Despite having played a negligible role in creating the climate crisis, African countries are already finding themselves paying the price. More creative and proactive forms of international support are needed to help African countries adapt and sustain progress towards broader sustainable development goals.
KINSHASA – Africa hardly contributes to global warming. Its 1.4 billion inhabitants, or about 17% of the world’s population, are responsible for less than 3% of total global greenhouse gas emissions. Additionally, data suggests that the forests of the Congo River Basin alone absorb 3% of global carbon dioxide emissions each year.
Nevertheless, Africa is at the forefront of the impact of climate change. The continent is already grappling with more frequent climate disasters, warmer weather, erratic rainfall and rising sea levels, all of which result in human tragedy, social upheaval and economic disruption. For example, with each new drought, the annual growth per capita over the medium term may decrease by one percentage point.
As elsewhere, African policymakers must embrace the inevitable global transition to a low carbon economy. In addition to pursuing economic programs to raise living standards, they urgently need to build resilience against climate shocks, especially in countries that depend on rain-fed agriculture. This is why the African Union has approved the Adaptation Acceleration Plan in Africa, which calls for investments in resilient infrastructure, climate-friendly agriculture, digitization, trade reforms and a widening of safety nets. security. Not only are these measures up to 12 times more cost effective than disaster relief; they will also generate jobs, increase incomes and improve living standards.
But the price to pay for climate action is significant and is in addition to what is needed to achieve the sustainable development goals. At the COP26 climate change summit last month, African leaders indicated that the region would need $ 1.3 trillion over the next two decades for climate change adaptation and mitigation. The sums needed are out of reach for African countries, especially now that the COVID-19 pandemic has raised debt levels and held back growth. The efforts of the international community have so far failed.
We need new ideas and new approaches. First, grants and concessional finance must be used more effectively. Multilateral climate funds, development banks, and other providers should look for opportunities to streamline project approvals (while maintaining guarantees) so that money flows faster to where it’s needed. Well-targeted interventions that unblock bottlenecks or correct market failures can also help attract private sector finance. For example, increased digital connectivity lays the foundation for entrepreneurs to provide real-time crop insurance, weather services or farm advice.
Second, we need to develop new financing mechanisms in the public and private sectors. Green bonds can help finance climate-related initiatives at relatively low rates, but Africa lags other regions in this crucial area. From 2007 to 2018, the region only accounted for around $ 2 billion in issuance, or just 0.4% of the global green bond market.
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Elsewhere, new programs directly link finance to climate action. The UK recently agreed to provide $ 500 million to the Democratic Republic of Congo (DRC) to curb forest loss. Norway has a similar deal with Gabon for $ 150 million. A related idea is that of “debt-for-climate swaps”. Linking debt relief to climate action will require a large pool of exchangeable debt along with standardized performance indicators and other related data.
Third, we must recognize that helping African governments access new sources of capital – including innovations in climate finance – is highly dependent on reducing their country credit and risk profiles. On the national side, this means improving governance – in particular through reforms in procurement and the management of public investments, public finances and debt – and ensuring carefully costed and financially viable investment plans.
The International Monetary Fund is already playing an important role in helping national governments build their capacity to tackle climate challenges (the DRC is one of the primary beneficiaries of IMF support for climate-focused capacity development). And through the Fund’s Article IV monitoring, investors stay informed about countries’ progress in implementing climate change adaptation measures.
Internationally, standardized measures – such as a system of first loss guarantees – could help improve risk profiles and catalyze private financial flows. Careful design would be necessary to ensure appropriate risk sharing between the public and private sectors. A promising model is the issuance of Seychelles ‘blue bonds’ of $ 15 million in 2018. Guaranteed by the World Bank, this instrument finances both ocean projects and, thanks to a reduced interest rate, contributes to reduce the national debt.
While these examples show what is possible, much more comprehensive action is needed across the African continent. The status quo will cause massive disruption to lives and livelihoods, while well-designed and well-funded adaptation can ensure development continues and people are equipped to live, work and prosper in the new climate economy.
Fortunately, there is a new global will to tackle the climate crisis and seize climate-related opportunities. COP26 resulted in new global deals on difficult issues like coal and energy subsidies, and generated tailor-made deals such as the combination of $ 8.5 billion in grants and cheap loans for help South Africa to decarbonize its economy.
In addition, following the recent allocation of $ 650 billion in new Special Drawing Rights (the IMF’s unit of account), the Fund has the green light to establish a new Trust for Resilience and Sustainability. This facility will provide affordable, longer-term financing to poor and vulnerable middle-income members and small states undertaking structural reforms to transform their economies and address climate risks.
The signs are promising. But, as the saying goes, “A swallow doesn’t make a summer. Tackling Africa’s climate crisis and putting the continent on a new trajectory of sustainable growth requires concerted efforts on the part of national governments, the private sector and the international community.
Time is not on our side. We all need to act now to make the most of it.