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– As a result of climate change, resource extraction industries in Africa will be impacted by asset stranding, researchers say.
“Stranding implies that several natural assets are going to become commercially unviable around the world as a result of climate change and the inability of countries to exploit them,” said Vanessa Ushie, manager of the policy analysis division at the African Natural Resources Centre of the African Development Bank (AfDB), which supports African countries to leverage their natural resources for sustainable development.
Ushie told IPS stranding is an increasingly important policy issue that African countries should consider because they are highly dependent on natural resources, with an average 70 percent of their exports being minerals.
As the content struggles to reach its Sustainable Development Goals (SDGs), a set of global goals identified by the United Nations to end poverty and inequality among member states, a wealth of natural resources that could be used for Africa’s development remain largely untapped.
As a result of the impact of climate change, Africa has difficult options when it comes to its mineral resources, researchers say. Can it keep the resources in the ground and risk economic stagnation or find profitability in clean energy sources?
“We are aware of the Paris Agreement and the commitment of African countries, just like their global counterparts, to reduce carbon emissions in order to meet the target of keeping global warming below 2°Celsius,” Ushie said. “With that warming target, it is clear that certain minerals will have to be left below the ground especially those that emit the highest carbon into the atmosphere.”
Speaking at the end of the U.N. Climate Action Summit recently, Nobel Peace Prize laureate and former president of Ireland, Mary Robinson, said world leaders should act on the outrage of millions of people around the world who marched against climate change and calling for and end to the use of fossil fuels.
“We urge all nations to commit to achieving carbon neutrality before 2050 to immediately end construction of, and investment in, coal power and to implement a green transition that is just and equitable,” Robinson said.
But many African countries are extracting coal, gas and oil with new discoveries, signalling future fortunes that could be difficult to forfeit.
For the African continent, a latecomer to the fossil fuel boom, arguments for asset stranding could influence development gains and also interrupt economic growth.
Ushie said some assets will be stranded due to changes in markets and investment flows, as global extractive companies and investors adjust their portfolios to meet new, low-carbon regulations. Other extractive assets are at risk due to changing consumer demand, such as the growing use of solar energy and electric vehicles in developed countries.
“With growing climate change and the ensuing low-carbon transition, Africa’s mining sector faces serious risks, and some opportunities,” Ushie told IPS, noting that African countries need to understand and respond to the new normal.
The AfDB is promoting a diversified approach to energy provision and integrated natural resource management. The solution lies in investing in localised and resource-efficient energy options like decentralised, community-owned local solar, wind and biomass projects.
By 2020, the Bank will have contributed $17 billion to climate finance for African since it developed a funding mechanism through its Climate Change Action Plan. Besides, the Bank’s Africa NDC Hub has supported African countries to implement their Nationally Determined Contributions (NDCs) under the Paris Agreement and helping countries attract sustainable financing opportunities such as green bonds to support climate change adaptation in high risk countries.
“We want to model scenarios under which stranding could occur for various minerals and fossil fuels, and provide policy advice to governments on how they could respond to this risk,” said Ushie. “There should be a robust public debate on stranded mineral assets and resources, and this is why the AfDB is engaged in policy platforms such as the Inter-Governmental Forum on Mining, Metals and Sustainable Development.”
The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development to be held in Geneva, Oct. 7-11 , has the theme; “Mining in a changing climate’”, indicating that even at a global level, there is recognition that resource extraction is being impacted by climate change.
The forum is a good opportunity for the Centre and the Bank to be engaged in global policy dialogue on the future of mining, which is a critical industry in Africa, she said.
Fatima Denton, Director of the U.N. University’s Institute for Natural Resource, told IPS the global shift from fossil fuels and the drop-in technology costs of renewables are an opportunity for the African continent to increase investment in green energy sources.
With rapid urbanisation of most African economies, coupled with a rising demand for electricity, African nations have begun taking advantage of this opportunity to increase investment in renewables, Denton said.
A 2018 study by Bloomberg Finance indicates that developing countries are beginning to lead the global clean power transition. A total 114GW zero-carbon power capacity was added in developing countries in 2017 compared to 63GW added in wealthier nations.
With the drop in global gas prices, more African nations were focusing on growing their gas economies. Renewables have greater need for metals and materials, creating opportunities for African countries with reserves of these resources essential to the construction of wind, solar, electricity transmission.
“Despite the opportunities mentioned above there is the challenge of when African economies will actually strand their fossil fuel assets and the lack of funding to invest in green growth opportunities as stated in their NDC’s,” Denton said.
Energy security in a low carbon future entails transition towards clean renewable sources, not as an end in itself, but as a means to achieving sustainable development in critical sectors such as agriculture, mining, health and education, said Denton.