global community in this regard ahead of the UN talks in Bonn, Germany in June 2020 and COP26 in Glasgow, Scotland in November 2020. Firmer commitments to the Green Climate Fund are also expected to be reiterated.

INSIGHT

As momentum behind these initiatives grow, there remains significant opportunity for the private sector in Africa as the realisation of current and future NDC commitments requires financial support. While the development of renewable energy generation projects abound across the continent (See: SPECIAL REPORT: THE OUTLOOK FOR RENEWABLE ENERGY PROJECTS IN AFRICA) – particularly as all NDCs refer to renewable energy – other opportunities exist in agriculture, food systems, food security, energy efficiency, water, and infrastructure.

Notably, according to the AfDB, as of March 2019, the various pledges under African NDCs create a USD 3 trillion collective investment opportunity across various sectors by 2030. This amount is ultimately expected to increase given the commitments by African states to revise their NDCs this year. Nevertheless, seventy-five percent of this investment is expected to come from the private sector to complement public sector financing. Such opportunity will primarily sit with small to medium enterprises (SMEs) as they constitute 95 percent of Africa’s private sector.

However, the continent’s ability to mobilise private sector capital in this regard needs to be preceded by an enabling environment for the private sector to invest in Africa and pursue these projects. Country risk factors will therefore naturally come into play in the continent’s long-term ability to fulfil its NDCs.