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COP29: Africa demands urgent climate action, $1 trillion fund

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As world leaders gather at COP29 in Baku, Azerbaijan, a powerful message reverberates through the conference halls: “The cost of inaction is far greater than the investment required to build a resilient and prosperous future for Africa.” This urgent call to action, articulated by Claver Gatete, United Nations Under-Secretary-General and Executive Secretary of the Economic Commission for Africa (ECA), underscores the pressing realities faced by a continent that suffers disproportionately from climate change while contributing minimally to global emissions.

Africa is already grappling with severe economic repercussions due to climate disruptions, with losses averaging 5% of GDP annually and reaching up to 15% in some regions. The stakes are alarmingly high, as Gatete emphasizes the need for a transformative vision to shift Africa from climate vulnerability to global leadership in green growth. His five-step plan includes leveraging critical minerals, enhancing carbon capture through nature-based solutions, setting ambitious climate finance targets, accelerating the clean energy transition, and advocating for decisive global action to limit emissions.

The Signs of Climate Change

The signs of climate change are glaring across Africa. Rising sea levels threaten the coastlines of West Africa, prolonged droughts devastate East Africa, and erratic weather patterns disrupt agricultural cycles in regions already facing food insecurity. In 2023 alone, climate-related disasters pushed an estimated 14 million Africans into poverty, exacerbating existing challenges in healthcare and food security while driving migration as people flee uninhabitable conditions.

“The daily realities grow worse for Africa,” stated Gatete. “From infrastructure damage to health risks, the cost of these disruptions is mounting. We cannot afford to wait.”

Pathway to Resilience

Gatete’s vision outlines a pathway to resilience through five key pillars. The first focuses on harnessing Africa’s wealth of critical minerals—such as cobalt, lithium, manganese, and nickel—that are essential for the global clean energy transition. With the surging demand for batteries and electric vehicles, these resources could not only fuel Africa’s development but also contribute significantly to the world’s green energy shift. Gatete cited the collaboration between the Democratic Republic of Congo and Zambia as a model for leveraging the African Continental Free Trade Area to create special economic zones that enhance regional and global value chains.

The second pillar emphasizes enhancing carbon capture through nature-based solutions. The Congo Basin’s ecosystems serve as vital carbon sinks that require protection from deforestation. Investments in afforestation and reforestation could generate up to $82 billion annually through high-integrity carbon credits while preserving biodiversity.

Furthermore, Gatete stressed the importance of establishing an ambitious target for the New Collective Quantified Goal (NCQG) for climate finance. He noted that the African Group of Negotiators has proposed a goal of $1.3 trillion per year, which aligns with Africa’s Nationally Determined Contributions (NDCs) that necessitate nearly $3 trillion for implementation.

Accelerating Clean Energy Transition

Accelerating Africa’s clean energy transition is another critical priority. Despite contributing less than 4% of global greenhouse gas emissions, Africa has immense potential to become a renewable energy hub due to its abundant solar, wind, and hydroelectric resources. “The transition to renewable energy is unstoppable,” Gatete asserted, emphasizing that coordinated policies and investments could position Africa at the forefront of the green economy.

However, time is running out. While the costs of renewable installations decrease, African leaders’ patience is waning as they await fulfillment of climate finance commitments from wealthier nations—commitments that have yet to materialize at the necessary scale.

The Cost of Inaction

At the heart of Gatete’s message lies a stark warning: failure to act now will incur far greater costs in the future. According to the Global Commission on Adaptation, every dollar spent on climate adaptation yields approximately four dollars in benefits through reduced disaster recovery expenses and increased agricultural productivity. In Africa, where economies are particularly vulnerable, this return on investment could be even more significant.

Without adequate investment in resilience, Africa faces a future plagued by escalating disasters and economic setbacks. The continent’s already heavy debt burden would worsen as countries are forced to borrow more to recover from increasingly frequent climate events.

Inaction constitutes not only a missed opportunity but also a moral failing; despite contributing minimally to global emissions, it is Africa that bears the brunt of climate change impacts. Gatete’s plea encapsulates a demand for climate justice—a call for wealthier nations to honor their commitments under international agreements like the United Nations Framework Convention on Climate Change.

