When it comes to untapped investment potential in Africa, nothing compares to investing in clean and green energy generated from environmentally friendly sources. As UN Secretary-General Antόnio Guterres told the African Climate Summit in September: “Renewable energy could be the African miracle.”
“A clean energy transition across the world’s developing nations will be crucial to keep alive the Paris Agreement goal [announced in 2015] of capping global warming ‘well below’ two degrees Celsius since pre-industrial times, and 1.5C if possible,” said Guterres.
Achieving that will require a lot of money. According to the International Energy Agency (IEA), in the next 10 years, developing nations, particularly those in Africa, will need to spend a total of $2 trillion on clean energy investments. That represents an “eightfold” increase from today’s levels.
Such funding would need to come from wealthy sources, such as the United States, EU, China, and oil-rich countries whose national incomes depend on exporting fossil fuels. Their pace of investing in green projects at home and abroad, however, will depend on political and economic agendas and allegiances.
Out of time?
One of the most significant factors affecting investments in clean energy is the long-term prospects for fossil fuels. Those in the fossil fuel industry argue that investments should be directed to decarbonize and thus extend the economic life of this resource.
A September press release by OPEC, the cartel of oil producers, stressed that “it is an extremely risky and impractical narrative to dismiss fossil fuels.” That is because they “continue to make up over 80% of the global energy mix, the same as 30 years ago, [and] the energy security they provide is vital.”
OPEC Secretary-General Haitham Al Ghais said sustainable long-term fossil fuel production depends on “technological progress, with the industry [developing] solutions to help reduce emissions.” That includes hydrogen fuel, carbon-capture technologies and storage facilities, and ensuring a circular carbon economy that prevents waste.
“While some may suggest that a number of these oil-focused technologies are still immature, they ignore the fact that many … net-zero … technologies … are at an immature, experimental or even theoretical stage,” according to the OPEC statement.
The IEA believes fossil fuel-related sectors are running out of time. “We are witnessing the beginning of the end of the fossil fuel era,” IEA head Fatih Birol told The Financial Times in October. “We have to prepare ourselves for the next era.”
He cited governments’ changing policies that have increased investments in renewables driven by climate change awareness. Prime examples are the Nordic countries (75% of their electricity is green) and China (50.9% of its electricity comes from renewables). Others are looking to ensure their energy security in light of sanctions against Russia, the second biggest oil exporter in 2021 with 11.8% of global trade, according to Investopedia, an online financial site.
Birol cited the astronomical global growth of electric vehicle sales from 700,000 cars in 2016 to 13.9 million so far in 2023 as proof of increased environmental awareness among consumers. Accordingly, the IEA estimates that “demand for oil, natural gas and coal [should] peak before 2030 — with some prior analysis having previously pinned this landmark to the mid-2030s.”
Sultan Al Jaber, who heads the U.A.E. national oil company ADNOC and government-owned renewable energy company Masdar, believes the world is not ready to transition to green energy. “We cannot simply eliminate fossil fuels when the new energy system hasn’t yet been built,” he said. The first step would be the quick “phase-up of zero carbon alternatives and [then] rapidly and comprehensively decarbonize the energies we use today.”
Al Jaber, who will head this year’s U.N. Conference of the Parties (COP) in the oil-rich U.A.E., stressed, “the ‘phasedown’ of fossil fuels is both inevitable and essential.” But it is unlikely that significant progress will happen by 2030. “We cannot afford to … eliminate fossil fuel production within the next seven years,” Al Jaber said in September during his keynote address at the U.N. Climate Ambition Summit. “We need to simultaneously increase and decarbonize the global energy supply.”
That will prove expensive for governments, businesses and households, especially low-income ones. A case in point is the United Kingdom — the sixth wealthiest nation in 2021. In September, Prime Minister Rishi Sunak announced extending the deadline to stop selling new fossil-fuel-powered cars from 2030 to 2035. He also delayed deadlines to ban new household fossil fuel boilers but announced a 50% cash incentive for replacing them with clean energy ones. “Ask most people about climate change [and] they want to do the right thing. They’re even prepared to make sacrifices,” Sunak told the media. “But it cannot be right for [the government] to impose such costs on working people.”
Conversely, South Africa has seen its emissions drop since 2021 despite forecasting the decrease would start in 2025. “We reckon we are well within the range of meeting the 2030 target,” Crispin Olver, executive director of South Africa’s Presidential Climate Commission.
However, that drop in emissions was “unintentional,” he added. “Regular breakdowns of the coal-fired power plants that supply 80% of South Africa’s electricity means less carbon dioxide is being pumped into the atmosphere.”
To ensure that energy transition is affordable while guaranteeing enough supply for GDP growth, clean energy production needs to increase significantly.
Al Jaber estimates the world needs to “triple renewable energy capacity in the next seven years [to] reduce its costs to around a quarter of the current cost of fossil fuel.” That should be enough of a price gap to make clean energy “outcompete fossil fuels well within the [following] 20 years … where emerging markets and population growth will drive electricity demand [by] 185% by 2050.”
Meanwhile, governments need to discourage the use of fossil fuels. An IMF paper in August stressed the need to reduce subsidies, which increased by $2 trillion between 2020 and 2022 to reach $7 trillion annually. The IMF said such cuts “would lead firms and households to consider environmental costs when making consumption and investment decisions.”
However, the paper acknowledged it “can be tricky.” “Governments must design, communicate and implement reforms clearly and carefully as part of a comprehensive policy package that underscores the benefits,” it said.
Last chance COP?
November’s COP28 will play a significant role in determining how fast and complicated the transition to clean energy will get in the coming few years.
“The COP28 presidency is attempting to strike a difficult balance confronting developing nations: protecting their prosperity while safeguarding the planet,” according to Ibrahim Ozdemir, a U.N. adviser and ecologist teaching at Uskudar University in Turkey,
That makes COP28’s proposed agenda “the most ambitious agenda ever put forward by a COP presidency in 28 years,” Ozdemir wrote in a Euronews blog in September. “If COP28 brokers a global climate deal … it would help fast-track a just transition away from fossil fuels. If it fails, the chances of such a transition will be dangerously diminished.”