CCA Special Events on the Sidelines of United Nations General Assembly: Powering Africa: Tackling the Energy Trilemma and Climate Change Impacts Through Carbon Market Credits Financing

On September 23, 2024, Corporate Council on Africa hosted an event on “Powering Africa: Tackling the Energy Trilemma and Climate Change Impacts Through Carbon Market Credits Financing.”

Florizelle Liser, CEO & President welcomed panelists and participants and invited Leila Ndiaye to deliver remarks,

During her remarks, Leila Ndiaye, Chair, the African Diaspora Alliance, President and CEO, LND Global Network, Agenda 2063 calls for Africa to diversify its revenue streams to meet its ambitious goals. By 2030, the target is to generate $6 billion USD in African carbon credits, increasing to $100 billion by 2050. This will help fund clean energy and climate initiatives, with the aim of creating 30 million jobs by 2030 and an additional 100 million by 2050.

H.E. President Mohamed Ould Ghazouani, President, Islamic Republic of Mauritania and President of the Assembly of Heads of State and Government of the African Union noted that Africa faces a double paradox: despite being the continent that produces the fewest greenhouse gases and experiences minimal harmful effects, over 600 million Africans still lack access to electricity. Africa accounts for less than 6% of global energy consumption and generates only 2-3% of global emissions, yet it holds 60% of the world's solar potential and 40% of key strategic minerals and hydroelectric resources.

Kalidou Gadio, Director, Africa Practice, DLA Piper invited the panelists to begin the discussions on the two panels:

Panel 1: "The Energy Trilemma in Africa and its Impacts on Economic Growth"

The panel, moderated by Ibrahima Cheikh Diong, Special Representative of the President of BADEA, brought together key representatives from Afreximbank, Power Africa, and the Africa Finance Corporation (AFC) to discuss Africa’s complex energy challenges. The discussion centered on the continent's energy security, sustainability, and affordability—referred to as the "Energy Trilemma"—and how it impacts economic growth.

Key Insights:

· Representative from Afreximbank addressed the dual challenges of energy security and sustainability. Over the years, Africa has made strides in diversifying its energy sources, with significant projects such as Ethiopia’s Renaissance Dam and Tanzania’s renewable energy efforts. However, balancing sustainability in the green space while improving affordability and access remains a pressing issue.

Afreximbank stressed the need to continue making energy more affordable and sustainable for long-term growth.

· Richard Nelson, Coordinator of Power Africa, discussed the U.S. Government initiative’s mission to double electricity access in Africa by 2030. He highlighted their success in helping connect 200 million people to both on-grid and off-grid solutions, supporting the generation of over 150,000 MW of electricity. Despite these efforts, rapid population growth is outstripping access gains. He pointed to examples such as Zambia, where reliance on hydroelectricity is strained due to drying resources, leading to frequent power outages, while Angola has excess capacity but lacks the infrastructure to transmit it to neighboring countries like Zambia. Power Africa aims to improve energy connectivity between regions to facilitate the transfer of surplus power to areas in deficit.

· Dr. Rita Babihuga-Nsanze from the AFC stressed the severe scale of Africa’s energy poverty, with 600 million people still without access to electricity, a number that continues to grow despite significant investments. She pointed out that energy solutions need to be tailored to the specific contexts of different regions, with East Africa showing more success in energy projects than West Africa. She also underscored that energy is vital for powering Africa's industries, which are crucial for economic development.

On carbon markets, the panel also explored the potential of carbon markets to accelerate energy sector growth in Africa. The representative from Afreximbank highlighted its role in derisking investments in energy projects to attract more capital to the underfunded sector. Nelson of Power Africa pointed out challenges in countries like Nigeria, where over 200 solar companies struggle due to regulatory issues and low customer affordability.

Panel 2: Funding Clean Energy and Climate Initiatives through Carbon Markets in Africa

The second panel, moderated by Andrew Westgate, Partner at DLA Piper, featured a discussion on the potential of carbon markets to finance clean energy and climate initiatives in Africa. The panelists explored both the challenges and opportunities presented by carbon markets, with a focus on pricing disparities and the need for better structuring to ensure equitable access and effectiveness.

Key Insights:

· Dr. Vera Songwe, Founder and Chair of the Liquidity and Sustainability Facility, emphasized the enormous potential of carbon markets in Africa, noting that 60% of the global carbon market remains untapped. However, she pointed out significant price imbalances: while the International Monetary Fund (IMF) suggests a carbon “floor” price of $80, the ceiling price in Africa is a mere $5, reflecting a major disequilibrium. Dr. Songwe stressed the need to properly structure the market before selling Africa’s carbon credits, as the current voluntary market—worth $90 billion—lags behind the $900 billion compliance market dominated by the U.S. and Europe. She also highlighted that seven U.S. agencies recognize the need for structural reforms to address these gaps.

· Cheryl Buss, CEO of ABSA International, focused on the opportunities that carbon credits present for expanding access to power across Africa. She advocated for finding mechanisms to bridge the gaps in the market, ensuring that carbon credits can fund projects that bring electricity to underserved regions. For Buss, carbon credits can serve as a tool to provide both environmental and social benefits, particularly in areas with limited access to energy.

· Yvonne Ike, Managing Director and Head of Sub-Saharan Africa (Ex-RSA) at Bank of America, took a pragmatic approach, cautioning against waiting for perfect pricing mechanisms before leveraging carbon credits. She argued that incremental steps could still position Africa as an attractive destination for industries using clean energy, with the added advantage of low labor costs. Ike emphasized the need to create insurance mechanisms to mitigate risks, especially in areas where the pricing of carbon credits is still a topic of debate.

In conclusion, the panel concluded with a consensus that while carbon markets hold significant promise for financing clean energy and climate projects in Africa, structural reforms and better pricing mechanisms are essential. Panelists agreed that Africa must take proactive steps to tap into the carbon market’s potential, even as work continues to address pricing imbalances and regulatory gaps.