The 27th UN Climate Change Conference of the Parties (COP27) takes place in Sharm El Sheikh, Egypt in early November 2022. In what is set to be “Africa’s COP,” COP27 shines a bright spotlight on the continent’s approach to the energy transition and climate change, as well as the challenges and opportunities that come with it.
In December 2021, off the back of discussions that took place during COP26, DLA Piper published the Africa Energy Futures – Horizon 2030 report on the topic of the energy transition, followed by a webinar that brought together an array of clients, investors and other energy sector participants from across the continent.
The report and webinar drew out clear themes:
- First and foremost, the vast majority of African countries are already taking steps to decarbonize their energy mix with legislative framworks and/or investment programs in place for renewables and through existing and planned hydroelectric, wind and solar projects. The incentives for these developments are twofold: to propel African countries to the forefront of the energy transition and to provide effective, reliable and clean power to overcome existing generation deficits and meet rising energy demand, which is projected to double by 2040.
- However, many African countries and energy sector participants across the continent view it as unjust that they are being asked to abandon fossil fuels now in order to address climate change, in circumstances where they have contributed little (only 2% of global emissions originate in Africa) but where restrictions on this infrastructure and market will disproportionately impact them in terms of economic development.
- The pressure to cut back on fossil fuels as part of a global drive toward net zero is also seen by many African jurisdictions and energy businesses as unfair given the role hydrocarbons, such as natural gas, will play in Africa’s energy transition. African countries will need to balance the crucial demands of combating climate change, which they recognize and are affected by, with their own priorities of energy grid and baseload development, on a continent in which (according to the UN) 46% of households do not have access to reliable power.
- The funding for this development will, for many jurisdictions, come in part from the exploitation and sale of oil and gas assets. While the impact can be limited with clean technologies, it is unrealistic to imagine that, without massive investment from developed countries, Africa’s energy transition can be achieved without exploiting Africa’s fossil fuel reserves. In this context, gas (especially LPG and LNG) is and will remain an important transitional fuel, providing reliable baseload with lower carbon emissions than comparable energy sources such as coal.
Since our report was published, the world has changed dramatically. The impact of the ongoing war in Ukraine and the way in which European countries have pivoted their own policies to focus to a greater degree on security of energy supply highlights the difficult balance African countries will need to strike between climate change, energy security and economic development.
We have therefore updated our Africa Energy Futures report to reflect this new reality. In it, our DLA Piper Africa lawyers assess what has changed (if at all) in 22 jurisdictions over the past year in relation to the energy transition, the opportunities and challenges facing the delegates at COP27, and how their countries are approaching climate change in the long term.
Climate change is a global priority that today is at the forefront of energy policymaking. But when it comes to how, or how quickly, different jurisdictions are going to reduce emissions, context is everything. For developed nations with reliable baseloads, security of supply and consistent nationwide electrification, appropriate routes to net zero are available. In Africa, the position is radically different, necessitating a focus not merely on adaptation, but on a just transition which accounts for the African context.
The position that most African countries will take at COP27 is straightforward: they should be allowed to transition to a cleaner energy mix in a way that does not prejudice their own economic development and industrialization goals or otherwise be penalized for a problem the continent did not create. Financial support from the developed world will be essential. Viewed in the long term, assisting Africa under a just transition may be the most powerful way to allow it to be a leading agent against climate change. A continent that is encouraged to develop and prosper is far more likely to embrace the transition required to address climate change.
Achieving this just transition will require significant financing, in addition to the implementation challenges to be addressed. Renewables projects will need to be de-risked and “bankable.” Public-private partnerships (the favored method of financing energy projects across much of the continent) will need to be liberated from the political interference and corruption that can afflict them. International financial assistance should be provided in a secure way and put to productive use. Projects must be carefully selected to avoid problems arising from wider ESG concerns about their local environmental and community impacts.
The immense opportunities arising out of this process will mutually benefit African countries and investors alike. Although there will remain significant interest in oil and gas production as African countries meet increasing demand from the current energy crisis and bolster their own baseload capacity, investors in the renewables sector have their eyes set on the future. It is they who will benefit in the long term from the opportunities Africa’s energy transition presents; it is incumbent on African policymakers and the developed world to promote their success.