As part of the UN’s sustainable development goals, greening the world economy has become central to any development agenda. There is a growing need for global collaboration to achieve a green transition globally. Despite having the least carbon emissions, climate change significantly impacts Africa. Therefore, it is crucial for African countries to join the discussion as early as possible by being proactive on legislation, especially regarding the adoption of renewable energy. Africa needs to ride these virtuous circles by ensuring that policymakers tap into the growing market for green, social, and sustainable (GSS) bonds to finance the green economy transition. The GSS bond market is estimated to have grown by over 300 percent in 2020, reaching a record high of USD 425 billion (Moody’s) to USD 500 billion (S&P) by the end of 2020.
African Union’s Agenda 2063 establishes that a sustainable development strategy must deliver a win-win outcome, which starts with increasing awareness and actualising green growth across different sectors. As we increase economic growth in Africa, it should not be at the expense of the environment. Some factors enable Africa’s green economy transition, which can accelerate through sustainable models. These include:
- Technology and Innovation
Progress in technology and innovation are some of the key factors that allow green growth. Studies aimed towards the role of specific technological innovations in green growth show that ICT is a pervasive general-purpose technology for the greening of industries, firms and ecological systems. African countries are already on the path of digital transformation, which puts them at an advantage in identifying the benefits and opportunities of green energy. Innovation is a precursor when it comes to green technology. It can help develop new and improved production systems in different sectors. These systems influence the production and consumption processes, ecosystems, institutions, business strategies, and user practices that facilitate the transition to greener growth trajectories.
- Progressive and Effective Policies
Policies are significant in the growth trajectory of ideas and concepts. When African countries start the conversation on turning green energy, they must put policies in place and involve all stakeholders. Effective outcomes and dialogue can emerge from these processes when all these dynamics come together. The ban on single-use plastics is a step in the right direction for African countries. On the other hand, this opens up great opportunities for businesses and start-ups to capitalise on the gaps left once major cities go green. Some African countries are implementing pilot programs to reduce carbon emissions, particularly in the public transport sector. These programs have seen start-ups coming up to offer solutions. However, these start-ups need to be brought on board when policies are being formulated to ensure they can operate in a conducive environment.
- The African Continental Free Trade Area (AfCFTA)
The AfCFTA allows African countries to cooperate on several issues that can form solutions. Natural resource endowment can be the touchstone upon which AfCFTA can begin the conversation on green transition. Since countries can still exploit natural resources haphazardly, there needs to be a discussion on how to use these resources while upholding sustainability standards. The free trade area can ensure harmonisation in the policies formed and help create a standard for member states to adopt. Despite being the world’s largest trading bloc, certain barriers must be overcome politically, socially and economically.
A regional approach to addressing the African energy deficit is not new. Countries need to actualise these partnerships, enabling them to manage power generation and distribution independently. To achieve an effective green transition, African countries must eliminate two bottlenecks. The first hurdle that governments must overcome is green energy investments. These investments need to be scaled up, especially those aimed at renewable energy. According to the UN, investment gaps range between USD 380 billion and USD 680 billion. Despite these challenges, the tide has begun to turn to some of the equipment needed to produce green energy, such as solar panels, whose prices have fallen by 80 percent since 2010.
The second hurdle governments must overcome is trimming down and discontinuing widespread energy subsidies on fossil fuels. The average subsidisation rate in Africa is about 33 percent, with the cost of fossil fuel subsidies representing an average of 3.8 percent of GDP, getting as high as 5.8 percent in Algeria. However, according to the International Energy Agency’s energy subsidy tracker, global fossil-fuel subsidy outlays reached a 14-year low in 2020 at USD 180 billion globally and USD 27.7 billion for Africa.
This downward trajectory in subsidy spending should be seized upon by policymakers to phase out inefficient energy subsidies and rechannel, in a carefully targeted manner, the freed-up resources to protect the poor and most vulnerable in society. Overall, African countries should take investment opportunities afforded to them and channel some of these efforts towards green energy as they aim to move away from fossil fuels gradually. Certain African countries, such as Morocco, are making significant strides towards renewable energy, with wind and solar energy receiving the most attention.