energy

We must act now to stop the COVID crisis from undermining Africa’s energy future

Development Matters Africa, Covid-19, Green transition , , , ,

By Dr Fatih Birol, Executive Director of the International Energy Agency (IEA)

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
We must act now to stop the Covid crisis from undermining Africa’s energy future

The COVID-19 pandemic continues to cause major disruptions to societies and economies around the world, and has dealt a worrying blow to years of hard-won progress in reducing the number of people in Africa who lack access to electricity. For seven years in a row, the number of Africans living without electricity has steadily decreased, thanks to efforts from governments, businesses and civil society. But this year, it is set to rise by 13 million amid the turmoil brought by the pandemic, according to IEA analysis. The worst effects are being felt in countries such as Nigeria, the Democratic Republic of the Congo and Niger. By putting energy services out of reach of more and more people, the crisis threatens to deepen their difficulties and those of economies across Africa.

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Carbon border adjustment: a powerful tool if paired with a just energy transition

Development Matters Green transition , ,

By Randolph Bell, Director, Atlantic Council Global Energy Center; Richard Morningstar Chair for Global Energy Security and Elena Benaim, Intern, Atlantic Council Global Energy Centre  

Carbon border adjustment (CBA) policies are gaining momentum on both sides of the Atlantic. They were proposed as a key element in the European Green Deal and as part of US Democratic presidential nominee Joe Biden’s climate plan. But how do they work? Carbon border adjustment mechanisms tax imported goods based on their carbon footprint with the aim of limiting emissions leakage and levelling the playing field for domestic industries that produce goods with lower greenhouse gas emission footprints than imports that may be cheaper but have higher greenhouse gas footprints.

There are a number of technical challenges to overcome in implementing a carbon border adjustment policy, including whether to peg it to a domestic price on carbon, which sectors to apply the tax, and how to ensure accurate and transparent data on embodied carbon. But one major concern is that the policy could have negative consequences for the economies of developing countries by cutting their export revenue and/or impeding the development of new export-oriented industries. Developing countries might argue that the policy runs counter to the Paris Agreement’s bottom-up, nationally determined contributions, and could push them to cut emissions more than what they pledged. Carbon border adjustment could also run afoul of the Common But Differentiated Responsibility (CBDR) principle that developing countries do not share the same responsibility as developed countries in addressing climate and environmental issues.

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Middle East and North Africa: The challenge of a long-term strategy for oil exporting countries

Development Matters Africa, Covid-19, Green transition, Natural Resources, Trade , , , , ,

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By Rahmat Poudineh, Senior Research Fellow and Director of Research, the Oxford Institute for Energy Studies

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

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Oil refinery plant in Qatar

There is no single successful strategy to shield oil-exporting countries of the Middle East and North Africa (MENA) from the long-term risks of an oil price crash, exposing them to serious long-term challenges.

Diversification for example, works only when it reduces risk by pooling uncorrelated income streams and sectors. If countries diversify only into sectors that rely on hydrocarbon infrastructure and where relationships (tangible and non-tangible) exist across fossil and non-fossil fuel businesses, they cannot build resilience. On the other hand, if they diversify into substantively different areas that have little in common with their current primary industry, which is the core of their comparative advantage, they run the risk of not being competitive. Moreover, the cost of reducing the long-term risks and increasing resilience of their core sector is to accept lower expected return on existing hydrocarbon assets, for instance, by investing in measures that align their hydrocarbon sector with low carbon scenarios. This lowers the overall return but reduces the risk of disruption in the long run. Continue reading →

How COVID-19 could help eliminate fossil fuel subsidies

Development Matters Covid-19, Green transition, Infrastructure, Natural Resources, Policy , , , , , , , , , ,

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By Mario Pezzini, Director of the OECD Development Centre and special adviser to the OECD Secretary-General on development, and Håvard Halland, Senior Economist at the OECD Development Centre

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

Oil pumpjacks in Tatarstan, Russia
Photo: Yegor Aleyev/Tass/PA Images

As oil-exporting countries struggle to respond to the crisis, there is a way to make critical fiscal resources available.

The Covid-19 pandemic has hit oil-exporting countries at the worst possible moment. Severely strained health systems, and the need for economic stimulus, call for unprecedented growth in public spending. At the same time, oil export revenues have plummeted, following the demand collapse caused by the pandemic and a breakdown of traditional price-setting mechanisms. As a result, many oil exporters in the low- and middle-income category will struggle to muster anything near the level of expenditure required for an efficient response to the virus. Continue reading →

Energising Africa’s productive transformation: how intermediary cities can be a game changer

Development Matters Africa, Building resilience, Infrastructure , , ,

By Bakary Traoré, Economist, OECD Development Centre, and Elisa Saint-Martin, Junior policy Analyst, OECD Development Centre 

Electricity-in-Africa-shutterstock_563620138A review of on-going industrial strategies (Africa’s Development Dynamics 2019 report) shows that most African countries have the ambition to expand processing activities in sub-sectors such as agro-industries, fertilisers, metals and construction materials. To achieve this, it is urgent to improve the quality of energy supply across the continent. Regional co-operation for energy among Africa’s cross-border intermediary cities can be a game changer.

