Unless sustainable financing sources are secured to improve infrastructure, particularly in the energy sector, Africa risks economic losses of up to $415 billion a year by 2030 due to the environmental impacts of climate change.
Energy and finance experts say, however, that Africa needs more than $23 billion to retrofit the continent’s existing refineries to produce cleaner fuels and replace charcoal with modern fuels, while arguing that without significant improvements in infrastructure resilience, annual economic losses from damage to urban infrastructure alone from natural disasters will rise from $300 billion today to $415 billion by 2030.
Speaking at the recent ARDA Virtual Sustainable Finance Workshop, Africa Refining Dealers Association (ARDA) Executive Director Anibol Kulaga said strategic options are needed to finance the energy transition in Africa’s downstream oil sector.
Mr Kulaga revealed that sub-Saharan Africa’s need to import transport fuels will continue to grow in the foreseeable future, with the region expected to become the world’s largest importer by 2030. He lamented that while complex and inefficient supply chains and intra-African trade challenges hinder the adoption of cost-effective clean energy solutions on the continent, the African Continental Free Trade Act (AfCFTA) provides an opportunity for the continent to address this issue and develop comprehensive policies. A just energy transition roadmap that captures the priorities, challenges and prospects of Africa’s low-carbon countries.
Kulaga and other stakeholders argued that energy transition roadmaps should not prioritize short-term emissions reductions (with relatively little benefit from climate change) over economic development and support for the energy transition, as Africa’s share of global emissions remains low.
Ayaan Adam, Senior Director at Africa Finance Corporation (AFC) and CEO of AFC Capital Partners, said climate change, including high temperatures and prolonged heat waves, changing precipitation patterns, droughts, floods and sea level rise, could cause significant damage to infrastructure assets, leading to losses of $415 billion in Africa alone by 2030. “Africa is the most vulnerable continent to climate change, so mainstreaming climate change is a key requirement for the long-term viability of Africa’s infrastructure,” she said.
Mr Adam said the impacts of climate change in Africa account for a disproportionate share of global emissions and will impact future infrastructure requirements.
Adam said future infrastructure development will need to be able to reduce, adapt to, or recover from the effects of natural disasters and climate extremes, adding that this will require climate-resilient infrastructure planning as well as consideration of additional costs for development. That’s why AFC and AFC Capital Partners are promoting the Infrastructure Climate Resilience Fund (ICRF), which drives investment in climate-resilient infrastructure projects in AFC’s core sectors of transport and logistics, power, communications and industrial parks across the continent.
Rene Awambeng, Global Head of Customers at Afreximbank, also noted the impact of Africa’s growing urban population on energy demand for industrial production, cooling and mobility.
He said Africa’s energy demand is growing twice as fast as the global average, and given Africa’s vast renewable resources and falling technology costs, deployment of utility-scale distributed solar photovoltaics (PV) and other renewable energy across Africa could drive double-digit growth.
He noted that while clean energy and decarbonizing international investment appear to dominate the development debate, Africa could tap into its vast existing solid mineral base, including rare earth minerals and metals, to fuel clean energy. Despite this, the 2014 Africa Energy Outlook noted that 30 percent of the oil and gas discovered globally between 2010 and 2014 occurred in sub-Saharan Africa, and Awambhen said many countries that were previously net energy importers will become energy exporters over the next five years due to increased oil exports.
Vitol experts Michael Curran (Vitol Global Head of Carbon Trading) and Maryro In a co-presentation, Mendez, Vitol Refinery Research Team Leader, noted that while the technology already exists to develop refineries with net-zero carbon emissions, issues such as environmental, social and governance (ESG) investment obligations and the transition from hydrocarbons to renewable energy are reallocating capital, reducing financing options and increasing debt service costs. Albon intensive sector. “Most companies already have plans to reduce emissions, including measurement and reporting, operational improvements, and incorporating carbon reduction targets into investment proposals. However, implementation is at an early stage and faces several barriers. Resources are lacking, both in terms of capital and technical capabilities, and CO2 reduction is not necessarily a top priority,” the expert said.
They emphasized that while the refining sector accounts for only 3% of global energy sector emissions, there are significant opportunities to reduce these emissions, especially in regions like Africa where demand for refined products increases and emissions increase accordingly. It further advised that key opportunities to reduce carbon emissions at refineries include improving energy efficiency through operational changes and small investments, reducing flaring, improving gas pipeline planning and investing in cogeneration. Ultimately, while continued energy efficiency improvements and fuel switching are the most promising short-term strategies for reducing CO2 emissions in the near term, aligning Africa’s refinery decarbonization goals with the continent’s broader long-term energy efficiency goals will require goals that span cost-effective initiatives, management capacity, access to capital, and stakeholder engagement.
