COP28: Prof. Osinbajo In New York University Abu Dhabi Campus; Delivers Speech On Climate Positive Growth – 05/12/2023

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SPEECH BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, IMMEDIATE PAST VICE PRESIDENT OF NIGERIA ON  “CLIMATE POSITIVE GROWTH: AFRICA AS A CLIMATE ACTION PARTNER FOR THE UAE AND THE WORLD”, AT NEW YORK UNIVERSITY (NYU) ABU DHABI CAMPUS, UAE, ON THE 5^TH OF DECEMBER, 2023

PROTOCOLS

I would like to thank the management of the New York University (NYU) Abu Dhabi Campus for the kind invitation to speak to you today. I must say that NYU is an important thought leader and generational convener on the conversations on climate change and climate action especially as NYU is a “key academic partner” to the COP Presidency and the Inaugural chair of the Universities Climate Network, (UCN) which I am told brings together about 20 institutions in the UAE (and growing) and is aimed at encouraging youth engagement.

Youth engagement in these conversations is the eminently sensible way of acknowledging that the subject is of greater relevance to the generation that will live through the consequences of action or inaction.

I will be speaking for a few minutes on the topic “Climate Positive Growth: Africa as a Climate Action Partner for the UAE and the world.” We are at a crucial moment in the energy transition journey. It is evident that at the rate we are going on the journey to net zero, we have no chance of meeting the target. Yet we miss the target at the peril of our world as we know it if science is to be believed.

Not far from here as we speak, many of the world’s political, private sector, civil, society and private sector leaders are assembled to discuss and negotiate these same questions at the annual UN Climate Conference, COP28. 28, let that number sink in; the 28th UN annual climate conference.

For many years, the science has been crystal clear: if we do not curb emissions – and get to net zero by 2050 – we risk the apocalyptic consequences for life on earth. 2023 has driven this point home by breaking many weather devastation records. So why has it taken 28 annual rounds of painful negotiations just to be where we are now, which is still very far from where we need to be? I would argue that one of the key reasons is that climate action has long been seen, as too costly.

It is generally believed that climate action and economic growth are incompatible: to realise effective climate action, you have to sacrifice growth. And that is a price developed countries are generally not willing to pay, and emerging and developing economies are simply unable to pay. It is time to collaborate with one another in thinking outside the box.

No matter how we slice it, Africa will play a key role in that collaboration. One in every 4 human beings born by 2040 will be African. Africa today is the fastest warming region, which means it is the most exposed to the potential devastation of climate change. Africa is also aspiring to the middle to high-income status for its peoples

But if Africa were to develop by the same carbon-intensive pathway employed by the wealthier countries, then the world would never achieve net zero. Why? Africa will annually pump 9.4 gigatonnes of CO2e into the atmosphere. Africa would go from being a mere rounding error in global emissions to representing as much as 75% of global emissions. In many senses, Africa can become the nemesis of the world or an important partner in solving the problem.

How will that work? Africa can be the solution because it can develop without increasing carbon emissions, and not even keeping it constant but actually reducing emissions. So I will argue today that economic growth and effective climate action can work together and that is possible through Climate Positive Growth. This is the ability to realise economic growth through climate action.

Africa has the potential to be a Climate Positive Growth leader, helping the world arrest and reverse climate change – while developing to middle – high-income status and beyond. My position is that this is a clear possibility with global collaboration.

What is the case for Climate Positive Growth?

The first is somewhat ironic and that is Africa’s low industrial base and its low carbon footprint which can be an advantage, enabling the continent to develop greenfield clean energy manufacturing, saving it the cost of abandoned legacy carbon-intensive manufacturing projects, and by pursuing an industrialization pathway that focuses on using renewable energy of which Africa has the most potential.

Africa is home to 60% of the world’s best solar resources – and, in addition, has abundant wind, geothermal, and hydro potential. Its untapped renewable energy potential is 50 times the anticipated global demand for electricity in 2040.

Also, Africa has the youngest and fastest growing workforce on the planet and with its massive natural resources, including arable land and critical mineral assets, it can develop the first green industrial civilization, greening global manufacturing and supply chains and removing carbon from the air.

In other words, Africa is perhaps the only region today, ironically on account of its low development base that can truly achieve green growth, and economic growth without growing emissions, or even keeping emissions constant, but actively addressing the reduction of emissions and the concentration of greenhouse gases in the atmosphere.

But what does this mean in practical terms?

It means for example, that if Africa processed the bauxite it mines which is 25% of global bauxite production, to aluminium with renewable energy before exporting it, we could save 335 million tonnes of CO2e per year (1% of global emissions), create 280,000 jobs, generate $ 37billion of additional revenue for the continent.

