
At COP29, nearly 200 nations convened with a singular aim: addressing the considerable climate finance deficit.
The United Nations Framework Convention on Climate Change (UNFCCC) estimates that by 2030, developing nations will need over $1 trillion each year to adapt to and mitigate the growing impacts of climate change. However, as this year’s summit concluded in Baku, developed countries set a more restrained target: to increase their annual financial aid for poorer nations from $100 billion to $300 billion by 2035.
Even more revolutionary is the goal to mobilize $1.3 trillion annually from both public and private sources by 2035. This ambitious target is expected to drive investments in renewable energy, adaptation projects, and infrastructure that enhances climate resilience across the Global South.
These funds could be crucial in enabling a fair energy transition for African nations while addressing the escalating challenges posed by climate change. However, Africa must cultivate private sector engagement and stimulate investment, which hinges on strong political commitment.
Perception – a significant barrier to investment
Africa shows no shortage of political will when it comes to climate action. Out of the 32 signatories brought together by the Climate Parliament for the recent Green Energy Zones and Corridors Pledge, 20 were African countries.
This is hardly surprising, given that the continent is among the most negatively impacted by global warming. Yet, it grapples with a pressing challenge: managing a rapidly growing population, escalating energy needs, and insufficient climate financing. Even though Africa makes up 18% of the global population and faces substantial climate risks, it receives less than 4% of global climate finance, according to the African Development Bank. The continent requires trillions in investments to establish resilient, low-carbon infrastructure and sustainably meet its energy needs.
The stakes are extraordinarily high for African nations: rising temperatures and erratic weather threaten food security, livelihoods, and economic stability. Nevertheless, Africa has unmatched potential to lead the global green energy transition, and with adequate support, this change is achievable. A major barrier to investment lies in the perception of financial, political, and currency risks. African leaders must confront these challenges by enhancing the regulatory and legislative landscape to attract capital and reshape Africa’s image as a dependable long-term partner for climate financing.
African parliamentarians as climate finance champions
Political will is crucial for achieving climate objectives. The investment gap needed to meet net-zero emissions by 2050 is enormous, and closing it requires both public financing and significant private sector involvement. Members of Parliament (MPs) play a key role in fostering an environment conducive to such investments. They have the power to prioritize essential infrastructure projects, such as transmission systems and interconnections, that are vital for the success of the clean energy movement.
By utilizing their legislative power, MPs can:
- Implement laws that establish ambitious renewable energy goals and mobilize additional funding for climate initiatives through budget allocations.
- Encourage private investment by mitigating perceived risks linked to renewable energy projects, enhancing transparency, and supporting multi-year plans that provide long-term stability for investors.
- Employ various financial tools, including tax incentives, subsidies, public-private partnerships, carbon markets, blended finance models, and financial guarantees to unlock new funding sources.
- Ensure that climate legislation is not only passed but also enforced, urging governments to adhere to their international commitments, including those made at COP.
By incorporating these strategies into national frameworks, MPs can send positive signals to the private sector that sustainable projects in Africa are both feasible and backed by strong legislative frameworks.
Moreover, elected officials can ensure that the green transition prioritizes social and economic inclusivity. They play a crucial role in ensuring that renewable energy efforts benefit local communities, especially women and youth.
A cross-party coalition of legislators is vital for creating lasting environmental policies that transcend political affiliations, thus ensuring continuity in climate action. This unified approach helps mitigate the consequences of short-term political cycles, solidifying the stability and effectiveness of climate policies. MPs are uniquely positioned to lead climate change solutions, bridging the gap between ambitious commitments and practical, actionable strategies.
The promise of green zones
The Istanbul Green Investment Dialogue, organized by Climate Parliament and UNIDO, launched a dynamic initiative under the Parliamentarians for Climate Finance project, aimed at enhancing the capacity of national legislators in 15 Sub-Saharan African countries. Its goal is to significantly boost the flow of green investments at the national level. This event convened MPs from 35 countries, alongside academics and financial experts, to discuss green zones as a critical investment opportunity. Following this dialogue, a closed-door session at COP29 in Baku provided a platform for MPs from participating countries and key GCF representatives to explore the economic potential of green zones, strengthening the link between policy, finance, and green investment.
Green zones are designated areas where limited public investment guarantees can be channeled to attract substantial investment in renewable energy, green hydrogen, and industries that utilize these resources to produce green steel, aluminum, cement, fertilizers, aviation fuels, and more.
These green zones offer developing nations the chance to compete for green investment globally and build low-carbon infrastructure for the future, without needing to overhaul a wide range of national laws and regulations. Many concepts applicable to green zones could also be adapted for national implementation in any country that wishes to do so. The design and specifics of green zones will vary from country to country, necessitating considerable work at the national level. At the same time, we aim to develop a replicable model for global use.
The concept is straightforward yet powerful. Green zones can serve as competitive hubs for green investment without requiring extensive alterations to national policies. They are versatile models that countries can implement or scale up at the national level, accelerating their transition to low-carbon economies.
The Green Investment Dialogue seeks to identify solutions to make green zones as attractive as possible for investors. These discussions will culminate in a toolkit for MPs, detailing the key factors that make these zones profitable and financeable. These factors include:
- Location. Access to renewable energy resources, industrial materials, and community involvement in ownership are essential for ensuring local engagement.
- Connection. Strong transmission lines must connect green zones to urban areas and cross-border regional grids, alongside transport frameworks for exporting products from the green industry.
- Risk Reduction. This means streamlining the approval process, establishing transparent investment frameworks, and providing government or multilateral guarantees to lower risks, thereby ensuring competitive pricing and attracting private investments.
The Climate Parliament and UNIDO will produce a Green Zones Toolkit to assist legislators in setting up green zones in their countries. This toolkit will include model legislation, successful case studies and best practices, and policies that have succeeded internationally. One outcome of the dialogue will be draft concept notes for countries to present to the GCF or other agencies to seek funding for developing green zones.
It is clear that African MPs are actively challenging perceptions, fostering discussions, and catalyzing investments to ensure that finance reaches those most affected by climate change. Despite the lukewarm response to the final COP agreement, with these forward-thinking parliamentarians and policymakers, a greener, safer, and fairer Africa is within reach.