Africa received 2% of $3 trillion in renewable energy investments in 2 decades.
This was stated by Dr. Akinwunmi Adesina, the President of the African Development Bank (AfDB).
He said this while addressing COP28 delegates on how Africa has been shortchanged when it comes to the new European Union carbon border tax at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai.
He said:
- “Africa received just $60 billion or 2% of the $3 trillion of global investments in renewable energy in the past two decades, a trend that will now impact negatively on its ability to export competitively into Europe. Africa could lose up to $25 billion per annum as a direct result of the EU carbon border tax adjustment mechanism.
The EU’s carbon border adjustment mechanism works like a tax on products that require a lot of carbon emissions to produce. These include things like fertilizers, cement, iron, steel, and aluminium brought into the EU from outside.
The main goal of this mechanism is to push companies to use cleaner and greener technology. By doing this, it aims to stop companies from making products with a high carbon footprint outside the EU and then bringing them in.
He stated further that Africa has been short-changed by climate change; now it will be short-changed in global trade. Adesina noted that with Africa’s energy deficit and reliance mainly on fossil fuels, especially diesel, the implication is that Africa will be forced to export raw commodities again into Europe, which will further cause the de-industrialization of Africa.
During his presentation, Adesina put his argument into perspective by referencing a recent report by Moody’s Analytics which showed that Africa had the least default rate on investment in infrastructure compared to other parts of the world.
In the report, it was highlighted that Africa’s default rate stands at 5.5%, compared to Latin America’s 12.9%, followed by Asia at 8.8%, Eastern Europe at 8.6%, North America at 7.6%, and Western Europe at 5.9%.
Adesina also said that because of weak integration into global value chains, Africa’s best trade opportunity lies in intra-regional exchanges, with the new Africa Continental Free Trade Area estimated to increase intra-Africa exports by over 80% by 2035.
Added perspective
In its preview of the March 2023 World Energy Transitions Outlook, the International Renewable Energy Agency (IRENA) highlighted that Africa received only 1% of the additional investments in renewable energy made in 2022. This statistic underscored Africa’s limited share in renewable energy investments compared to other regions. The report emphasized:
- “Despite global investment in renewable energy, a substantial 85% of these investments mainly benefited less than half of the world’s population. Africa specifically accounted for a mere 1% increase in renewable energy capacity in 2022. IRENA’s Global Landscape of Renewable Energy Finance 2023 highlighted that approximately 120 developing and emerging markets received notably lower investments.”
The outlook’s preview stressed the necessity for increased investments in developing and emerging markets to foster a more inclusive energy transition. Francesco La Camera, the Director General of IRENA, emphasized the importance of a significant shift in investment focus toward developing nations.