Dubai, United Arab Emirates, 4 December 2023 (ECA) - “As we strive to harness the potential of the AfCFTA, it is essential that we do so in a manner that safeguards our natural ecosystem, promotes renewable energy and mitigates the impact of climate change” Mr. Claver Gatete, Executive Secretary of the United Nations Economic Commission of for Africa (ECA) has said in remarks made on his behalf by Melaku Desta, Coordinator of the ECA’s Africa Trade Policy Centre (ATPC) at a COP 28 side event themed: “Africa’s Trade and Green Transition: A Continentally Coordinated Approach.”
Mr. Desta said ECA and Centre d'Etudes Prospectives et d'Informations Internationales (CEPII) conducted a study - Greening the African Continental Free Trade Area Agreement's Implementation -with a view to shedding light on important findings regarding the implementation of the AfCFTA Agreement and parallel adoption of climate policies. It examines how the implementation of AfCFTA agreement can be aligned with green principles, renewable practices and low carbon strategies.
“The study was conducted against the backdrop of a growing need to consider the impact on the environment as the continent moves towards greater economic integration and take proactive measures to mitigate any negative consequences.”
“Africa is being negatively impacted by climate change despite contributing a small amount to greenhouse gas (GHG) emissions. Currently, Africa accounts for approximately 7% of total global GHG emissions from carbon dioxide and other gasses. GHG emissions in Africa are forecasted to grow faster over the next decades than in other parts of the world, although starting from a relatively low level currently,” said Mr. Desta, adding that as per the study, emissions could rise to nearly 12% by 2045 based on current trends. If large emitting countries implement policies to transition to clean energy, Africa's economic costs to export goods to those countries could increase.
The AfCFTA creates opportunities for the continent to industrialize and transform through increased trade and as stressed at the session, the AfCFTA stands as a beacon of hope for fostering intra-African trade, economic integration and shared prosperity."
There are concerns, however, that it could add pressure to climate change through increased manufacturing and transportation use, among others. Analysis shows intra-African trade could be 35% higher in 2045 with AfCFTA agreement in place, as compared to without AfCFTA. About two-thirds of the absolute intra-African trade gains would benefit industrial sectors supporting economic transformation.Supporting this increased trade will require major investments in transportation infrastructure to meet the AfCFTA needs which would be well over 2 million trucks, 100,000 rail cars, 150 vessels and 250 aircraft.
Presenting the key findings, Simon Mevel, Economic Affairs Office at the ECA said they analyzed the impact of implementing the African Continental Free Trade Area (AfCFTA) Agreement on Africa's GHG emissions. They also assessed implications of pursuing climate policies like Nationally Determined Contributions (NDCs) and carbon pricing in parallel with AfCFTA Agreement’s implementation.
Key Findings:
1. Implementing AfCFTA can boost intra-African trade by 35% in 2045 while increasing GHG emissions less than 1%, compared to no AfCFTA or climate policies.
2. AfCFTA and Africa's climate objectives are compatible. Adopting climate policies with AfCFTA could reduce GHG emissions by 25% while still increasing intra-African trade by 31-34% (depending on climate policy considered). Pricing carbon in Africa seems to be an effective and efficient mechanism to help African countries meeting their climate objectives defined under their NDCs.
3. Climate policies can also help accelerate Africa's renewable energy transition. Pursuing climate policies with AfCFTA could increase Africa's renewable energy use 5-12% in 2045 compared to no AfCFTA or climate policies.
The analysis further showed continental coordination on climate policies through carbon pricing produces better outcomes than uncoordinated approaches like existing NDCs. This suggests African countries can provide an effective African-driven response to address climate change by working together.
The main objective of this research is to help stakeholders - member States and green investorsbetter understand the expected impacts of adopting climate policies in Africa and how those interact with the AfCFTA.
Panelists included Ms. Faten Aggad, Advisor, climate diplomacy and multilateralism, who suggested a phased approach could be considered for carbon pricing in Africa.
Mr. Rashid Kaukab, Senior Specialist, Trade and Sustainable Development, International Institute for Sustainable Development (IISD) said that the poverty and employment impacts of climate policies shouldn’t be overlooked, while Mr. Babajide Sodipo, Senior Manager, Export Development Advisory, Afreximbank, emphasized the need for innovating financing mechanisms for the success if Africa’s energy transition.
Participants attending the side event acknowledged the conversation is “a timely reminder of the need to find a balance between trade and climate for the benefit of Africa's future.”
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