Africa at COP28: How will this year's decisions affect development work in Africa?

By Leah Berger

COP27 marked progress for developing countries, given?developed countries’ commitment to the?loss and damage fund, which saw them pledge USD 700m. Yet the headline-grabbing historical decision might not be all it seems, considering that estimates for the annual cost of developing country damage vary between USD 100-580bn. While the symbolism of the fund is potent, a lot more was at stake for Africa at COP28. ?

For one thing, the fate of the Carbon Border Adjustment Mechanism (CBAM) to be introduced by the EU in October was one of the main issues discussed at the meeting and ultimately one of the main determinants of the impact of global decarbonisation policies on Africa. Its aim is to ensure that the carbon price of imports is equivalent to the carbon price of domestic production within the EU. It also motivates foreign producers and EU importers to reduce their carbon emissions by raising the price of carbon imported into the EU. That Africa suffers disproportionately from climate change and therefore needs to embrace the mitigation and adaptation agendas is a given. Yet part of the developed countries’ means of enforcing decarbonisation, such as CBAM, could be detrimental to Africa’s wider developmental and industrialisation processes, due to its impact on African exports. According to the Lalji Africa Centre of the London School of Economics, the CBAM could cause a fall in exports from Africa to the EU of aluminium by up to 13.9%, iron and steel by 8.2%, fertiliser by 3.9% and cement by 3.1%.?Crucially, the thorny issue of CBAM faded from the COP28 text. The consensus was?that it should be discussed at the World Trade Organisation, not the United Nations.??

Overall, the main takeaways of this year's COP discussion is that all finance is climate finance, voluntary carbon markets are key and there needs to be an increase in climate ambition and data gathering. For companies and investors, stopping climate change is about focusing less on opportunities and risks and more on sustainable growth for the whole economic system. COP also triggered a series of discussions about unlocking carbon markets aimed at using carbon credits for decarbonisation. Data collection was also a key point. Data matters for analysing companies’ climate progress and for attributing the impact of investments on the climate. “Data is the soil, the water and the sunshine for everything we’re doing,” Oliver Marchand, Head of MSCI’s Climate Risk Center, “It’s a central component of the solution to climate change.” In the closing days of the discussions, this was a crucial point. At Pharo, it is also a point that resonates with us as we believe in data collection and studying what we do to ensure that it is beneficial.?

What were African countries hoping to achieve at COP28??

Beyond that, COP28 was an opportunity to change the global narrative of Africa’s involvement in climate change issues. One of the major aims was to be not only thought of as a recipient of climate aid, but instead a participant in climate solutions. Following the Summit for a New Global Financing Pact in June, the Africa Climate Summit in September, and the Annual International Monetary Fund-World Bank Meetings in October, Africans are hoping to secure a place for themselves to do more on adaptation and mitigation because despite having the lowest greenhouse gas emissions in the world, they live in the continent that is the most affected by climate change.?

Even though climate is a priority for African leaders this year, they must balance their climate-related initiatives with poverty alleviation, health, education, and debt financing. In this context, climate finance is becoming an important solution to balancing these constraints for Africa. For many African countries, this COP presented a unique opportunity for innovative debt-for-nature swaps, such as the $500 million deal in Gabon.??

African entrepreneurs were also keen to use this COP as a pitching ground for their innovative solutions in solar and wind energy and in newer fields such as carbon capture and green hydrogen. African scientists and climate innovators were keen to present themselves?as leaders in climate technology.

What COP discussions and advancements affect African Development???

The opening day of COP28 witnessed a large pledge to help developing countries cope with the climate crisis. The oil-rich host, the United Arab Emirates kicked off a series of pledges by offering $100 million to help poorer countries. This offer was matched by Germany and dominoed into numerous contributions. The European Union said it would give at least €225 million for the fund (including Germany’s pledge), and the UK pledged a further ￡40 million. Many activists and climate-vulnerable countries have long argued that rich, industrialised countries responsible for the bulk of planet-warming emissions should take the lead on funding climate action. Even the Paris Agreement echoes this point. This was a huge breakthrough in Loss & Damage in terms of agreeing on which countries would contribute funds and which ones would receive them.?This agreement and pledges given are an important development for African stakeholders who are concerned about the escalating impact of climate change on the continent.?Whilst an official list of the recipients has not yet been released, we expect that many African countries will be able to benefit from this financing. In the African development world this provides opportunities for sustainable economic development through building reliable energy solutions, water management systems and investing in sustainable agricultural practices. However, going forward it will be important to ensure that the most developed amongst the developing countries, which are to some extent holding on to their outdated status as “developing” in order to avoid having to participate in giving large sums of financial support, step up their contributions. After all, their recent and rapid industrialisation has played a non-negligible role in emitting large carbon emissions. ?

