AfCFTA – A New Strategy for Energy Transition

24 March 2023

The AfCFTA WEF agreement is a trade deal that was signed in Davos, Switzerland, in January 2023, between the African Continental Free Trade Area (AfCFTA) and the World Economic Forum (WEF). The agreement aims to boost trade and investment between Africa and the rest of the world, as well as support the continent's economic recovery and development after the COVID-19 pandemic.

The agreement includes a commitment to support Africa's energy transition and policy aiming to achieve climate justice, by providing financial and technical assistance, facilitating technology transfer and innovation, and promoting regional integration and cooperation. The agreement also recognizes the importance of involving the private sector, civil society and youth in the process, as well as ensuring gender equality and social inclusion.

The climate justice aspect in Africa in terms of the energy transition is a key issue that was discussed at the Davos 2023 meeting. The energy transition refers to the shift from fossil fuels to renewable and clean sources of energy, such as solar, wind, hydro and geothermal. Climate justice is the principle that the people and communities who are most affected by the impacts of climate change, such as droughts, floods, heat waves and diseases, should be supported and empowered to adapt and mitigate the effects. Africa is one of the most vulnerable regions to climate change, but also has a huge potential for renewable energy development.

Some of the main challenges of the energy transition and climate justice in Africa are:
- Lack of adequate and affordable financing for renewable energy projects, especially in rural and remote areas, where the costs and risks are higher.
- Insufficient infrastructure and grid capacity to integrate and distribute renewable energy, as well as to connect and electrify millions of people who still lack access to modern energy services.
- Policy and regulatory barriers that hinder the development and deployment of renewable energy, such as tariffs, subsidies, taxes, permits and standards.
- Social and environmental impacts of the energy transition, such as the displacement of workers and communities, the loss of livelihoods and revenues, and the potential conflicts over land and water resources.
- Capacity and knowledge gaps among the stakeholders involved in the energy transition, such as policymakers, investors, developers, operators, consumers and civil society.

These challenges require concerted and coordinated efforts from all actors, at the national, regional and international levels, to overcome them and to ensure a fair and inclusive energy transition that benefits all Africans. The AfCFTA WEF agreement aims to support Africa's energy transition and climate justice challenges by providing financial and technical assistance to African countries and businesses to develop and implement renewable energy projects, especially in rural and off-grid areas, and to improve energy efficiency and conservation. A key factor will be the technology transfer and innovation that is needed to enable the African countries and businesses to access and adopt the latest and best renewable energy technologies, as well as to foster local research and development capacities.

The agenda of the agreement includes the promotion of regional integration and cooperation to enhance the interconnection and harmonization of energy markets and policies across Africa, and to foster cross-border trade and investment in renewable energy. In order to achieve it, all the stakeholders must be involved in the energy transition and climate justice process - the private sector, civil society and youth - by creating platforms and mechanisms for dialogue, partnership and participation, and by supporting each other's initiatives and solutions. On top of that, to ensure the gender equality and social inclusion, there is a great need to address the specific needs and challenges of women and marginalized groups, and to empower them to access and benefit from renewable energy opportunities.

The agreement has been received with mixed reactions, depending on the perspective and interest of the stakeholders. There was positive feedback from the African Union, the WEF, the United Nations, the European Union, the United States, China, India and other major trade and development partners of Africa, who have welcomed the agreement as a milestone for enhancing Africa's economic integration, resilience and sustainability. Constructive criticism was received from some African civil society organizations, academics, activists and journalists, who have raised concerns about the potential negative impacts of the agreement on Africa's sovereignty, environment, human rights and social justice, and have called for more transparency, accountability and participation in the implementation and monitoring of the agreement. A more negative response was received from several fossil fuel companies, lobby groups and countries, who have opposed the agreement as a threat to their interests and profits, and have argued that it is unfair and unrealistic to expect Africa to reduce its emissions and transition to renewable energy, while the developed countries have historically contributed more to the climate crisis and have not fulfilled their commitments and obligations.

The fossil fuel companies have some valid points, but they also have vested interests that may not align with the development of the people and the planet. Some of their valid arguments are that Africa has a low share of global emissions (around 3%) and a high need for energy access and economic development, which may justify the use of its abundant fossil fuel resources, especially natural gas, as a bridge to a low-carbon future. Also, Africa faces many challenges and barriers to transition to renewable energy, such as financing, infrastructure, policy, capacity and technology, which may require more time and support from the international community. It is undeniable that it's difficult to find a balance between their arguments and their own interests. Fossil fuel companies have invested billions of dollars in exploring and developing fossil fuel deposits in Africa, and they stand to lose a lot of money and market share if the demand and prices for fossil fuels decline due to the energy transition. They also have a lot of influence and power in the political and economic spheres of Africa, and they may use their lobbying, marketing and legal strategies to resist and undermine the policies and regulations that promote renewable energy and limit fossil fuel emissions.

Natural gas emerges as a bridge fuel in Africa and the benefits seem clear. Natural gas is cleaner and more efficient than coal and oil, and can help reduce greenhouse gas emissions and air pollution from the power sector. It is abundant and affordable in Africa, and can help increase energy access and security, as well as create jobs and revenues for the continent. Its use is flexible and compatible with renewable energy, and can help balance the variability and intermittency of solar and wind power, as well as provide backup and peaking capacity. However, in the context of the net-zero goals, there are significant drawbacks. Natural gas is still a fossil fuel that emits carbon dioxide and methane, and can contribute to global warming and climate change, as well as undermine the goals of the Paris Agreement. It is subject to price volatility and geopolitical risks, and can create dependency and vulnerability for African countries, especially if they rely on imports or exports of liquefied natural gas, not to mention that it can crowd out or delay the development and deployment of renewable energy and energy efficiency, and can lock in high-carbon infrastructure and assets that may become stranded or obsolete in the future.

As a result of these ongoing debates, several best practices are recommended for natural gas to become a bridge fuel for Africa:
- Adopting and implementing clear and coherent policies and regulations that support the development of natural gas in a sustainable and inclusive manner, and that align with the national and regional climate and energy goals.
- Enhancing the governance and transparency of the natural gas sector, and ensuring that the benefits and revenues from natural gas are equitably distributed and invested in the social and economic development of the people.
- Promoting the integration and complementarity of natural gas and renewable energy, and ensuring that natural gas is used as a flexible and transitional fuel that does not crowd out or delay the deployment of clean energy solutions.

There are several success stories that can serve as blueprint for subsequent projects:

- Senegal and Mauritania are developing a large offshore natural gas field, called the Grand Tortue Ahmeyim project, that is expected to produce 2.5 million tonnes of LNG per year, and to provide low-cost electricity and revenues for both countries.

- Nigeria is implementing a national gas expansion programme, that aims to increase the domestic use of natural gas for power generation, industrialization, transportation and cooking, and to reduce the flaring and wastage of natural gas from oil production.

- South Africa is planning to procure 3,000 megawatts of power from gas-fired power plants, that will use LNG imported from Mozambique and other countries, and that will help diversify the country's coal-dominated power mix and support the integration of renewable energy.


By Ioana Belu

The full lenght report can be read here.