AFRICA FACES US440 BLN CLIMATE-RELATED LOSES-AFDB

By Jeff Kapembwa

Climate change headwinds remain in Africa for a long haul and may cost the continent a staggering US$440 billion in loss and damage while combined macroeconomic effects of the man-induced-crisis will have great bearing on the continent’s Gross Domestic Product by about three percent by 2050, estimates by Africa’s leading financial institution show.

Initial estimates to date show that Africa is losing 5% to 15% of its per capita economic growth induced by aggravated droughts, flooding and cyclones across the continent in recent years.  African nations had received around $18.3 billion in climate finance between 2016 and 2019 for climate action, though analysts project a $1.3 trillion climate finance gap is needed for the 2020 to 2030 period to mitigate, though not feasible.

The African Development Bank, an Abidjan-headquartered multilateral finance institution foresees severity of climate change reversing Africa’s economic gains. It calls for sustained efforts to mitigate the impact of development and economic growth if the continent is not insulated.

In a multi-page-report dubbed: “Climate Change Impacts on Africa’s Economic Growth” the Pan African multilateral institution contributing to sustainable economic development and social progress of Africa urges all member states to integrate climate change risks in development and macroeconomic planning, among other cross cutting stop gaps to reduce the climate change ‘whirlwind’.

An improved understanding and knowledge of current aggregate and sectoral economic vulnerability are urgently needed to address countries’ adaptation deficit in the most meaningful manner, notes the report lead authored by Florent Baarsch and Michiel Schaeffer and commissioned by the United Nations Environment Programme (UNEP), the African Development Bank and the United Nations Economic Commission for Africa (ECA).

Macroeconomic forecasts for Africa should include climate-induced economic risks. This integration would require capacity-building and analytical tools for government experts to analyse climate and socioeconomic data, and collaborate across ministries and agencies (development planning, statistics, meteorology.

Multisectoral processes within Governments should lead to the design and implementation of resilience-building measures at the sectoral level. Development investment projects in Governments’ mid-term development plans should integrate resilience-building measures for all prioritized development sectors.

In planning and implementing development policies, it is important to consider the benefits and co-benefits for both mitigation and adaptation actions. Climate-informed and climate-resilient development planning is essential to mitigate the future negative impacts of climate change.

While investments in adaptation would benefit communities, some African Governments will simply not be able to afford them. It is essential that they receive adequate support in accessing international finance through bilateral and multilateral sources such as the Green Climate Fund, and mobilize domestic public and private sources.

There is an unwavering need for countries to strategise and explore opportunities from additional private sector sources and innovate financial mechanisms to sustain the financing against loss and damage, which can be attained after adaptation and mitigation initiatives are actualised.

African Governments, together with technical and financial partners, need to actively promote renewable energy and energy efficiency through investment incentives for the development of low-carbon economies.

Large economic and development impacts if no action is taken, climate change would impede development across Africa on a macroeconomic scale, according to direct, quantitative evidence grounded in empirical data.

The financial organization projects clear detrimental macroeconomic consequences to occur spurred by climate change over the coming decades. Across Eastern and Western Africa, climate change in the high-warming scenario would reduce GDP per capita by around 15 per cent by 2050.

Northern and Southern Africa would also be seriously affected, with around a 10 per cent decrease in GDP by 2050, while Central Africa would be comparatively less affected, with a possible decrease of 5 per cent in the high-warming scenario.

A globally low-emissions, low-warming scenario, in line with the Paris Agreement’s goal of limiting global warming well below 2°C and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, could avert a large part of the most serious macroeconomic consequences for Africa.

As early as 2030, a gap in macroeconomic costs emerges between a low and a high-warming scenario, highlighting the necessity to avoid a high-emissions, fossil-fuel-intensive trajectory.

By 2050, losses in the high-warming scenarios range from 50 per cent higher for Central Africa, to around 85 per cent higher for Western African regions.  With climate-related disasters expected to slow GDP per capita growth, African Governments are likely to experience increasing pressure on budgets and fiscal balances.

Climate change risks to economic growth African countries’ limited resilience against the negative impacts of today’s climate are already resulting in lower growth and development, highlighting the consequences of this lack of resilience and adaptive capacity.

However, while structural transformation is highly recommended to foster economic development, the report further notes that the services and industry sectors have higher sensitivity to extreme wet events than the agricultural sector remains vulnerable to climate change induced effects and affect food security among many countries.

“As a result, with structural transformation, macroeconomic sensitivity to extreme wet events could slightly increase,” the report notes.

Northern African countries are projected to be exposed to more extreme wet events as a consequence of climate change, and could experience higher macroeconomic risks with structural change than without, if no adequate adaptation and risk management measures are implemented.

This preliminary analysis suggests that structural change under a changing climate must go hand-in-hand with infrastructural improvements that increase resilience of industry and services to extreme wet events, such as better drainage systems, alternate routes, improved urban planning, and other strategic initiatives to insulate sectors.

Additional evidence on these budgetary implications and their long-term effects is needed, but these initial findings show that the increased negative consequences of climate related disasters for fiscal balance and government budgeting should, at the very least, be considered plausible, if not likely.

It warns, however, that the increasing negative impacts of climate change on both the GDP per capita and the development capacity of African countries could reduce Africa’s ability to cope with – and adapt to – the current and future impacts of climate change. Countries could be increasingly drawn into a downward spiral of risks and vulnerabilities.

A decreased ability of Governments and households to invest in adequate protection to adapt to long term changes in precipitation and temperature, or in emergency relief, could further amplify the future negative consequences of climate change.

This decreasing ability, combined with the increasing severity of the impacts of climate change in Africa, could heighten the likelihood of countries falling into macroeconomic low growth patterns, or poverty traps, potentially leading to increasing their dependency on international support.

Climate change impacts on GDP growth would be an additional constraint on African Governments’ capacity to reach the 2030 Sustainable Development Goals agreed by the United Nations in 2015, possibly hindering them from reaching the targets if impacts were left unchecked.

Our analysis of the effects on both GDP per capita by 2030 indicates that many African countries would have already experienced negative consequences on their GDP. – In the high-warming scenario especially, countries in Eastern and Southern Africa would have a GDP up to 3.6 per cent lower than their GDP per capita baseline scenario.

Reduced GDP per capita prospects, as a consequence of climate change, could have implications for a wider range of social and economic indicators relevant to the Sustainable Development Goals, such as education, health access and above all poverty eradication.

The combined development and macroeconomic risks adduced to attaining these Goals highlights the need for African countries to adopt early and efficient development resilience planning. With the added risk to GDP, this also highlights the pressing need to integrate climate change impacts as a constraint in development planning.

According to the United Nations, the United Nations aired a dire warning: “The window to reverse climate change, and its resulting “atlas of human suffering,” has almost closed, but not just yet-only if Africa can raise resources to mitigate and insulate against climate risks using available funds.