COP27: Africa Gains From Climate Financing
On November 6th, 2022, an annual conference on climate change dubbed COP27 kickstarted in Egypt and is expected to go on until the 18th of November. While the aim of COP26 in Glasgow was to raise global ambition, in particular regarding the reduction of greenhouse gas emissions, the United Nations Synthesis Report indicates that the States’ commitments are not yet sufficient. COP27 must therefore be a conference to deepen ambitions and implementation, in order to maintain the possibility of limiting global warming to 1.5°C.
Among the major issues being addressed at the conference is the rising average global temperature as highlighted by a report by the Intergovernmental Panel on Climate Change (IPCC) in Volumes I to III of the Sixth Assessment Report.
Countries in developing countries continue to be critical of wealthy governments and oil companies for driving global warming, using their speeches on Tuesday at the COP27 climate summit in Egypt to demand that they pay up for damages being inflicted on their economies.
As a result, Finance took center stage in the meeting as a variety of big money projects, mainly for developing countries, was announced. According to UN experts, projects totaling $120 billion were announced to help developing countries cut emissions and adapt to the impacts of global warming.
In this article, we analyze the ongoings of the climate conference.
Developing countries demand climate change reparations
Leaders from developing countries especially in Africa at the COP27 have demanded compensation for the loss and damage caused by global warming. While Africa accounts for less than 4% of greenhouse gas emissions, it has long been and is expected to be continually severely impacted by climate change. Leaders in developed nations have however consistently rejected these demands, as leaders are wary of accepting liability for the emissions driving climate change.
While talking at the conference, Senegal’s President Macky Sall said poor developing countries in Africa needed increased funding from wealthy nations for adaptation to worsening climate change and would resist calls for an immediate shift away from fossil fuels African countries need to expand their economies. “Let’s be clear, we are in favor of the reduction of greenhouse gas emissions. But we Africans cannot accept that our vital interests be ignored,” he said.
Another report released on Tuesday suggested that developing countries would need to secure $1 trillion in external financing every year by 2030, and then match that with their own funds, in order to meet the world’s goal of preventing runaway climate change. By contrast, the world’s leading development banks lent $51 billion to poorer countries in 2021, with private investors contributing just $13 billion, a recent report from the lenders said.
Frustrations by global leaders were further directed toward oil drillers with the oil industry making multi-billion-dollar profits since Russia’s invasion of Ukraine in February. In response to this, U.S. President Joe Biden this month said the industry was raking in “war profits” and proposed a windfall tax, an idea that has little chance of passing a divided Congress. The United Kingdom has already imposed a windfall profits tax on oil producers, with proceeds meant to defray household energy costs.
Projects agreed on at the conference
Several financial deals have been announced so far with the plan of combating climate change. Among them was one between Namibia and the Dutch government and European Investment Bank. Namibia secured over 540 million euros ($544 million) in climate finance to produce green hydrogen in one of the world’s sunniest and least densely populated countries and position itself as a renewable energy hub in Africa.
Hydrogen is categorized as green when it is made with renewable power and is seen as key to helping decarbonize the industry, though the technology remains immature and relatively costly.
In May, the EU’s energy strategy set a goal of importing at least 10 million tonnes of “green” hydrogen by 2030, with another 10 million tonnes to be produced within the bloc.
Elsewhere, South Africa also benefited from a loan agreement between France and Germany to extend 300 million euros ($300.69 million) in concessional financing to support its shift away from coal-fired power. Countries including Egypt, Fiji, Kenya, and Malawi also benefited from pledged donations of more than $350 million to finance nature-based solutions to the climate crisis in countries.
Italy, Britain, and Sweden were among the donors.
Elsewhere, U.S. climate envoy John Kerry announced the creation of a carbon offset plan, dubbed the Energy Transition Accelerator, that aims to help developing countries raise cash to fund their transition away from fossil fuels.
Egypt also announced it had signed partnerships for its Nexus of Water-Food-Energy (NWFE) program to support the implementation of climate projects with investments worth $15 billion.
Africans were not just beneficiaries of the climate deals, with a group of over 85 insurers in Africa pledging to create a financing facility to provide $14 billion of cover to help the continent’s most vulnerable communities deal with climate disaster risks such as floods and droughts. The commitment to create the African Climate Risk Facility (ACRF) was made on Wednesday during the conference. The African insurance plan is based around creating a scalable, local market-based funding tool to help countries better manage the financial risk of climate shocks and increase the resilience of its more vulnerable communities, the group said in a statement.
While implementation has been noted to be fairly slow, global leaders continue to show commitment to curbing climate change. Investors will be on the lookout for investment opportunities that arise with the deals reached at the COP27 conference, with investments in climate change recorded to be fairly future proof.