World leaders also announced an agreement on the future of food and agriculture. At least 130 countries including Brazil, China and the USA have signed up to the UAE Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action. This will commit them to consider emissions from agriculture in their Nationally Determined Contributions (the national action plans for reducing emissions), as well as appreciating the interlinkages between food systems, food security, and global emissions. Given that agriculture, forestry and land use is responsible for around 18% of global emissions, this declaration is severely overdue. Whilst developing countries are adjusting their agricultural systems accordingly this presents an opportunity for Africa to fill a gap. African agriculture and food exports will become more important than ever in order to feed the world. Africa has a unique opportunity to use sustainable large-scale farming practices from the get-go, instead of furiously backpedalling like many others. At Pharo we train smallholder farmers in good agricultural practices and management systems to ensure that they are able to increase their crop yield without compromising the sustainability of their farming. We are currently working with a large group of farmers in Somaliland and Ethiopia to ensure that they are able to contribute to economic development in their country by producing essential food. Not only does this help in creating solutions for food insecurity, it also elevates the entire economy and we can ensure that is the most sustainable avenue. ?

Furthermore, carbon credits were?discussed in terms of the Paris Agreement. This refers to a government's ability to reduce their net carbon emissions cooperatively through carbon markets. This is an issue that directly affects African countries as they often have the smallest carbon footprints. Therefore, developed countries buy carbon credits from countries with a small carbon footprint to reduce their net carbon emissions.?The money/debt cancellations received from the purchase of African carbon credits could provide helpful capital for investing in the development of Africa. This money will be hugely important in African development going forward. Governments have a unique opportunity to invest in climate-conscious technology or infrastructure. ?

Africa At the Centre of a Sustainable World and Pharo Foundation’s Role in It?

Africa is in a unique position where it has the lowest energy access rates in the world, with more than six hundred million people lacking access to electricity. Given the large economic development challenges, it may be tempting to prioritize short-term access to energy, whatever the source (especially oil and gas). African countries must reconcile economic development with the green transition or, rather, ensure that the green transition is the faster route to economic development. This issue will be at the forefront of African development in the coming years, as African leaders seek solutions as well as help in developing and distributing green energy to their people.??

Implicitly, the?COP28 Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action, which aims to reduce emissions and create food security for Africa, puts Africa at its centre. Many countries on the continent are faced with food security issues that grow worse with climate change. This declaration shows new thinking in global climate governance, aiming to transform the global food system into a food-secure, yet decarbonised system. With 152 signatories and an early financial commitment of US$7.1 billion, there is potential for African agriculture and food systems to be boosted. There is also an opportunity to develop highly efficient and sustainable systems that will generate income for African countries as well as feed their populations and the world. Pharo Ventures Ethiopia seeks to align itself with this concept, given its commitment to finding solutions that are based on the circular food economy. Its first sesame oil processing plant project is built on this philosophy.??

The?COP28 Declaration on Climate and Health?was also a milestone for Africa. Climate change?increases the continent’s disease burden. The US$1 billion funding raised at COP28 for transforming health systems to?cope with climate change-induced illness?and protect vulnerable populations will be very useful for African development. This commitment resonates with Pharo Foundation. At Pharo, we believe that health is one of the key factors for productivity to increase. Our Assosa Diagnostic and Clinical Services centre was set up in 2022 in this perspective.??

Furthermore, governments such as those of Germany, France and Japan, as well as philanthropic organisations and global institutions,?pledged over $175 million?to the Alliance for Green Infrastructure in Africa to build new green infrastructure. With more funding and well-planned execution, the Alliance for Green Infrastructure in Africa could help the continent maximise development opportunities in climate change mitigation. This aspect of the COP28 negotiations is also at the heart of Pharo Foundation’s aspirations as our water infrastructure is clearly a green answer to climate change.??