GDP damage and renewable slumps: Africa’s low-carbon transition is stalling, can Finance Day at COP27 help?

Many green groups believe that Africa can be one of the drivers of the net-zero movements, with many communities currently responding to the climate crisis through innovative measures. Some organisations are already forming partnerships with small-scale African farmers to rollout training and infrastructure that will improve climate adaptation and resilience on farms, and reports state that the continent has an “unlimited potential” for forms of clean energy. According to Bloomberg NEF (BNEF) analysis, however, around $9trn is required to enable emerging markets to derive two-thirds of their energy demand from renewables by 2050.

Climate scientists have repeatedly emphasised that, even if emissions were to decrease sharply and rapidly enough to meet the Paris Agreement, some physical climate impacts are already ‘baked in’, and we need to adapt to them. The greater the level of warming and the more severe changes in weather patterns are, the greater the need to adapt becomes, and the more challenging and expensive.

However, Africa is the least responsible continent in terms of contributing to the climate crisis, yet the one in most need of support. As Finance Day kicks off at COP27 it is alarming that two new studies have been published. One suggests that up to two-thirds of the continent’s GDP could be wiped out compared to if climate change no longer existed, while another warns that investments into renewables – a key driver of a low-carbon transition – are declining across Africa. Something has to change.

GDP hit

Even if nations can limit global temperature rises to 1.5C as envisioned by the Paris Agreement, African countries can expect to see GDP growth shrink by one-third, with the potential to lose 64% under current climate trajectories.

That is the headline figures from a new study published by Christian Aid to mark Finance Day at COP27.

With many finance ministers and national delegations meeting in COP27 in Egypt, the first African COP for six years, to discuss new climate finance mechanisms, the report warns that African nations are set to suffer dramatic economic losses as a result of the climate crisis.

The study, led by Marina Andrijevic, an economist at the International Institute for Applied Systems Analysis in Vienna, explores the economies of African nations to 2050 and 2100. While these economies are still expected to grow compared to current levels, GDP growth is expected to be compounded by the climate crisis. The report compares GDP loss against certain warming trajectories compared to if climate change no longer existed as an issue.

Based on current climate policies, which put the world on track for 2.7C of warming by 2100, African nations can expect to suffer an average GDP hit of -20% by 2050 and of -64% by 2100.

Even in nations meet the 1.5C ambition of the Paris Agreement, African countries will still face an average GDP reduction of -14% by 2050 and -34% by 2100.

A total of eight countries face GDP hits of more than 25% by 2050 and 75% by 2100 under current policies. These eight are: Sudan, Mauritania, Mali, Niger, Burkina Faso, Chad, Djibouti, and Nigeria. Sudan, which this year saw flash floods impact more than 250,000 people, is expected to be the worst hit in economic terms, facing a GDP reduction of -32.4% by 2050 and -84% by 2100 compared to if there was no climate change.

According to Christian Aid, this outlines the need for urgent implementation of loss and damage mechanisms, one of the key talking points at COP27.

Christian Aid’s chief of policy, public affairs and campaigns, and report author, Oliver Pearce said: “These findings are stark and deserve to act as a wake up call to leaders of all countries about the economic devastation African countries face unless we put the brakes on our rising emissions.

“However even if we limit global heating to 1.5C this report shows that African nations will still suffer substantial economic harm, underlining the need for much greater financial support for people who face permanent harm from climate change.  It’s why at COP27 in Egypt we need to see much greater adaptation finance for vulnerable countries and a fund to compensate communities for loss and damage due to climate change they did not cause.”

The 20 nations that are the worst affected by the climate crisis, as listed in the report, generate average emissions of just 0.43 tonnes of C02 per person. In comparison, the US generates 14.2 tonnes per person and Saudi Arabia 18.

The report is unable to account for how adaptation can help alleviate some issues, largely due to the lack of funding and mechanisms on a global scale to date. According to the UN’s Adaptation Gap report, levels of finance flows for this area to developing countries are up to 10 times below required levels, and the gap is widening. The UN reports that annual adaptation needs are $160-340 billion by 2030 and $315-565 billion by 2050.

The report notes that there has been some progress in the development of national adaptation plans. 165 (84%) of nations involved in climate diplomacy through the UN have produced such a plan, up from 79% this time last year. The vast majority of these plans have been drawn up with the necessary considerations on how climate impacts are likely to be felt more severely by historically and presently disadvantaged groups.

However, half of the nations with a plan do not have more than one instrument in place to deliver their ambitions. Moreover, only 65 of the 165 nations with a national adaptation plan have included numerical, time-bound targets. Without such targets, tracking progress is challenging. It is also challenging to see which warming scenarios the plans are accounting for.

Africa’s renewables slump

The Christian Aid report isn’t the only analysis focusing on Africa to be released today.

New research from BNEF warns that African nations are lagging behind the rest of the world when it comes to renewable energy investment and meeting the aims of Sustainable Development Goal 7 – Clean and affordable energy.

The report examines the opportunities and challenges for clean energy deployment in Africa and finds that while 86% of the African nations surveyed by BNEF now have long-term clean power targets – up from 57% in 2019 – the speed at which capital is deployed is being hindered.

BNEF found that only $2.6bn of capital was deployed across renewable power-generating projects in Africa in 2021 – accounting for less than 1% of the $434bn invested globally.

Overall, renewables investment in Africa has slipped by 35% year-on-year, despite global investment levels rising 9% from 2022 to 2021 to an all-time high.

“The global transition from fossil fuels to clean energy has the potential to benefit economies and health across Africa,” said Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions and Founder of Bloomberg LP and Bloomberg Philanthropies.

“But as this new report details, clean energy investment in Africa is at an alarmingly low level. Changing that requires new levels of collaboration to identify viable clean energy projects and bring more private financing and public support to them – so we can turn Africa’s potential as a global clean energy leader into reality.”

As mentioned, Africa is uniquely positioned to harness renewables and become a clean energy continent, but citizens are still lacking basic access to electricity.

The World Bank notes that among those lacking electricity access globally, some 564 million (77%) are located in sub-Saharan Africa. For those that do have electricity access, 75% still have their needs met by coal and natural gas, with wind and solar accounting for just 5% of generation in 2021.

This is why Finance Day at COP27 is crucial, to give a voice to the states and communities of the Global South, to outline not only their willingness to embrace renewables, but also the desperate need for support to help make key frameworks like the Paris Agreement and SDG7 a reality.