Energy poverty and financing obstacles hamper Africa’s green transition

The effects of a rapidly warming climate are all too visible in Africa. In May, floods described as “unprecedented” in Kenya killed more than 200 people and displaced thousands more. In the Sahel, a semi-arid belt south of the Sahara, climate change is causing desertification, which is hampering livestock production, exacerbating conflicts and driving people into poverty. And in West Africa, scientists attributed a deadly heatwave earlier this year to human-induced climate change. The situation is expected to worsen.

According to UN data, as the least industrialized continent in the world, Africa currently accounts for only 2-3 percent of global carbon dioxide emissions from energy and industrial sources. However, it is the continent most vulnerable to the effects of global warming, with less reliable infrastructure, energy production and funds to build resilience to climate change.

There is an urgent need to industrialize Africa. About 600 million people on the continent, or about half of its population, still have no access to electricity. This has a detrimental impact on household incomes, education and overall economic growth. And 950 million people do not have access to gas or electricity for cooking, so instead resort to burning charcoal or firewood.

However, there are divergent views on how to achieve industrialization. Celebrities including Gwede Mantashe, South Africa’s energy minister, are calling on Africa to continue using fossil fuels to generate electricity. Oil-rich countries such as Nigeria and Angola also say it is important for the continent to exploit its mineral resources.

Lobby group the African Energy Chamber says Africa has a “sovereign right” to use its energy resources – 125 billion barrels of oil and 620 cubic feet of natural gas, according to the organization – in a “sustainable and sustainable” way.

Other supporters of continuing fossil fuel exploration in Africa say they understand the effects of climate change but believe that solving energy poverty should be the most urgent priority. They point to what they call Western hypocrisy as financing for fossil fuel projects in Africa becomes increasingly difficult to come by, even as Western countries reject their own net-zero emissions targets and continue to license new oil fields.

“Africa should produce every drop of hydrocarbons it can use to power and industrialize Africa,” says Nj Ayuk, president of the African Energy Chamber, arguing that such a scenario would increase global emissions by less than 1 percent.

“Climate change is a serious problem and we should not underestimate the challenges,” adds Ayuk, arguing, however, that Africa should use revenues generated from fossil fuel drilling to invest in green technologies.

600 minutesNumber of people in Africa without access to electricity

However, there is an alternative view: that Africa should “leapfrog” fossil fuels completely and go straight to clean energy to achieve its industrialization goals. But Ayuk warns that “it doesn’t really make sense” because Africa “can’t afford it.”

James Mwangi, chief executive of investment firm Africa Climate Ventures, adds that the “jumping frog” phrase is wrong because most of the fossil fuels extracted in Africa are exported and little is used to generate energy domestically.

Africa already has more renewable energy resources than fossil fuel reserves, notes Mwangi. However, to cover the continent’s own energy needs, more financial resources and the development of renewable energy are needed, he notes. “Investing in green energy is a sound financial decision for Africa,” says Mwangi.

According to the International Energy Agency, Africa, for example, has more than 60 percent of the world’s top solar energy resources but only 1 percent of the world’s installed photovoltaic capacity.

Wind power is also plentiful: a study commissioned by the International Finance Corporation found that the continent has the potential to generate 180,000 terawatt-hours of wind electricity per year, or 250 times Africa’s annual electricity demand. However, the study shows that Africa accounts for only 1 percent of the world’s installed wind power capacity, despite a surge in capacity elsewhere in recent years.

Africa also needs billions of dollars to finance climate change adaptation if it is to build the resilience needed for a warming planet. According to analyzes by the Climate Policy Initiative and the Global Center on Adaptation, an average of $29.5 billion was allocated to the continent in 2019 and 2020 – including funds from national governments and financing flows from Western countries. Adaptation measures include early warning systems, land and water management, and climate-conscious agriculture.

And yet the amount of investment is insufficient. The analysis shows that meeting the targets set for African countries under the Nationally Determined Contributions in the 2015 Paris Agreement would require an additional $41.3 billion in investment per year for the continent.

At COP26 in 2021, rich countries promised to double the level of financing for climate change adaptation in developing countries by 2025 compared to 2019. Instead, investment has fallen, according to Patrick Verkooijen, chief executive of the Global Adaptation Center.

Africa needs $100 billion a year to finance adaptation, but only receives $10 billion

“The worst situation is in Africa,” he says. “Africa needs $100 billion a year to finance adaptation, but only receives $10 billion. Investing in adaptation is not a sunk cost – every (amount of) money spent on adaptation saves lives and ecosystems.”

Currently, around half of Africa’s funding comes from multilateral development finance institutions and climate funds, with the majority coming from African governments and international and bilateral development finance agencies, according to FSD Africa, a UK-funded development agency.

But only 14 percent comes from the private sector, including pension funds and private equity firms. Moreover, the agency says climate finance is concentrated in the hands of too few countries: 10 of Africa’s 54 countries receive more than half of the proceeds.