This is an extract from the report “The State of Climate Finance in Africa” published by the Climate Policy Initiative
Determining climate finance needs in developing economies is critical to identify financing gaps and opportunities to guide stakeholders to effectively access, allocate and mobilize climate finance. Such data supports international policy processes, like the determination and implementation of a new collective and quantified goal on climate finance and accelerates action. The process of estimating needs also helps in assessing the effectiveness of climate finance flows.
Total climate action cost and needs
The total cost of implementing NDCs in Africa is estimated at USD 2.8 trillion over 2020- 2030. This includes the estimation of loss and damage when provided by countries. Of this, national governments have committed to providing USD 264 billion (about 10%), with the remaining USD 2.5 trillion identified as climate finance needs.
Across all African regions, reported needs greatly exceed country allocations from national government budgets. Central Africa is the only subregion that plans to finance a significant share of costs through national public resources, more than 34% of the subregional total. Southern Africa reports the highest costs, accounting for almost USD 1.1 trillion, about 40% of the African total. However, it plans to allocate less than 1%, just under USD 7 billion, from national public budgets. National governments in Eastern Africa, Western Africa and Northern Africa aim to finance 11%, 7% and 13% of the relative subregional totals, respectively.
Estimated climate finance needs in Africa by region
Comparing needs in absolute terms is challenging. Even when data is complete, estimates could be biased towards those countries covering wider geographical areas and with larger populations. Broadly speaking, South Africa will always face significantly higher costs than Togo. In this regard, it is interesting to compare needs per annum with figures for GDP. Although GDP is not the only lens through which we should assess a country’s ability to finance projects from its own resources (the availability of technical capacity to implement projects is also an important factor), GDP is an informative metric.
South Africa, Ethiopia, Nigeria, and Egypt have the highest needs per year, together representing almost USD 151 billion per year, but also the highest GDPs. Nigeria reports needs of almost USD 12 billion. However, these represent only 3% of the national GDP. Similarly, Egypt estimates needs of around USD 7.3 billion, less than 2% of its GDP. South Africa and Ethiopia have needs of 32% and 23% of their GDP, respectively.
The Democratic Republic of Congo, South Sudan, and Somalia have the highest needs as percentages of their GDPs, all above 80%.11 This is a worrying figure as it implies that national resources are not enough to sustain national climate efforts, and significant external support (private and public) is required. Although the Democratic Republic of Congo plans to use 10% of its GDP to finance climate projects, it estimates remaining climate finance needs to be around 141% of its GDP.
According to the World Bank (2022), all African countries together have a GDP of USD 2.38 trillion. Based on what countries have reported in their NDCs, Africa will need about USD 250 billion per year to meet the 2030 country climate goals, more than 10% of its GDP. This is alarming, considering that only USD 22 billion flowed into climate investments in the region in 2020 (CPI 2021).
Climate finance needs for mitigation and adaptation
Although international climate negotiations are calling for a balanced allocation of finance between adaptation and mitigation, the identification of adaptation needs still falls far behind mitigation. Based on the NDCs, mitigation measures require the largest share of financial support, accounting for 66% (USD 1,607 billion). Adaptation needs are estimated to be USD 579 billion, only 24% of the total. The remaining 10% relates to dual benefit actions that have an impact on both mitigation and adaptation.
As with Africa overall, mitigation represents the highest share of financial support needed in four out of the five African subregions, with Northern Africa the notable exception. 77% in Western Africa, 75% in Southern Africa, 70% in Central Africa, and 57% in Eastern Africa, while dual benefit needs are the most reported in Northern Africa, accounting for about 57%. Northern Africa is the only subregion where adaptation and mitigation needs are almost equally distributed.
Subregional climate finance needs in Africa by use (2020-2030), USD billion
Climate finance mitigation needs by sector
Most mitigation finance needs are in the transport sector (41%, USD 657 billion), followed by energy, agriculture, forestry, and other land use (AFOLU) and industry. Transport needs almost solely relate to South Africa (94% of the transport total). The main subsectors in transport are land transport, accounting for almost all the transport needs (about 97%, USD 35 billion), crosscutting (3%, USD 1 billion) and sea transport, (less than 1%, USD 0.1 billion).
Surprisingly, Africa’s highest emitting sector, AFOLU, only accounts for 7% of total needs (USD 108 billion). According to AfDB (2021), the AFOLU sector contributed 57% of GHG emissions in Africa in 2016, while energy and transport combined only accounted for 35%. Arguably, this implies that the greatest mitigation efforts are required in the AFOLU sector.
Only 30 countries presented needs by sector and only 25 by subsector. This is a key data gap. Due to the lack of disaggregated data in most of the NDCs, the results are heavily weighted to a few countries.
Central Africa reported the most complete information. The mitigation sector with the highest need is industry, representing 50% of the total. However, these needs are mainly a reflection of those countries that provided disaggregation by sector and have the highest absolute values, mainly Angola (56% of the total disaggregated data).
Information on needs by sector remains a huge gap in national reporting, and only a few countries, so far, provide this data. For instance, in Eastern Africa, the vast majority of needs by sector (75%) have been reported by South Sudan.
Climate finance adaptation needs by sector
Sector breakdown of adaptation needs remain limited. Almost 71% of the total needs reported in NDCs (USD 408 billion) are not allocated to any adaptation sector. Although African countries have initiated planning processes for adaptation, a comprehensive integration with economic and development planning is still lacking. The IPCC (2022) noted with “high confidence” that additional funding is required not only to finance new adaptation projects, but also to assess needs and plan projects.
According to the IPCC’s latest report (2022), due to their dependence on seasonal climate variability, the AFOLU and water sectors are the most vulnerable in Africa, and adaptation measures are crucial to guarantee food security. For countries that reported adaptation needs by sector, food, and water security, as well as conservation of forests and ecosystems, are a priority. For countries providing a breakdown of adaptation data by sector, the largest share of adaptation needs is in the AFOLU sector (8%, USD 49 billion). Water 5% and other/ crosscutting measures for 4% of the total (USD 29 billion and USD 24 billion, respectively).
Central Africa and Western Africa reported the most complete information on adaptation needs. In both subregions, the majority of needs are reported in the AFOLU sector. These mainly come from Cameroon (50% of the total disaggregated data in Central Africa), and Mauritania and Mali (35% and 26% of the total disaggregated data in Western Africa, respectively).
Southern African and Eastern Africa have high adaptation needs but current data does not specify where this finance is needed. All the adaptation finance without a specific sector in Southern Africa is attributed to Namibia. In Eastern Africa, unknown adaptation needs are split between Ethiopia (33%), Kenya (14%), Madagascar (28%), Rwanda (7%) and Mauritius (3%). None of these countries yet provide disaggregated financial data for adaptation.
The complete report can be read here