A Unified African Stance

As COP29 progresses, African nations are arriving with renewed determination, demanding that wealthier countries honor what they see as an accumulated $45 trillion climate debt. Delegates are pushing for quality climate financing that directly targets areas critical to sustainable growth while advocating for immediate financing for projects that bolster local resilience.

With minimal contributions to global emissions but significant exposure to climate impacts such as floods and droughts, African leaders are making it clear: only meaningful commitments will suffice if there is any hope for a sustainable future amidst an ever-worsening climate crisis.

New UN report highlights potential of carbon markets for LCD’s

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The United Nations Conference on Trade and Development (UNCTAD) has released its 2024 report, titled “Leveraging Carbon Markets for Development,” which underscores the significant opportunities carbon markets present for the least developed countries (LDCs). This comprehensive report aims to explore how these nations can utilize carbon markets to foster sustainable development and economic growth.

The report emphasizes the urgent need for LDCs to engage proactively in carbon markets, particularly in light of global climate commitments under agreements such as the Paris Agreement. It outlines key challenges and opportunities associated with participation in both compliance and voluntary carbon markets, highlighting the potential for these markets to generate revenue and support sustainable initiatives.

According to the report, carbon markets can play a crucial role in bridging economic, environmental, and technological divides within LDCs. By participating in these markets, countries can access financial resources necessary for implementing climate-resilient development strategies while also contributing to global efforts to reduce greenhouse gas emissions.

The report details various case studies demonstrating successful carbon market projects in LDCs, showcasing how these initiatives have led to positive outcomes in terms of sustainable development, poverty alleviation, and enhanced local capacities. It also calls for strengthened international support to help LDCs navigate the complexities of carbon market participation and maximize developmental gains.

UNCTAD’s report serves as a critical resource for policymakers, stakeholders, and development practitioners aiming to harness the potential of carbon markets for the benefit of LDCs. As the world continues to grapple with climate change, this report highlights the importance of inclusive and equitable approaches that empower the most vulnerable nations to thrive in a low-carbon economy.

NBE to undergo major reorganization ahead of banking liberalization

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To ensure the stability of the financial system as it moves toward liberalization, the central bank, expected to receive the new establishment proclamation at the beginning of the New Year, will undergo institutional reorganization, including the establishment of new departments.

With the upcoming banking business proclamation, the central bank has clarified that it will not be deregulating the financial industry.

In recent appearances before Parliament, NBE Governor Mamo Esmelealem Mihretu addressed the two highly anticipated proclamations aimed at liberalizing the banking industry and enhancing the operations of the National Bank of Ethiopia (NBE). He stated that the regulatory body will reorganize its approach to drive the economy with a modernized system, facilitated by the changes in the NBE formation proclamation.

According to the draft proclamation, which is expected to be approved in the coming weeks, the central bank will establish a new committee. During a two-day session, which included a public hearing, Mamo outlined how the new proclamation will create a seven-member monetary policy committee. This committee will be responsible for developing and recommending monetary policy for the Board’s approval.

On the governor’s recommendation, the NBE Board will nominate two external experts, not employed by NBE, to join the monetary committee, which will be led by the governor and the vice governor as deputy. Mamo explained that the committee, which will meet at least every two months, will propose monetary policies for the nation, including determining the National Bank Rate (NBR). At the beginning of the fiscal year, the NBE sets a policy rate of 15 percent.

Another new initiative established under the new proclamation is the Financial Stability Committee. This committee will propose macro and micro prudential policies for the Board’s decision-making and will regularly assess, analyze, and identify systemic risks to the financial system during its monthly meetings.

The Board will also make decisions regarding policies related to the lender of last resort and other crisis management tools available to the National Bank based on recommendations from the committee.

According to the governor, the new banking business proclamation will significantly amend the 2008 law, making the financial industry accessible to international players. This will allow international banks to obtain licenses for various types of business in Ethiopia.

In response to concerns, the governor assured that while the industry will open to international players, it will not be deregulated. Frezer Ayalew, director of the Banking Supervision Directorate, added that the proclamation includes several provisions to protect local financial institutions as the industry opens up to competition.

The draft proclamation outlines two ways for the diaspora to invest in the financial sector. Mesfin Getachew, Legal Directorate Director at NBE, stated that Ethiopian-born foreign nationals can invest in local currency as Ethiopians or in foreign currency. However, if they choose to invest in local currency, they will receive their earnings in birr.