COP26: African countries stand to gain from climate change conference

The Climate Vulnerable Forum (CVF), made up of representatives from 48 of the countries “most threatened by climate change”, has published a ‘manifesto’ (2-page / 469KB PDF) ahead of the conference, which it describes as “maybe the last chance for humanity to avert climate catastrophe”. Among the actions that the CVF is pushing for are carbon tariff exemptions, debt restructuring and a formal plan for the delivery of the annual US$100 billion in climate finance for developing countries pledged by more developed nations at COP21 in Paris six years ago.

COP26 president Alok Sharma MP has publicly stated the UK’s commitment to this annual figure (25-page / 9.8MB PDF), stressing that the conference, which was delayed by the Covid-19 pandemic, must be held in person “to ensure the voices of these countries are heard and acted on”. As the CVF has made clear, wealthier nations have a duty to rebuild trust and confidence in international climate cooperation; accelerate funding for adaptation and mitigation; and limit global warming to the 1.5 degrees set out in the Paris Agreement.

While the full annual $100bn commitment is yet to be reached many governments of developed counties, multilateral development banks (MDBs) and private sector investors, including those based in the UK, are already investing in ‘green’ projects on the continent. Ahead of anticipated announcements of new and recommitted funding at COP26, we look at the scale of the investment needed – and areas in which responsible investors should be seeking to get involved.

Opportunities for African countries

The CVF manifesto is the latest expression by those in climate vulnerable countries of their needs ahead of COP26, and is consistent with public statements to date.

In May, the Allied for Climate Transformation by 2025 (ACT2025) consortium, which includes local and global organisations based in Africa, Asia, the Caribbean and Latin America, published five outcomes it would like to see from COP26. These are:

• more ambitious national climate targets (nationally determined contributions, or NDCs) from developed countries in line with the Paris Agreement 1.5 degree target ahead of 2025, when these must next be submitted to the UN. The CVF would like to see even more stringent measures adopted, requiring every country to present a new climate plan each year to 2025;
• scaled up and accessible finance for vulnerable countries, including sovereign debt relief where the money will be redirected to green projects;
• increased support for adaptation efforts, including methodologies and metrics to measure progress. The CVF manifesto also calls for a more equitable split in climate finance between adaptation and mitigation measures – adaptation currently accounts for only 21% of total climate finance, according to the OECD;
• increased action and support for loss and damage due to climate impacts where adaptation is not possible. This should include more streamlined approaches to funding and the effective operationalisation of the Santiago Network on Loss and Damage, established at COP25 to coordinate technical assistance following unavoidable climate damage. The CVF has also recommended that this take place;
• finalised rules and architecture under the Paris Agreement including the Paris Rulebook implementation guidelines, carbon market mechanisms under article 6, securing a clear common end date for countries’ emissions reduction targets and the first global climate ‘stocktake’. The CVF has suggested that at least 5% of the proceeds from any carbon market mechanisms be used to fund urgent adaptation works in the most vulnerable nations.

Other potential opportunities identified by the chair of the African Group of Negotiators on Climate Change include the negotiation of exemptions for developing countries from carbon tariffs; avoiding the shifting by developed countries of their climate responsibilities, such as cumulative greenhouse gas (GHG) emissions, to developing countries; and explicit assurances that the response to the Covid-19 pandemic will not derail climate efforts.

What has been agreed so far?

Under the United Nations Framework Convention on Climate Change (UNFCCC), countries are classified as ‘industrialised’, ‘economies in transition’ and least-developed countries (LDC). The 49 LDCs, which include 33 countries in Africa, are given special status under the treaty, given their limited capacity to adapt to the effects of climate change.

More developed countries are required under article 9 of the UNFCCC to provide financial and technical support to EITs and LDCs to assist them in climate change mitigation and adaptation efforts. Under article 4, developed countries are expected to take the lead by undertaking economy-wide reduction targets while developing countries should instead continue to enhance their mitigation efforts while being encouraged to move towards economy-wide targets over time.

To facilitate the provision of climate finance, the UNFCCC established a financial mechanism to provide financial resources to developing countries. The mechanism is accountable to the parties to the convention which decide on its policies, programme priorities and eligibility criteria for funding. The Global Environment Facility (GEF) has served as an operating entity of the financial mechanism since the entry into force of the UNFCCC in 1994.

The Green Climate Fund (GCF), the UN’s main climate finance mechanism, was established at COP16 in 2010. In 2011, it was also designated as an operating entity of the financial mechanism.