In fact, by aggressively deploying its renewable energy resources, Africa can provide energy to all Africans, 600 million of whom currently do not have access to energy and 150 million of whom have unreliable access to energy, at a 30% lower cost and with over 90% lower emissions per KWH, compared to the current stated policy.

Africa’s renewable energy is not only abundant but also has very low seasonality, or intermittency which makes it possible to reliably provide renewable baseload, to power continuous industrial production. Strikingly, the lowest-cost set-up of solar, wind, and battery storage to get reliable baseload to power industry, is twice as expensive in Germany as it is in Nigeria.

Solar Photovoltaics (PV) in Nigeria and Kenya vastly outperform Europe’s industry centre and even Europe’s top PV spot. Nigeria’s same battery-supported PV system will enable a baseload that is 8 times as large as in Germany. In Spain 1.8 times larger.

A recent Bloomberg study done for AfDB in 2021 on the manufacture of battery precursors found that manufacturing battery precursors in the Democratic Republic of the Congo (DRC), which has plenty of Lithium and Cobalt, is 3 times cheaper than manufacturing in the US, EU and China. And manufacturing in DRC would extend value chain opportunities to other African countries, they would need manganese from Zambia, Tanzania, Gabon, and South Africa to contribute to their capacity to produce these battery precursors.

Interestingly, several African countries now have restrictions on raw exports of critical minerals. Indeed over 42% of African countries excluding North African countries, have those restrictions. So, mining companies are now establishing local processing plants; this is great, but to reap maximum rewards for climate action and development, processing and mining must be done by the use of renewable energy to mine and process these minerals.

This makes perfect economic sense, the most recent International Energy Agency (IEA) publication made clear that renewable energy is now not just the climate-smart, but economically rational choice. For the first time in history, going renewables- first, even with storage, is the cheapest overall form of energy generation. And these costs are expected to fall further in the next few years.

As we allocate our global financial resources, we should make sure to get the greatest bang-for-buck – which means investing in places where these resources will have the highest and most consistent yield, where they can immediately be deployed towards new economic activity, as where there is less existing infrastructure that needs to be decarbonised.

A substantial part of foreign funding flowing into Africa’s renewable energy projects is concessional and grant funding – it has to be, because investing in generation capacity without secured demand, is like clapping with one hand: it does not work. It may generate much-needed energy access – but it will struggle to last, and will struggle even more to scale.

Green industrialisation is the path to making sure that grid-scale investments in renewable energy in Africa, generate the return profile that will attract private capital and sovereign wealth funds.

That is why this twin approach that uses industrialisation to drive energy access is critical: it is the way to get the anchor demand that will draw in investments.

What will it take to realise Climate Positive Growth and create a green industrial region of the world?

Four things are necessary, two that African countries can and should work on and two that require global partnership and engagement.

One, African countries need to focus their economic growth and development plans on these green opportunities. Interestingly, several African countries are beginning to do so, especially after some of the developments culminating in the Africa Climate Summit in Nairobi, Kenya last September where the African Union adopted the paradigm of Climate Positive Growth. Two, they need to structure their policy and regulations in ways that support this green industrialization.

We then need two pieces of global collaboration; first, fair and equitable market access to meet global demand for green products, services and carbon credits. For example, as the EU builds out its Carbon Border Adjustment Mechanism (CBAM) and other regions look at similar measures; this needs to be designed in a way that does not exclude the locations most suitable to rapidly and affordably decarbonising global production.

This includes not only demand for industrial products but also for carbon credits. Emerging economies, and in particular African countries have a disproportionally low market share and attract some of the lowest prices.

Admittedly, carbon markets are far from perfect. These days, not a week goes by without an exposé about bad carbon credits – often African. And whilst these issues exist in the market, it is important not to lose sight of one of the core drivers, and that is the current price coming out of Africa.  At the current price of 50 cents to a few dollars per tonne in the voluntary carbon market, it is simply impossible to generate quality credits.

That price needs to cover the costs of developing a project, generating and trading the credit, conducting proper monitoring and evaluation, paying taxes and generating viable returns for all stakeholders involved, from local communities to project developers to the providers of risk capital.

When you find later that these projects do not consistently meet high quality and integrity standards, you should not be very surprised. It is like buying a Rolex watch for $20 and being upset when it turns out to be counterfeit – really, you had no clue?

The second condition to make Climate Positive Growth a reality for which we need global collaboration is the right type and amount of investments and capital. The UAE has shown far-sightedness in its investment commitments to the development of renewable energy in Africa.

