Closing the $2.5 trillion Climate Gap in Africa
published on 11 March 2024
The sheer scale of financing needed to cope with climate change is coming to light, and in Africa, it is an eye-watering $2.5 trillion. To help countries put in motion climate strategies, development banks are working to narrow the massive gap, as highlighted in the fifth edition of “African Economies”, a report on the continent’s economic prospects in 2024, recently published in collaboration with AFD.
About 30 of the world’s 40 economies most dependent on agriculture are located in Africa, and the dependence on natural resources like farming and mining, is rendering many African economies increasingly vulnerable to the effects of climate change.
This is why significant financial resources are needed to help countries cope. The Climate Policy Initiative (CPI) estimates that some $2.8 trillion will be needed between 2020 and 2030 for Africa to achieve its global warming prevention targets. However, the resources committed so far to implement contributions determined at national level (CDN, or national climate plans) only amount to $300 billion, which is just over 10% of total needs.
See also: Africa on the Front Lines of Climate change
"Knowing that $2.5 trillion are lacking to implement the CDNs, at least $250 billion will have to be mobilized each year, i.e.approximately 10% of Africa’s GDP,” says Colin Bermingham, economist at the European Investment Bank (EIB), in “African Economies 2024”, a booklet produced in collaboration with AFD. “Of course, Africa needs funding that goes far beyond what is necessary to tackle climate change."
90% of climate finance comes from abroad
Although the gap remains wide, there has been slow, continued growth in climate action financing in recent years. Some $22.5 billion was reached in 2020, which is a rise of almost 6% since 2019. This figure includes public and private flows from national and international sources: companies, households, national financial institutions, bilateral and multilateral development banks and foreign states.
"The continent relies heavily on external funding for climate initiatives,” says Colin Bermingham. “CPI data shows that nearly 90% of climate-related investments were funded by foreign entities." And yet, Africa’s responsibility for global warming is minuscule: the continent accounts for just 7% of cumulative greenhouse gas emissions since the mid-19th century, versus 45% for developed countries.
See also: AFD Group publishes its first TCFD report on managing climate-related risk
The bulk of this financial effort is being driven by multilateral development banks, which deployed more than $10 billion in climate finance in Africa in 2020 (versus 6.4 billion in 2019), or 45% of the total.
These financings are increasing, but there is still a long way to go. To maintain momentum in the fight against climate change, all stakeholders, both national and international, will need to coordinate their efforts. Although the cost will be high, the cost of inaction would be far higher.
