Almost 20 years ago, and following long debate, the wealthiest countries wrote off some of the debts owed to them by economically disadvantaged countries. With the United Nations recently declaring ‘a world of debt’, we’re back to it again, and so soon. But this time around, an imminent environmental crisis looms in the background. Developing countries simply cannot contribute to climate change solutions when weighted with debts. As many as 27 countries in Africa have ratio of debt to GDP above 60 per cent. Another important difference is that this time around, Africa holds more than half the raw materials needed for decarbonizing global economies. This year’s COP28 would be most effective by solving this paradox, as well as securing decarbonisation gains made so far, mostly in wealthier countries. Africa’s natural resources for energy transitions positions the continent to sustainably manage its debt, encourage economic growth and stimulate energy transitions across the continent, writes Michael Davies-Venn.
Long after an answer to one of the most important technological questions on mitigating climate change, which was how can societies transition from fossil fuels to renewable energy, with photovoltaic, wind turbines and hydropower, a confounding critical query remains.
And that is how to ensure every country has access to renewable energy technologies. Climate change impacts are global, and so mitigating in one half of the world while pollution goes unabated in the other is undoubtedly folly.
Yet decades after claims that the total cost of converting sunlight to electricity continues to decrease, it is still an unfortunate reality that a good number of countries still can’t afford, and thus do not benefit from, cheaper renewable forms of energy. Ironically, Africa, with 540 million people, was found last year to have ‘60% of the best solar resources globally, yet only 1% of installed solar PV capacity’. There is a critical and urgent need to reconcile this paradox as failures to mitigate climate change will inevitably impact every corner of the world. Environmental benefits from reducing emissions through decarbonisation are not local, national or regional, but global. Indeed, as the first Paris Agreement implementation global stocktake notes, ‘climate change threatens all countries’.
Politicians readying for this year’s Conference of the Parties (COP), the forum where the accord was agreed in 2015, need to discard tiresome speeches and reflect on this fact: ‘The world is not on track to meet the long-term goals of the Paris Agreement.’ Such information should keep them from continuing the COP tradition of making promises they have little or no intention of honouring. Remarkable strides on decarbonisation have been made in developed countries. But remarkably, developing countries, with large amounts of natural renewable resources, remain in a viscous loop.
Economically disadvantaged developing countries need economic growth to be able to afford renewable energy technologies at market rates. But they also need energy for economic development. To break out of this loop, they could borrow money against natural resources and, by doing so, ignore the president of the African Development Bank, who claimed that natural resource-backed loans ‘will be a disaster for Africa’. They could relent to western pressures and enact constraining fiscal policies, such as restructuring tax laws, so as to harmonize their regulatory frameworks with western countries. Or they could fully pursue the African Union’s (AU) principle of ‘African solutions to African problems’. Africa has a wealth of natural resources critical to global decarbonisation efforts, while the average debt ratio in sub-Saharan Africa alone ‘almost doubled in just a decade — from 30 percent of GDP at the end of 2013 to almost 60 percent of GDP by end-2022’. Governments now heading to COP28 must focus on resolving this paradox.
‘Everyone knows,’ stated Moussa Faki Mahamat, the AU chairperson, ‘that the public debt stock of sub-Saharan African countries at the end of 2022 was estimated at USD 1.1 trillion.’ And that relates to 48 countries, constituting most of the continent. But what seems to elude everyone is how to solve this problem. The answer is critical because the USD 100 billion a year by 2020 promised to developing countries for climate action in 2009, and promised again in a so-called ‘delivery plan’ during COP26 in Glasgow in 2021, still remains an unfulfilled promise in 2023 – 14 years later.
Where the Glasgow COP26 president, Alok Kumar Sharma, and the British government have failed to deliver on that 2021 promise which was originally made in 2009, the UAE’s Sultan Ahmed al Jaber, president of COP28, could well succeed. As the era when the validity of political narratives is assessed based on the origin of the speaker (such as the global North vs the global South) comes to a close, al Jaber might be able to oversee successful and relevant COP outcomes by convincing creditors to accept innovative solutions for unsustainable debts.