At the Africa Climate Summit, the UAE gave a “non-binding letter of intent” for $4.5 billion towards clean energy and $450 million for carbon credits. Masdar, the UAE’s clean energy champion has announced a partnership with Africa50, the pan- African infrastructure investment platform to identify, fast-track and scale clean energy projects across the continent.

In March, Masdar consummated perhaps the biggest green energy deal in Africa by acquiring South African renewable energy company Lekela in a joint venture with Egypt’s Infinity Power.

On accessing the right quantum of capital, the cost-of-capital in Africa is high. African governments pay 5 times as much interest in the bond market as they would if the Multilateral Development Banks were properly capitalised. The cost of borrowing for African countries is probably the highest of any region. Those seeking investments for private projects face high costs of capital and unhelpfully short tenures, driven by both real and perceived risk factors.

Addressing this requires a whole range of interventions. I will structure it into 4 important categories, which all need to be delivered upon.

The first category is keeping past promises, including the operationalisation of the Loss and Damage Fund agreed last year at COP27 and the commitment to $100billion a year in climate finance for developing countries.

The second category is the reform of the International Financial Architecture. These have been identified in the Bridgetown Initiative and the Capital Adequacy Framework, amongst others. This includes a wide range of tools that increase and strengthen the balance sheets of Multilateral Development Banks, ensure more of their deployment goes to emerging and frontier economies, and drive more deployment towards climate-aligned investments.

Technical solutions such as recycling of Special Drawing Rights (SDRs), smart capital blending and tailored risk mitigation interventions will support this.

The third is dealing with the huge burden of sovereign debt. Recently in a jointly authored article, titled “If You Want Our Countries to Address Climate Change, First Pause Our Debts” President William Ruto of Kenya, Dr. Akin Adesina, President of the AFDB, and Moussa Faki, President of the AU Commission reiterated the call for a 10-year moratorium on interest payments on African foreign debt to give the world’s most vulnerable countries the space to invest in climate resilience and other pressing needs, such as health and education.

They also argued for more climate-targeted debt relief, for example, debt-for-nature swaps – where a portion of a nation’s foreign debt is forgiven in exchange for local investments in environmental conservation measures.

The fourth is identifying new additional sources of finance, investment capital, and liquidity through new levies, carbon pricing, and taxation. Many tools and levers are being considered – and the support for or against them often follows a predictable pattern linked to short-term economic interests.

Let me spend a moment on the role of gas in the energy transition. The role of gas in the transition has become divisive especially since while actively banning new investments in fossil fuel projects in Africa, most global North countries including China, Japan, and large parts of Asia and the EU include gas as a major pillar of their multi-decade decarbonization plans.

Nevertheless, it is evident that for gas-rich countries in particular, gas as a transition fuel makes perfect sense. But it is evident that this can only be transitionary, renewable energy is now becoming a cheaper source of energy.

But let’s look at the economically smart deployment of gas – and in doing so, we need to make a distinction between broadly two different use cases: (1) countries investing in new exploitation of unexploited resources or who are growing production of existing resources. Such countries must look out for stranded assets.  These assets are becoming more difficult to insure and refinance.

Countries should avoid creating or growing their domestic dependency on gas. Unlike many other parts of the world, African countries do not need to use the gas themselves given their abundance of renewable energy potential – not even for their industrialisation as we have seen before.

Conversely, creating a domestic dependency makes countries vulnerable to price volatility: using your gas may create so-called “energy independence”, but you still incur opportunity costs from domestic consumption. Many experts praise Norway’s development model: Norway has exploited its fossil fuel wealth, serving global demand, and used the proceeds to aggressively build renewable energy, and as they say, never “getting high on its own supply”.

The second use case looks at low-income countries with existing gas infrastructure that have already incurred the sunk cost of building the fixed infrastructure. Ideally, these countries should deploy their domestic infrastructure towards future-proof solutions, climate-smart solutions.

Today, gas-powered cooking results in much lower emissions and cleaner indoor air than using wood or charcoal. Gas can be used to power Direct Air Capture which removes atmospheric CO2, and gas can be used for domestic fertiliser production to reduce import dependency, and coal phase-out in heavy industry.

These domestic gas use cases should be transitionary and should help accelerate a path towards long-term renewable-first or renewable-only deployment.

So let me end by saying that we will not meet global net zero targets if the global North does not take options that appear to be in the best interest of the global South today.

Usually, even those advantages are only short-term, ultimately preserving our civilization is in the best interest of all of us. We need more climate statesmanship to have any chance of achieving our targets.

Stewardship to our planet and the generations who will live in it calls for much more selfless sacrifice from all of us than we are seeing currently.

Thank you very much.