Africa must Calm Investor Unease over backing Costly Low Carbon Projects
Everyone agrees green growth is a good thing. So why isn’t the whole world speeding along the low carbon route? Why are there so many red lights along the way?
The reason is that many low carbon projects are costly, beyond the reach of many if not most African governments. The private sector is not closing the gap. The reason is that investors are worried whether their money is safe.
This was one of the topics discussed in a session at the climate change energy conference, or COP 17, in Durban.
The consensus was that governments must enable safe investment environments for low carbon growth projects. African leaders are committed to pursuing a green growth plan, but can only do so with an injection of cash. But if investors are scared of losing their money, that cash will not arrive.
“Energy is the engine of economic growth and development”, said Salvador Namburete, Mozambique’s minister of energy. “Although Africa has a sizeable scope for renewable energy, and the issue of clean sustainable energy is top of our agenda, Africa has limited financial resources to develop renewable energy.”
He called on finance bodies to fund such projects, and on governments to attract private investors.
“Climate investment must be improved so perceived risks can be minimised. Political leaders and institutions must develop enabling environments to facilitate private investment”, he stressed.
Norway’s junior minister in the Ministry of Foreign Affairs, Arvinn Gadgil, agreed climate investment must be improved. “Private business needs an enabling environment that’s predictable and transparent. It must include stakeholders from government”, he said.
Gadgil warned that misconceptions about Africa still exist, and Africa needs to eradicate this prejudice to attract private investors.
Offering advice based on Norway’s experience, he told African leaders to take ownership of projects. “In Norway, after 50 years, all private plants fall into the hands of the state.” He suggested countries slap carbon rich industries with high taxes. “Norway taxes the oil industry at 79 percent. It worked for us.”
Ethiopia’s Gosage Mengiste said they are committed to turning the country into a low carbon emitter by 2030. “We have an ambitious green growth agenda, and welcome investment”, he said. “We see green growth as a necessity and an opportunity.”
Speaking for the African Development Bank (AfDB), where she is Director of Energy, Environment and Climate Change, Héla Cheikhrouhou, said: “As a bank, we intervene with a wider range of instruments and work to identify opportunities and solve problems in private-public partnerships.”
She cited the example of Morocco, which wants its energy use to be 42 percent renewable by 2020. “Public investment will enable infrastructure. Private investment will come in for the actual plant, and the bank comes in as an enabler providing loans,” said Cheikhrouhou.
She said the AfDB had tailored tools to complement medium-scale renewables. “Rwanda is trying to attract small and medium-sized enterprises [to help it to develop]. The AfDB will help to fill the gap and to find resources,” she said.
Following up on Mengiste’s statement, Yacoob Mulugetta added, “Low carbon offers an opportunity to transform climate challenges into development opportunities.”
He said that in the pursuit of low carbon growth, technology transfer is critical. “There’s a need for the right mix of policies. Technology that fuels development goals must be accessed.” He urged the mobilisation of citizen participation.
Dr Felix Dayo, president of Triple E Systems, said myths surrounding low carbon growth no longer exist. “Five years ago, low carbon was met with myths. Everybody said Africa could not afford it. Technological innovation means costs are decreasing, and now we see there are ample opportunities for Africa to tap into.”
He laid out a policy plan which he sees as a guarantee for success. “We must develop a low carbon future that’s related to stakeholders, develop a reference energy scenario with alternative plans, recognize the importance of comparing scenarios, develop a credible and practical low carbon scenario, have proper and comprehensive resources and create good plans for implementable projects.”