Africa’s biggest economy has 206 million people, endemic poverty and vast energy reserves that could be harnessed to fuel development. But it’s coming under huge pressure from developed countries to abandon fossil fuels and shift to renewable energy in order to help save the climate.
Nigeria is not the only country confronting this dilemma. Developing economies across Africa, Asia and Latin America are facing increasing pressure to cut carbon emissions at the very moment they are industrializing, a process that powered the advance of the West and lifted billions of people out of poverty.
At the same time, many poor countries that have so far contributed very little to global CO2 emissions are particularly vulnerable to rising temperatures and increased droughts, fires and floods linked to climate change, which threaten food security and exacerbate water scarcity.
Nigeria’s largest city Lagos, for example, may become uninhabitable by the end of this century if sea levels continue rising, according to scientific projections. It is already grappling with an eroding coastline that makes the city vulnerable to flooding.
Yet the average person in Nigeria emits less than 0.7 metric tons of carbon dioxide per year, according to the World Bank. That compares with the European Union’s 6.4 metric tons per capita and North America’s 15.3 metric tons.
“The biggest justice issue is that the countries that are the least developed are also the most vulnerable and have the least ability to adapt to climate impacts,” said Amal-Lee Amin, climate change director at CDC Group, Britain’s development finance institution.
If poor countries are asked to give up fossil fuel production, experts say their wealthy counterparts need to spend trillions of dollars to develop solutions that both spur economic development and protect the planet. If that doesn’t happen, the global poor may be left behind in the energy transition.
Untapped resources
Millions of Nigerians don’t have access to electricity. But the country’s government and economy depend on energy.
Nigeria is Africa’s biggest oil producer, with fossil fuels accounting for 60% of government revenue and 90% of foreign exchange earnings. The Petroleum Industry Act, which Buhari signed into law in August, envisions an even greater role for oil and gas in Nigeria’s economy.
“The intent [of the Act] is to really transform the industry for us to be able to attract the required investment into oil and gas,” explained Adewale Ajayi, a partner at KPMG in Lagos. That entails ramping up oil production to 4 million barrels per day, from 1.6 million barrels currently, and drawing on the country’s roughly 200 trillion cubic feet of gas reserves to provide much needed electricity.
“We have enormous reserves of gas in Nigeria and we need to be able to tap into those resources to develop the Nigerian economy,” Ajayi told CNN Business, adding that alongside power generation, gas will also be crucial to developing industries such as petrochemicals and fertilizers.
The law also lays the groundwork for developing oil refining capacity, which would allow Nigeria to stop importing virtually all of its fuel at an enormous cost.
Change can’t come quickly enough in a country where some 90 million people, or more than 40% of the population, don’t have access to electricity and more than 80 million live on less than $1 a day.
“Nigeria will soon, certainly before 2050, have a larger population than the United States, but it has less than 1% of America’s electricity generation capacity,” said Todd Moss, executive director of the Energy for Growth Hub, a nonprofit focused on energy for development based in Washington D.C.
Nigeria’s installed power generation capacity is about 13 gigawatts, but only about 4 or 5 gigawatts reaches end users due to breakdowns in transmission and distribution. By comparison, the United States has over 1,000 gigawatts of utliity-scale electricity generating capacity.
“Nigeria just needs a lot more energy,” added Moss.
Can’t afford to wait
Nigeria’s energy ambitions are coming up against a global drive by banks, pension funds and development finance institutions to limit or altogether halt investments into fossil fuels in line with net-zero emissions goals.
“They’re prioritizing global emissions over Africa’s development needs,” said Moss.
Across Sub-Saharan Africa, natural gas projects are “increasingly imperiled by a lack of development finance,” according to Nigeria’s Vice President Yemi Osinbajo.
“Efforts to restrict fossil fuel investments in Africa are even harder to stomach because many of the wealthy countries behind them — including Japan, the United Kingdom, and the United States — include natural gas in their own multidecade plans to transition to clean energy,” Osinbajo wrote recently in Foreign Affairs.
The European Investment Bank will end financing for fossil fuel energy projects from the end of this year, with some exceptions for gas-fired power plants, while the World Bank, the biggest provider of climate finance to developing countries, is moving towards restricting its fossil fuel investments, according to Reuters.