First, let’s take a look at the main challenges

Today, industrial processing activities and transport services account for no more than 35% of total energy consumption in Africa (see Figure 1, based on the OECD/IEA 2019 database). Africa’s electrical networks are struggling to cope with current needs: on average, firms in sub-Saharan Africa face 8.5 electricity outages a month (World Bank, Enterprise surveys, 2019), and 40.5% of them consider insufficient access to energy to be a major constraint to their growth and competitiveness.
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The Green Eureka Moment: Investing and Inventing to Stop Climate Change

Development Matters Development finance, Green transition , , , ,

By Raluca Anisie, Carbon Impact Analyst and Paul Hailey, Head of Impact, responsAbility Investments AG

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A family bakery in Ecuador that used a green loan from a GCPF investee to buy a more energy-efficient oven. Photo: José Jacomo

In the 3rd century B.C., Archimedes declared: “Give me a place to stand and with a lever I will move the world.” This phrase speaks to the potential of the right tools at the right time, but as anyone who has tried to build flatpack furniture will confirm, not having the right tools can derail any project, however grand.

In 2019, our quest to find and use the right tools to move the world is more urgent than ever. As UNEP stated at COP24, we are the last generation that can stop climate change. This challenge requires a mobilisation of investment on an unprecedented scale, yet enormous gaps remain, especially in the developing world. Filling these gaps will require ground-breaking investment approaches like blended finance, a method that uses public money to improve the risk profile of investments to catalyse private funding. However, tools such as blended products will also need to credibly demonstrate impact to attract and retain public and private investors. Continue reading →

We now have a Paris Agreement rulebook, where do we go from here? Insights on environmental policies from randomised impact evaluations

Development Matters Building resilience, Green transition, Natural Resources, Policy , , ,

By Iqbal Dhaliwal, Executive Director, and Rebecca Toole, Senior Policy Associate, Abdul Latif Jameel Poverty Action Lab (J-PAL)

 

gas-pollutionAt the United Nations Climate Change Conference in December 2018 (COP24), parties agreed to a rulebook that lays out how governments will measure, report and verify emissions under the Paris Agreement. Now countries need to act — and know whether policies and programmes are meeting their climate goals.

Thanks to innovations in research design, improvements in measurement technology and an increasing political will to know what works, more opportunities to rigorously evaluate and learn from real-world environment and energy policies exist than many might think.

Take, for example, our work at the Abdul Latif Jameel Poverty Action Lab (J-PAL) to ensure that policy is informed by scientific evidence. J-PAL is anchored by a network of 171 affiliated professors at more than 50 universities who conduct randomised impact evaluations to answer critical questions in social policy. Our Environment & Energy sector measures the real-world impacts of environmental and energy policies on everything from pollution reduction to climate change mitigation and resilience.

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Energy for the 2030 Agenda

Development Matters Africa, Policy, SDGs , ,

By Dr. Fatih Birol, Executive Director, International Energy Agency

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Africa’s night sky could change dramatically if we achieve “energy for all” by 2030.

The 2030 Agenda for Sustainable Development has been ratified, and access to affordable, reliable, sustainable and modern energy for all by 2030 is a target in its own right (SDG 7). Modern energy is central to achieving global development: it has never been a more important time to understand where the world stands on achieving this target, and to propose pragmatic strategies for achieving universal energy access.1

Achieving modern energy for all is within reach. The number of people without access to electricity fell below 1.1 billion in 2016, from 1.7 billion in 2000. We have undertaken an in-depth assessment of each country’s progress, finding some staggering successes. Half a billion people gained access to electricity in India alone, with government policies putting the country on track to universal access by the early 2020s, a tremendous achievement. Moreover, some countries in sub-Saharan Africa, including Kenya and Ethiopia, are on track to universal electricity access by 2030. However, progress overall has been uneven. Despite current efforts, over 670 million people will still be without electricity by 2030, 90% in sub-Saharan Africa.

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Electricity for all in Africa: Possible?

Development Matters Africa, Building resilience , , , , ,

By Bakary Traoré, Economist, Sébastien Markley, Statistician, and Ines Zebdi, Research Assistant, OECD Development Centre 1 

Explore the 2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa for more on this subject

Electricity-in-Africa-shutterstock_563620138For decades, access to electricity has been a serious challenge in Africa. It still is. 600 million Africans are not connected to an electrical network. African businesses cite electricity amongst the two most severe constraints on their operations (Enterprise Surveys, 2016). Twenty-five of the 54 countries in Africa, including Nigeria, South Africa, Ghana and Senegal, deal with frequent power crises characterised by outages, irregular supply and surging electricity costs. These are symptoms of insufficient generation capacity and a lack of infrastructure.

Despite these sobering facts, a number of recent initiatives signal that major improvements may be underway. The impetus to act is driven by the benefits Africa can reap by investing in electrification. Such benefits go far beyond direct job creation in energy infrastructure, as important as that is. Several pieces of evidence (Jimenez [2017], Torero [2014], van de Walle et al. [2013]) suggest that household electrification also increases job opportunities by carving out more time for work and enabling rural micro-entrepreneurship. We see three reasons for hope that Africa is on the path to greater electrification – provided certain conditions are met.

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Africa’s Blue Economy: An opportunity not to be missed

Development Matters Africa, Development finance , , , , ,

By Carlos Lopes, UN Under Secretary General & Executive Secretary of the UN Economic Commission for Africa

Blue-economyThe world’s oceans, seas and rivers are a major source of wealth, creating trillions of dollars’ worth in goods and services as well as employing billions of people. Three out of four jobs that make up the entire global workforce are water-dependent. It is forecasted that the annual economic value of maritime-related activities will reach 2.5 trillion euros per year by 2020, while the International Energy Agency estimates that renewable energy from the ocean has a power potential sufficient to provide up to 400% of current global energy demand. Yet Africa’s blue potential remains untapped. Continue reading →