What could COP27 mean for African climate finance?
What’s happening? The African Development Bank (AfDB) has said Africa is losing between 5% and 15% of its per capita economic growth because of climate change and is facing a $1.3tn shortfall in climate funding between 2020 and 2030. African countries received around $18.3bn in climate finance between 2016 and 2019, according to AfDB acting Chief Economist Kevin Urama. A rich nations pledge in 2009 to offer $100bn of climate financing to the developing world has only been partially met and is due to expire in 2025. (Reuters)
Why does this matter? The impact of climate change on African economies is much larger than in other parts of the world – the 5-15% AfDB projection compares to an estimated global GDP loss of 4% from global warming.
As a consequence, African countries are being forced to spend a significant amount on dealing with the impacts of climate change – analysis has found that adapting to extreme weather costs almost 6% of GDP in Ethiopia alone, and that African nations will spend an average of 4% of GDP on dealing with climate impacts.
Not enough cash – Climate Policy Initiative reported in August that Africa is only receiving 12% of the finance it needs to manage climate impacts. Its report noted that Africa needs $250bn annually to move to greener technologies and to fund climate change adaptation, but received just $29.5bn in 2020.
In the run-up to the COP27 climate conference, African ministers have been pushing for more climate finance. A communique said that Africa has received less than 5.5% of global climate financing, even though it is suffering disproportionately from climate change.
What is being done? Most recently, vulnerable nations have been calling for a “climate-related and justice-based” global tax to fund payments for loss and damage suffered in less economically developed nations. This could take the form of a global carbon tax, a tax on airline travel, a tax on bunker fuels used by ships or a tax on financial transactions.
Meanwhile, Denmark recently became the first developed nation to specifically pledge funds for loss and damage. The country has committed 100 million DKK ($13m) to construct resilience infrastructure and assist climate victims in recovering. A proportion of the funds will go to a firm called InsuResilience, which provides subsidised insurance in developing nations. Some of the funds will also go toward civil society actors in developing nations that are working on climate change resilience.
The importance of high-quality data – Another obstacle in Africa’s climate fight is how a lack of historical records and high-quality data in the region is preventing accurate climate forecasts, as we have previously explored in Sustt. For instance, even though sub-Saharan Africa is a hotspot for heatwave activity, there are almost no official records for heatwaves in the region.
Reliable forecasting is a prerequisite for adequate decision-making in areas such as housing, infrastructure, agriculture or insurance needs. The fact that some regions such as East Africa still don’t know whether to expect a drier or wetter climate in the future fundamentally impedes these decisions.
This needs to be improved as it means that if a greater degree of climate finance is provided, there is a strong risk it will not be allocated efficiently.
The future – It is clear that Africa and other vulnerable nations urgently need a greater amount of climate finance. Whether Denmark’s stepping up on loss and damage will be the only pledge of its kind as we move towards COP27 remains to be seen.