Developed countries have pledged contributions of up to $100bn annually to the GCF by 2020, with the most significant pledges to date coming from Canada, France, Germany, Japan, the UK and a number of MDBs. The US, at September’s UN General Assembly, pledged to increase its annual contribution to $11.4bn by 2024. However, commentators have claimed that the amounts pledged do not sufficiently reflect each contributor’s relative gross national income and cumulative emissions.

The GCF aims to achieve maximum impact in the developing world from its investments, supporting paradigm shifts in both mitigation and adaptation. Recent examples of significant schemes have featured climate finance blended with other sources of development funding, including private sector funding. An example is a climate adaptation project in Rwanda’s eastern province which is aimed at restoring farming lands that have become increasingly vulnerable to drought. The $49.6 million project received $33.8m in grant funding from the GCF, to complement funding from co-financing partners. In Senegal, the GCF is providing the concessional financing needed to mobilise private sector participation in the ASER solar rural electrification project, with the goal of bringing reliable solar power to households in 1,000 isolated villages.

The CVF, in its manifesto, has called on the UK in its role as COP26 president to take full responsibility for developing a delivery plan for the committed annual $100bn, which it believes should be split equally between adaptation and mitigation measures. The CVF has also called for independent annual monitoring of the delivery plan by the International Monetary Fund (IMF).

Navigating funding opportunities

For African countries, one of the challenges is how best to navigate the different funding sources available. Outside of the COPs, these include bilateral arrangements with individual developed countries along with private finance and corporate agreements.

The UK, for example, is already one of the biggest investors in Africa. In January 2020, over 1,000 delegates attended the UK-Africa Investment Summit in London, at which billions of pounds worth of commercial deals were announced alongside new initiatives and funding commitments from the UK government. Some of these commitments were targeted specifically at clean energy and climate compatible infrastructure, including the creation of a new Climate Finance Accelerator programme and a ‘Clean Energy Pacesetter’ initiative with Ethiopia, Kenya, Morocco, Nigeria, Sierra Leone and Senegal.

CDC Group, the UK’s development finance institution, announced £300m worth of new investment commitments at the summit, and plans to invest a further £2 billion into Africa by 2020. As of the end of 2020, CDC had invested either directly or indirectly in 681 African businesses, which account for around 60% of its $7.2bn investment portfolio.

The UK has also announced £132m of new investments in Kenya focused on building new green affordable homes, connecting households to clean energy and boosting manufacturing. From a climate perspective these include a new £58m fund, anchored by £35m of UK government investment, which will finance the construction of 10,000 green affordable homes; £3.3m from UK-backed InfraCo Africa to finance expansion of off-grid solar power to 6,000 homes in western Kenya; and £3.7m government support to back the country’s green transition, including projects supporting renewable energy, clean cooling and forest restoration.

Africa’s agriculture sector is particularly vulnerable to the impact of climate change. Extreme weather events such as storms, heavy rainfall and prolonged periods of drought threaten food security across the continent along with the livelihoods of millions of rural smallholders. To this end, the UN’s Food Agriculture Organisation (FAO) is, together with the GCF, funding projects that build climate resilience, reduce greenhouse gas emissions and spur sustainable growth in countries including the Ivory Coast, the Republic of Congo and the Republic of Sudan.

Leveraging the supply chain

The UK is also proposing changes to national laws which would protect unique habitats, including the African rainforest. It intends to impose new due diligence responsibilities on larger businesses using “forest risk commodities” in their supply chains, along with a prohibition on the use of products grown on land that was deforested illegally. It is using the Environment Bill, which is currently before the UK parliament, to take forward these measures.

This approach is designed to work in tandem with the existing efforts of governments, communities and businesses in producer countries to enforce national law and is being billed as a first step. In 2019, the UK established the Global Resource Initiative (GRI), an independent task force bringing together representatives of some of the country’s biggest businesses. The due diligence requirement was one of the GRI’s first recommendations, and it has been tasked with identifying further measures to reduce the impact of key UK supply chains on the global environment.

COP26 as impetus

There is a real prospect that there will now be a considerable ramp up of activities in order to identify and deliver projects that will utilise the substantial funds that are becoming available to address climate change and related issues in the developing world and the signs are that this is likely to be given extra impetus by COP 26.

For this ambitious programme to succeed, it will need to be delivered in a way which empowers the developing world as an equal partner in addressing the global climate challenge. Governments and private businesses in the developing world will need to be able to take ownership of the opportunities that are offered. They must be entitled to meaningful input and control of the manner in which projects are prioritised and delivered within their own countries.

Additional research by Mariam Hassaballah of Pinsent Masons