Energy and finance experts are concerned about sustainable funding for Africa, particularly in the energy sector, and emphasize that if infrastructure is not improved, Africa faces a $415 billion annual economic loss due to climate change by 2030.
The experts insisted that without significant improvements in infrastructure resilience, yearly economic losses from natural disasters’ damage to urban infrastructure alone would increase from $300 billion currently to $415 billion by 2030. On the one hand, they claimed that Africa needs over $23 billion to upgrade existing refineries on the continent to produce cleaner fuels and replace charcoal with modern fuels.
Anibor Kragha, Executive Secretary of ARDA, stated that strategic options are required for the financing of the energy transition in the African downstream petroleum sector during a recent ARDA Virtual Sustainable Financing Workshop.
According to Kragha, sub-Saharan Africa will become the world’s top importer of transport fuels by 2030 as its demand for imports would likely continue to increase.
The African Continental Free Trade Act (AfCFTA) presents an opportunity for the continent to address these issues and deploy an inclusive, equitable energy transition roadmap that captures the priorities, challenges, and perspectives of Africa’s low-carbon emitting countries, he lamented, adding that intra-African trade challenges and complex, inefficient supply chains obstruct the implementation of cost-effective clean energy solutions on the continent.
Kragha and other stakeholders emphasized that because Africa’s contribution to global emissions was still small, the roadmap for energy transition should not give assistance for economic development and energy transformation precedence over short-term emissions reductions with marginal climate benefits.
Ayaan Adam, a senior director at the Africa Finance Corporation (AFC) and the CEO of AFC Capital Partners, noted that climate change-related phenomena such as extreme heat and prolonged heat wave phenomena, altered precipitation patterns, droughts, floods, and rising sea levels-may seriously harm infrastructure assets, resulting in a loss of $415 billion by 2030 in Africa alone.
In light of the fact that Africa is the continent most susceptible to climate change, she said, “mainstreaming climate change is a crucial necessity for the long-term viability of its infrastructure.”
According to Adam, the impact of climate change in Africa is out of proportion to its contribution to global emissions, which will have an impact on the region’s future infrastructure needs.
Future infrastructure projects, according to Adam, must be able to lessen, accommodate, or recover from the consequences of natural disasters and climate extremes. He said that this would necessitate climate resilient infrastructure planning as well as additional cost consideration for construction.
Because of this, the AFC and AFC Capital Partners are promoting their Infrastructure Climate Resilience Fund (ICRF), which will encourage investments in climate-resilient infrastructure projects across the African continent in the AFC’s core sectors of transportation and logistics, power, telecommunications, and industrial parks.
Rene Awambeng, global head of client relations at Afreximbank, emphasized the effects of Africa’s expanding urban population on energy demand for transportation, cooling, and industrial production.
He claims that because of the continent’s abundant renewable resources and declining technology costs, the deployment of utility-scale and distributed solar photovoltaic (PV), as well as other renewable energy sources, can grow by double digits throughout the continent. He claims that the energy demand in Africa is rising twice as quickly as the global average.
He pointed out that while the development narrative appears to be dominated by clean energy and decarbonizing international investment and financing, Africa could take advantage of the large supply of solid minerals it already has, including rare-earth minerals and metals that would power clean energy.
Despite this, Awambeng predicted that many nations that were previously net energy importers will become energy exporters in the next five years due to rising oil exports, noting that 30% of all worldwide oil and gas discoveries made between 2010 and 2014 were in Sub-Saharan Africa.
Experts from Vitol Michael Curran (Global Head of Carbon Trading for Vitol) and Mary Mendez (Lead of the Vitol Refineries Research Team) noted during a joint presentation that while technologies to build refineries with net-zero carbon emissions already exist, among other issues, Environment, Social & Governance (ESG) investment mandates and capital reallocation away from hydrocarbons into renewables/energy transition have led to a reduction in financing options.
“Most businesses already have policies in place to lower emissions. These include monitoring and reporting, streamlining operations, and including carbon-reduction goals in investment bids. Implementation, however, is still in its early stages and faces a number of challenges, according to the experts: “Resources are limited, both in terms of financial and technical expertise, and CO2 reduction is not always a top priority.
They emphasized that although the refining sector only accounts for 3% of the emissions produced by the energy sector globally, there are still plenty of opportunities to reduce these emissions, particularly in places like Africa where the demand for refined products will rise and emissions will follow suit.
Additionally, they suggested that improving energy efficiency through operational improvements and small investments, minimizing flaring, better design for gas pipelines, and investing in cogeneration would be the main potential for refineries to reduce their carbon emissions.
