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Fossil fuel extraction in Africa: carbon risks and economic realities
To achieve its Nationally Determined Contributions and reduce dependence on high-carbon sectors, Africa needs to strengthen its policies, build institutions and mechanisms to strengthen governance, and attract climate investment.
On Policy Day at the African Development Bank’s Pavilion at COP24, in a session titled “Managing Carbon Risks and Raising Climate Ambition - New Policy Approaches for Countries with Fossil Fuels”, the African Development Bank partnered with London-based Chatham House to explore what better coordinated approaches to carbon risk would look like.
Delivery of net-zero carbon emissions will have significant impacts for fossil fuel exports and the competitiveness of fossil fuel-based power, with economy-wide implications. Direct impacts range from volatile and declining fossil fuel revenues over time, to potential reductions in the productive lifespan of fossil fuel assets.
There will also be rapid shifts in the competitiveness of energy technologies and industrial pathways, presenting both carbon risks and green growth opportunities for producer countries.
The impacts will, of course, vary depending on the country and stage of production, the type and scale of reserves, and the allocation of production between exports and domestic use.
Sian Bradley, Research Associate at Chatham House, outlined the risks and complexities for African countries that are currently extracting oil and gas:
“About half of all low-income economies are either producing fossil fuels or exploring right now; this is a significant issue. When we’re talking about the role of fossil fuels with African Governments, it’s a conversation around wealth creation and shared value. The ability to extract oil and gas has traditionally improved countries’ positioning for finance, their credit ratings and their ability to graduate from aid.”
“But there’s a much wider reassessment of value going on in the global economy, with the reallocation of capital to more sustainable energy sources,” Bradley said.
Countries need access to timely and accurate information about fossil fuel production to mitigate carbon risks and plan for climate and green growth ambitions to support economic development.
Chebet Maikut, Commissioner for Climate Change in Uganda, said: “Oil and gas is a resource that everyone welcomes to support our socioeconomic transformation. We have in excess of 3 million barrels and exploration is still ongoing. The Government has now prioritized oil and gas as a key sector to speed economic growth in the country.”
“But we want to learn from the mistakes of others and do this in a sustainable way. In our Nationally Determined Contributions we’ve committed to reduce emissions by 22 percent by 2030; part of this is to increase the supply of renewable energy,” Maikut further remarked.
Dr. Paul Abolo from Nigeria noted that one of the most important lessons that Nigeria as an established producer can offer to emerging producers is for the government to work together with the National Oil company, towards achieving NDC targets and industry-wide goals.
The African Development Bank created the Africa Natural Resource Center to work with African countries to develop long-term emission strategies and help plan the development of key resources, including integrating climate change into natural resource extraction strategies.
Capacity-building will be required in key areas of government - economic, energy and industrial policy and the fossil fuel sector itself will be crucial to avoiding and mitigating carbon risk and guiding a smooth and rapid transition.
Rose Mwebaza, Chief, Natural Resources Management Officer at the African Development Bank, spoke about Nigeria as a country that has specifically targeted the oil and gas sector in their NDCs.
She noted that Nigeria’s oil and gas is one of the top 10 greenhouse gas (GHG) emitters in the world mainly through gas flaring. Nigeria has a clear strategy and framework to reduce GHG emissions, particularly in flaring. Nigeria has also identified several low carbon development projects and has made progress to implement some of them through mitigation financial instruments such as the Green Bond.
Ultimately, development assistance needs to be aligned with climate and country needs. Investment considerations for fossil fuel and green growth initiatives also need to be aligned to sustainable development plans.
By helping countries align with the United Nations Framework Convention on Climate Change processes, including country NDC and long-term emissions reductions plans to 2050, the African Development Bank is helping to solve this complex problem - helping African countries to grow as sustainably as possible, and positioning them as part of the solution to climate change.
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