In 2005, then G8 members wrote off USD 40 billion in debts owed by African countries, after which former UK prime minister Tony Blair argued that ‘it isn’t the end of poverty in Africa, but it is the hope that it can be ended’. It did not. And that’s partly because African countries cannot affect unfair interest rates on loans because the increasing value of loans, in addition to the interest rates, are determined by the free market. African countries pay, on average, four times more for borrowing than the United States, for example. So poverty continues to flourish as debts increase. Eighteen years later, the same confounding quagmire, namely how to unburden developing countries from unfair and unsustainable debts, is the focus of multilateral institutions, such as the World Bank. One critical change this time around is that the continent, which has the highest number of young adults (with a median age of 19 years) and the fastest growing population, cannot be left out of global emission reductions. So, if debt write-off isn’t a sustainable solution, what practical options are there to engender economic growth across Africa, and shift economies to renewables, without compromising gains from mitigating climate change in developed countries? Could al Jaber convince politicians to embrace sensible solutions that would stimulate renewable energy development projects across Africa and help ensure sustainable economic growth?
First, G7 members at COP28 could agree to establish a mechanism focused on relieving the poorest countries from debts, for instance, in the form of debt reinvestment in developing countries. This would not require that G7 members make promises to fund climate action with new or additional funds. Instead, they would agree to transfer debts owed to their national industries – such agreements give confirmation to the claim often heard in developing countries that the private sector has a role to play on climate action. In addition to infrastructure, it would also stimulate technological renewable energy development in developing countries as it would facilitate technology transfer, which was envisioned in the Paris Agreement. As debts owed to developed countries are rather old, this transfer would not affect national budgets in developing countries, because none of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States or the European Union balance budgets based on debts owed to them by 46 of the world’s poorest countries across sub-Saharan Africa. Yet each G7 country owns and protects, through the World Trade Organisation, technologies and know-how that can drastically reduce global carbon emissions.
Usually, natural resources from Africa are extracted in Africa to produce items that are then sold back to Africans. The new so-called green economy is not an exception. Instead, a useful outcome from COP28 must include a moratorium on the extraction of materials needed for this type of economy to flourish in developed countries. Africa holds more than half the world’s cobalt in a single country. As this implies that more than half of all electric cars driven in developed countries will have materials from Africa, the continent adds value to the emerging green economy. And with 47 per cent of world manganese reserves, Africa holds half of the material used to convert sunlight into energy in solar panels. Such figures contribute to Africa having ‘at least a fifth of the world’s reserves in a dozen metals critical for the energy transition’. This lays the basis for an agreement to build industries in African countries to process such materials. This would inevitably result in building energy infrastructure in Africa, without which history reveals industrialisation is impossible, increase industrial productivity, stimulate fair trade and better integrate African economies. Considering that such materials are substantially important to producing goods necessary for decarbonisation, African countries should benefit from reformed ‘rules of origin’ based on primary source materials, not just the country in which a car or solar panel was finally produced. The EU delegation to COP28 can lead in this area, proposing to include countries with such resources into the bloc’s ‘most-favoured nation treatment’. In an era of climate change and societal transformation to sustainability, Africa must not simply continue to supply commodities in need elsewhere.
Natural resources in Africa, such as cobalt, that are primarily relevant for decarbonizing developed countries can play an important role to more sustainably manage sovereign debts in the region. Such resources could be leveraged against debts. In exchange for access to them, developed countries transfer value of debts owed them to their relevant industries who would then undertake renewable energy development projects across Africa. This would be a more sustainable way to address debts because with reliable renewable energy in place, the continent would be better positioned to develop economically, which would have long-term positive effects. Such would assure access to natural resources for developed countries necessary for decarbonising their economies, which are heavily dependent on fossil fuels, compared to developing countries. This is because alternatives, including debt renegotiations or insisting on repayments by African countries is likely to contribute to protection from political strife, worsened by climate impacts. Instability would be unsuitable for material extraction.
These are starting points that would allow the continent to pursue decarbonisation without negative impacts to other national priorities, such as reducing hunger, providing increased access to health and education, and stimulating economic growth.