CDC Group will no longer invest in most parts of the coal, oil and gas industries, according to its recent fossil fuel policy. CDC will consider investments into gas power where there are “large unmet energy needs” and if these are consistent with a pathway to net zero, according to Amin.
Moves by such institutions to restrict fossil fuel funding come despite the fact that the United Kingdom relies on gas for around two thirds of its electricity, while the European Union currently has €87 billion ($102 billion) worth of gas projects in the pipeline, according to a report by the Global Energy Monitor.
Africa’s renewables potential
The Nigerian government’s Solar Power Naija initiative — which aims to deploy 5 million new solar-based connections by 2023 — highlights how difficult it is to scale renewable solutions quickly.
The program will expand energy access to 25 million individuals, delivering power to just 28% of Nigerians who don’t currently have access. And while a step in the right direction, solar panels on roofs are not necessarily adequate to power large industrial businesses, which require a great deal more electricity than what’s needed to switch on a light bulb or charge a cellphone.
Still, renewable technology is developing at lightning speed and this can only benefit Africa.
Mark Carrato, who coordinates the US Agency for International Development (USAID) Power Africa program, sees vast potential to deliver electricity to Africa in a climate smart way.
Since its launch in 2013, Power Africa has delivered electricity to over 118 million people on the continent, connecting 25 million homes and businesses to on and off-grid energy solutions. More than three quarters of the transactions it has closed are based on renewable technologies.
“In almost every case, project by project you see a renewables solution that is cheaper,” he told CNN Business.
Carrato argues that fossil fuels might provide short-term solutions to energy needs, but could end up taxing poorer countries in the long run through increased funding costs and the problem of “stranded assets,” in which infrastructure becomes obsolete as it is replaced by cleaner and cheaper renewable technologies.
“The cost of capital to do fossil fuels is only going to increase,” Carrato said.
On the other hand, the cost of renewable technologies is rapidly declining. According to the International Renewable Energy Agency, the cost of large, utility-scale solar projects decreased 82% between 2010 and 2019, while the cost of onshore wind fell by 40%.
The cost of electricity storage technologies — which will be crucial to facilitating “deep decarbonization” including in sectors such as transport and construction — are also expected to fall considerably by 2030.
Africa is well positioned to benefit. The continent’s estimated potential to generate renewable energy from existing technologies is 1,000 times larger than its projected demand for electricity in 2040, according to IRENA.
“Renewable energy — including green hydrogen — could replace African exports of coal, oil and gas,” it said in a recent report with German development banks KfW and GIZ.
But to leverage the potential for renewables, average annual investments in Africa’s energy system must double by 2030 to approximately $65 billion.
While there’s good reason to be bullish on Africa’s potential to leapfrog fossil fuel technologies in favor of cleaner energy sources, the kind of renewable technology that can rapidly drive industrial development — to power factories, fuel transport and logistics networks and enable the digital economy to thrive — is not yet commercially available at scale.
A just transition
To put the world on track to reach net zero emissions by the middle of the century, the International Energy Agency estimates that annual clean energy investment into emerging and developing economies needs to increase more than sevenfold to $1 trillion annually by 2030.
As it stands, these economies currently account for just one fifth of global investment into clean energy and pay interest rates to borrow money that are up to seven times higher than in the United States or Europe.
Developed countries also remained $20 billion short of meeting a pledge to channel $100 billion per year by 2020 towards helping poor countries tackle climate change.
“In many emerging and developing economies, emissions are heading upwards while clean energy investments are faltering, creating a dangerous fault line in global efforts to reach climate and sustainable energy goals,” IEA executive director Fatih Birol said in a recent report.
“Countries are not starting on this journey from the same place — many do not have access to the funds they need to rapidly transition to a healthier and more prosperous energy future, and the damaging effects of the Covid-19 crisis are lasting longer in many parts of the developing world,” he added.
In the race to solve the climate crisis, there’s a clear risk that the development needs of poor countries are sacrificed in pursuit of global emissions goals.
Nigeria could be a testing ground.
Source: CNN
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