During COP29, nearly 200 countries convened with a key mission: to address the substantial gap in climate finance.
The United Nations Framework Convention on Climate Change (UNFCCC) estimates that by 2030, developing nations will need over $1 trillion each year to adapt to and combat the escalating impacts of climate change. Yet, as this year’s summit concluded in Baku, wealthier countries aimed for a more moderate goal: to increase their annual financial contributions to poorer countries from $100 billion to $300 billion by 2035.
Even more groundbreaking is the target to mobilize $1.3 trillion each year from a mix of public and private funding by 2035. This ambitious ambition is expected to drive investments into renewable energy, adaptation projects, and infrastructure aimed at bolstering climate resilience across the Global South.
These funds could be crucial in facilitating a fair energy transition for African nations while addressing the growing challenges posed by climate change. However, for Africa to attract private sector engagement and increase investment activities, robust political will is essential.
Perception – a significant barrier to investment
African nations demonstrate strong political commitment to climate action. Among the 32 signatories organized by the Climate Parliament for the recent Green Energy Zones and Corridors Pledge, 20 were African countries.
This isn’t surprising, as the continent is one of the most severely impacted by global warming. Yet, it faces a significant challenge: balancing a rapidly growing population, rising energy demands, and insufficient climate financing. Despite making up 18% of the global population and bearing a substantial share of climate-related risks, Africa secures less than 4% of the world’s climate finance, according to the African Development Bank. The continent urgently requires investments in the trillions to build resilient, low-carbon infrastructure and sustainably meet its energy needs.
The stakes are incredibly high for African nations: rising temperatures and erratic weather patterns threaten food security, livelihoods, and economic stability. Nevertheless, Africa has unique potential to lead the global transition to green energy, and with adequate support, this transformation is achievable. A key obstacle to investment is the perception of financial, political, and currency risks. African leaders need to address these concerns by enhancing the regulatory and legislative framework to attract capital and reshape Africa’s image as a reliable long-term partner for climate financing.
African parliamentarians as champions of climate finance
Political will is crucial for meeting climate targets. The investment gap necessary for achieving net-zero emissions by 2050 is vast and requires both public funding and significant participation from the private sector. Members of Parliament (MPs) are essential in creating a conducive environment for such investments. They hold the power to prioritize infrastructure initiatives, like transmission systems and interconnections, that are vital for the success of the clean energy transition.
By leveraging their legislative authority, MPs can:
- Pass laws that establish ambitious renewable energy targets and channel additional funding toward climate initiatives through budgetary measures.
- Encourage private investment by mitigating perceived risks associated with renewable energy projects, fostering transparency, and advocating for long-term plans that provide stability for investors.
- Utilize diverse financial instruments, including tax incentives, subsidies, public-private partnerships, carbon markets, blended finance models, and financial guarantees, to unlock new funding sources.
- Ensure that climate legislation is not only created but effectively enforced, compelling governments to adhere to their international commitments, including those made at COP gatherings.
By integrating these strategies into national policies, MPs can signal to the private sector that sustainable projects in Africa are both viable and backed by solid legislative frameworks.
Moreover, elected officials can make certain that the green transition emphasizes social and economic inclusion. They play a crucial role in ensuring that renewable energy projects benefit local communities, especially women and youth.
A bipartisan coalition of legislators is vital for establishing enduring environmental policies that transcend political boundaries, ensuring consistency in climate action. This collaborative approach helps mitigate the effects of short-term political shifts, securing stability and effectiveness in climate policies. MPs are uniquely positioned to initiate solutions for climate change, bridging the gap between ambitious commitments and tangible, actionable policies.
The potential of green zones
The Istanbul Green Investment Dialogue, organized by Climate Parliament and UNIDO, kicked off an engaging initiative under the Parliamentarians for Climate Finance project to enhance the capabilities of national lawmakers in 15 Sub-Saharan African countries. Its aim is to significantly boost the flow of green investments at the national level. This event gathered MPs from 35 countries, along with academia and financial experts, to discuss green zones as a critical investment opportunity. Following this dialogue, a closed-door session at COP29 in Baku provided a platform for MPs from the participating nations and key GCF representatives to explore further the economic potential of green zones, strengthening the linkage between policy, finance, and green investment.
Green zones are designated areas where focused public investment can attract significant funding for renewable energy, green hydrogen, and industries that leverage these resources to produce green steel, aluminum, cement, fertilizer, aviation fuel, and more.
These green zones offer a chance for developing nations to compete for green investment on the global stage and establish low-carbon infrastructure for the future, without the need for extensive revisions of broad national laws and regulations. However, many concepts relevant to green zones can also be applied nationally in any nation that opts to do so. The design and characteristics of green zones will vary from one country to another, necessitating considerable effort at the national level, while simultaneously aiming to create a replicable model worldwide.
The concept is simple yet potent. Green zones can serve as competitive hubs for green investment without necessitating sweeping changes to national policies. They represent flexible frameworks that countries can adopt or expand upon, accelerating their transition to low-carbon economies.
The Green Investment Dialogue aims to identify strategies to make green zones as attractive as possible for investors. The discussions will culminate in a toolkit for MPs, detailing the key elements that render these zones profitable and bankable. These elements include:
- Location. Access to renewable energy sources, industrial materials, and local community engagement in ownership are critical for ensuring local involvement.
- Connection. Robust transmission lines should link green zones to urban centers and regional grids, in addition to transport infrastructure for exporting products from the green industry.
- Risk Reduction. This involves a streamlined approval process, clear investment frameworks, and government or multilateral guarantees to lower risks, thus ensuring competitive pricing and attracting private investments to these zones.
The Climate Parliament and UNIDO will create a Green Zones Toolkit to assist legislators in establishing green zones within their nations. This toolkit will include model legislation, successful case studies, best practices, and policies that have been proven effective internationally. One outcome of the dialogue will be draft concept notes that countries can present to the GCF or other organizations to seek funding for the development of green zones.
It is clear that African MPs are proactively challenging perceptions, fostering discussions, and catalyzing investments to ensure that climate finance is directed to those most impacted by climate change. Although the concluding COP agreement received a tepid response, with the efforts of these pioneering parliamentarians and policymakers, a greener, safer, and fairer Africa is indeed achievable.
