Africa is waiting with bated breath for the outcomes of the Africa Climate Summit in Nairobi, Kenya, underway from Sept. 4-6. The summit arrives at a significant time when the world needs to build a path towards addressing the climate catastrophe through climate finance.
There has been a growing understanding ahead of the Africa Climate Summit on the role of the Multilateral Development Banks (MDBs) such as the African Development Bank, the World Bank, and the International Monetary Fund (IMF) in particular.
But are these powerful institutions fit for purpose? Does their design align with the needs of the Global South? Or is this just business as usual?
The world came away disappointed at the recently held Paris Climate Finance Summit talks, the main mandate of which was to mobilise additional innovative climate finance, to promote more private investments, and push for investment in green infrastructure for the energy transition in developing countries.
But very few real commitments were made. As we look towards the Africa Climate Summit we already face a number of challenges that will continue to lock Africa in a cycle of debt, need, and want with regards to climate finance. There are strong lessons to be learned from the failed Paris discourse that need not to be repeated in Africa.
Transformational Change at the World Bank and IMF?
To start with, there was limited recognition at the Paris Summit that there is a need for a complete overhaul of the governance structure of the World Bank and IMF to make them more democratically driven, with significantly increased agency for the Global South. There was a strong presence of leaders from the Global South in Paris and yet this wasn’t matched by presence from G7 leaders. So yet again the conversation between North and South was imbalanced and important decisions could not be taken.
Unless the World Bank and IMF review the representation of Global South countries in their decision-making, how can they operate to ensure democratic, accountable, and sustainable development?
The Paris summit reflected on the extent to which the MDBs have incentivised a model of development that creates dependency of the Global South on the Global North. And yet the outcomes of the summit represented business as usual.
Fuelling Debt Dependency
To date the MDBs have fuelled debt dependency by providing loans for developing economies globally, which has, consequently, given way to an extractivist economic model. More than six decades after attaining sovereign rule, most African countries, for instance, are still dependent on coal, oil, and gas exports to finance their economies.
So while the new World Bank President, Ajay Banga, announced a new “Debt Pause Clause,” this does not represent an acknowledgement of the World Bank’s historical role in creating the debt crisis.
In the future the World Bank will allow countries hit by disasters to pause repayments on loans to the multilateral lender. This is a step in the right direction, but far away from the debt cancellation and debt rescheduling needed to lift countries out of their current debt-poverty cycle.
A Fossil Fallacy
As a new model of clean energy provision comes into focus, old vested interests are reasserting themselves. The Russian invasion of Ukraine has intensified the “dash for gas” and European governments and industries are redoubling efforts to extract and export fossil fuels from Africa. The “dash for gas” would put lives at risk while trapping Africa in a deadly cycle of energy poverty, climate pollution, and colonialism.
The Africa Climate Summit has an opportunity to correct the record and set the stage for success at key upcoming global climate events, including the UN Climate Action Summit in September and COP28 in December.
Access to renewable, affordable, reliable, and clean energy is very important in enabling Africa’s development aspirations, prosperity, and overcoming the climate breakdown. Africa has abundant and sufficient renewable energy sources for its development and for sharing with the world.
It is critical that Africa cultivates increased investments in its abundant renewable energy wealth to accelerate worthwhile and equitable development on the continent. African actors, partners, and stakeholders need to focus on the important task of ending energy poverty, stimulating sustainable and equitable development, and contributing to addressing the climate crisis for the people.
Role of Multilateral Development Banks
Further, the summit must require MDBs to rapidly evolve into institutions that lead the just energy transition while opposing funding across all their financing instruments for expansion and establishment of new fossil fuel projects.
Fossil gas, including LNG (liquified natural gas), must be ruled out by all MDBs as a “transition fuel”. The Paris alignment involves keeping global warming below 1.5°C and therefore cannot include public finance for fossil gas in any of its forms.
It is pointless and self-defeating for MDBs to mobilise capital for climate adaptation and resilience while financing fossil fuel projects at the same time. Consequently, the summit must rule out all funding for carbon projects, ports, and storage facilities that facilitate trade in liquefied natural gas thus prolonging the use of fossil fuels.
There is consensus among experts that the Paris pact summit should align countries to deliver on the Paris Agreement. This means working fast together to realign finance with a sustainable renewable future.