Addis Ababa, 5 October 2023 (ECA) - Africa, rich in mineral resources, must leverage the African Continental Free Trade Area (AfCFTA) to accelerate green transition to boost sustainable development and environmental protection.
Speaking at a three-day peer review meeting for research papers on Green Considerations of the AfCFTA in Addis Ababa, ECA Director for Regional Integration and Trade Division, Stephen Karingi underscored the importance of green transition for Africa.
“Africa needs to use every instrument at its disposal to move towards green transition, this will be for the region’s own resilience and future competitive advantage as we have already seen from the example of the European Union Carbon Border Adjustment mechanism that African businesses competitiveness in foreign markets will be heavily tested,” said Mr. Karingi, emphasizing that Africa needs to create a policy and regulatory environment that promotes green growth, including green industrialization and environmental protection.
ECA in collaboration with the United Nations Conference on Trade and Development (UNCTAD) and with financial support of the Danish International Development Agency (DANIDA) undertook research to investigate opportunities of how to promote green transition and environmental protection through the implementation of the AfCFTA. The research sought to understand the interlinkages between policy areas of the AfCFTA and environmental conditions as well as understanding the opportunities and challenges of greening the implementation of the provisions of the AFCTA protocols.
Launched in 2019 by African countries, the AfCFTA is a free trade area to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion. At its full realization, the AfCFTA with the mandate of eliminating trade barriers, will be the largest free trade area in the world bringing together the 55 countries.
Climate change poses a significant threat to African countries' economic, social, and environmental sustainability. Investing in green sectors and promoting sustainable investment practices is critical for African countries in mitigating the impacts of climate change and transitioning to a low-carbon economy.
The ECA notes that the AfCFTA Protocol on Investment presents a unique opportunity for African countries to attract and promote investments in green sectors that support green transition.
The AfCFTA Protocol on Investment provides several mechanisms for African countries to achieve green transition. These mechanisms include promoting investment in green sectors, facilitating technology transfer, developing green investment standards and encouraging regional cooperation.
Why Africa must pursue green transition
Africa is the least contributor to climate change but it is worst affected by it. 16 of the 20 countries listed as most vulnerable to climate change are in the African region, Mr. Karingi said.
Besides, there is a major financing gap in climate finance and investments in Africa which attracts less than 1.5 percent of the global renewable energy investments yet climate disasters are costing the continent between 5 and 15 percent of the GDP.
Research by the Africa Climate Policy Centre indicates that the implementation of Nationally Determined Contributions (NDCs) under the Paris Agreement, requires annual investments of $3 trillion, including $2,5 trillion between 2020 and 2030.
Mr. Karingi highlighted that the AfCFTA could improve the regulatory and policy environment to boost intra-African trade and investments that promotes sustainable industrialization and broadens domestic resource mobilization while attracting finance to support Africa climate mitigation and adaptation strategies. With the right market-backed policies, there is a great potential for Africa to leverage its natural resources through the beneficiation of its green minerals, renewable energy and carbon markets, he said.
“The AfCFTA presents Africa with the opportunity to build resilient value chains that can generate green industrial development and also attract investment for sustainable competitive advantage of African businesses in the global market,” said Mr. Karingi.
Officer-In-Charge of the UNCTAD Regional Office for Africa, Judith Ameso, said the review of the papers on Green Considerations of the AfCFTA - a culmination of a two-year research - was timely on the back of growing recognition of the devastating impacts of climate change in Africa.
Currently research indicates that while Africa contributes 4 percent of the global greenhouse gas emissions, it is suffering the biggest impact of climate change as seen in worsening droughts, low agriculture, high temperatures, flooding and damage to infrastructure, supply and distribution chains.
The latest UNCTAD report on Economic Development in Africa shows that some of Africa’s competitive advantage includes having vast resources of critical minerals like copper, magnesium, cobalt and lithium which are key in high technology and green product development.
Ms. Ameso underscored the need to value add the critical minerals and ensure that they are produced and traded in a sustainable, just and transparent manner. The AfCFTA is instrumental in promoting inclusive and sustainable economic development through trade, said Ms. Ameso.
“It is necessary to mainstream climate change and bring policies to the AfCFTA processes including the implementation aspect,” Ms. Ameso said.
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