Certain developing African countries are in unique positions in the 21st century. While they are resource-rich in oil and gas, they face a dilemma amidst increasing calls for decarbonization. Developed countries are urging their neighbors, even the poorest, to transition towards a green economy through bold emissions targets aimed at bypassing the climate crisis.
Wealthy countries have made it clear that the future of energy will not be in fossil fuels. This was evident at the recent COP26 meeting on climate change when 39 countries and institutions “pledged” to cease investing in fossil fuel projects by the end of 2022. Furthermore, the European Investment Bank has also declined to fund new oil and gas projects in Africa.
However, this situation poses a serious threat to the capacity of developing countries to fund their green transitions, absent of alternative outside investment. The government of Nigeria has pushed back strongly against divestment from fossil fuel investments by wealthy countries, arguing that it is an injustice to their impoverished citizens and excludes the possibility of natural gas as a “transition fuel.”
However, the issue remains that help from the richest countries towards the poorest, is inadequate; wealthy countries have not met even their most conservative funding goals for green investment. While there is a place for climate activists in wealthy countries to advocate for ‘climate justice’, the poorest countries have clear opportunities to empower themselves, taking advantage of the momentum among non-state actors for green policy.
Some of these increasingly popular policy tools are called ‘carbon offset’ schemes, recently having attracted interest among private firms and individuals with high carbon emissions. These schemes aim to remove carbon from the atmosphere, thereby offsetting their carbon footprint. However, these carbon offsets are heavily criticized by activists and experts alike, for being ineffective.
An alternative, unorthodox schemes should be constructed by regional African political blocks like the Economic Community of West African States (ECOWAS) and the East African Community (EAC), or continent-wide institutions like the African Union (AU) and the African Development Bank (AfDB). Under this scheme, private firms, individual actors, international institutions, and states themselves would pool resources into a collective fund paid out to resource-rich countries with the assurance that key fossil fuel resources would not be exploited. In essence, they would be paid to leave oil untouched in the ground–It can be characterized as a ‘pay-to-sequester’ scheme. This fund would finance green energy transitions on the continent, while enabling climate-minded actors in wealthy countries to fulfill their campaign goals or corporate social responsibility (CSR) requirements.
This scheme must have two key elements: it must block additional greenhouse gas emissions from new extraction while funnelling funds towards green energy/economy projects which will in the long term reduce emissions. The latter is a key part of this scheme since it is still a fact that all actors within the global system must participate in a climate-oriented transition.
This scheme is not without precedent. In 2007, the government of Ecuador came up with a strategy to address the future of its oil reserves composed of hundreds-of-millions of barrels buried below vast, biodiverse rain forests. Simply put, the President would “ask wealthy countries and donors to pay Ecuador $3.6 billion to leave that oil untouched.”
Though ending in a resounding failure due to a lack of interest and thus funding, the Ecuadorian scheme could show serious promise in a world where economic actors are more interested in averting climate catastrophe and fulfilling self-imposed targets than ever before. Judging by the scheme outlined above, individual states would unfortunately be unlikely to raise sufficient funding. Instead, the main targets for lobbying would be private investment banks, large multinational corporations, wealthy individuals, and multilateral development banks.
Unlike carbon offset schemes, there would be no purchasing of ‘shares’ in a project nor would it be directly resulting in the removal of carbon from the atmosphere. Instead, it would offer an opportunity for actors to ensure a net decrease of future carbon emissions. This scheme has multiple advantages compared to that of carbon offset: It is much simpler for investors to understand while avoiding the controversy of its predecessor.
To retain credibility, these schemes should be implemented at the supranational level rather than the individual state level. There is a place for organizations like ECOWAS, EAC, and African Union in accounting for regulatory failure, a serious factor in oil-rich Nigeria, for example. If implemented at these regional levels, large masses of funding can be pooled together and redistributed among member states by the organization themselves, avoiding but not completely eliminating some possible points of corruption. This solution is an imperfect but necessary action to account for government graft.
Furthermore, collective agreements between states at these multi-national levels gives more credibility to the threat of extraction if funding fails. The scheme relies on wealthy actors replacing the revenue gained from extracting and selling fossil fuels. By collectively pooling their efforts, their political clout on the international stage is increased.
Fossil-fuel-rich developing countries have an opportunity to forge relationships with non-state sources of wealth to achieve their climate goals. This policy should form one part of a broader and multi-faceted green transition strategy. If implemented with other policy tools like carbon credits, cap-and-trade, and carbon border adjustment mechanisms (CBAMs), the African continent can achieve its targets without having to rely on the often-unreliable community of wealthy governments.
Edited by Isaac Yong
William Gilbert is in his fourth year at McGill University, pursuing a B.A. Joint Honors in Political Science and International Development. He is a staff writer for Catalyst. He is particularly interested in structural transformation for economic development in Sub-Saharan Africa.