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AfCFTA – The environmental case for continental Africa free trade area

The climate talks (COP27) in Sharm El-Sheikh, Egypt this November come at a time when momentum on the African Continental Free Trade Area (AfCFTA) is picking up with the recent launch of the guided trade initiative – an initial pilot of eight African countries trading under the treaty’s preferential terms.

The AfCFTA seeks to create a single market of 1.3 billion people, with an estimated GDP of $2.6 trillion. According to the World Bank, it could lift 30 million people from extreme poverty.

At the same time, in a recent interview with Africa Renewal, Akinwumi Adesina, the President of the African Development Bank, maintains that since COP27 is Africa’s COP, it must address Africa’s climate challenges.

From an AfCFTA perspective, what might an African-led response to climate change look like? 

To achieve sustainable development, Africa needs to quicken the pace of industrialisation and reduce its reliance on manufactured imports. Studies repeatedly show that the manufacturing sector will be the main beneficiary of the AfCFTA.

Africa accounts for only a tiny share of greenhouse gases (GHG) emissions – at below 4% – yet, as acknowledged by the 2022 Intergovernmental Panel on Climate Change (IPCC) Report, the African continental will be most negatively affected by climate change. That reality is already painfully evident in East Africa where, following four consecutive seasons of below-average rainfall, the Horn is facing a catastrophic drought, the worst in 40 years.

Free-trade agreements like the AfCFTA are not usually associated with climate-friendly policies, as many people correctly perceive trade as a major contributor to carbon emissions. According to the World Trade Organisation, GHGs released by the production and transport of traded goods and services represent on average 20-30% of global GHG emissions. The international transport sector alone generates 12% of emissions.

With the dramatic growth of global trade since the 1950s, demand across the world for increased choice and variety of goods and services knows few limits. For instance, air transport for low-value perishable goods has become economically viable.

Nowadays, throughout the year, supermarkets in high-income countries stock fresh fruit, vegetables and flowers from around the world, opening windows of opportunity for suppliers in countries with a warmer climate or those in the southern hemisphere.

Technological changes – the much trumpeted ‘Fourth Industrial Revolution’ – are now facilitating smaller scale production in manufacturing, making a localized approach much more viable. In the face of significant disruptions to global trade in recent years, shortening supply chains and producing more for the regional market is advisable. Crucially, greater intra-regional trade will be less damaging to the global environment than long-distance value-chains.

Some East African countries have taken advantage of such opportunities. For instance, Kenya’s annual export of horticultural products to Europe stands at over a billion US dollars, accounting for one-sixth of its total exports.

Yet the COVID-19 crisis exposed the vulnerability of these supply chains. We must also ask whether such production and consumption patterns are ultimately sustainable. Cash crops for export have always been controversial. While turning over good quality arable land for production of tea, coffee, vegetables, tropical fruits, or flowers has an economic rationale for cash-strapped developing countries, concerns have been raised (not always well-founded, it must be said) that it undermines food security.

What is clear is that currently in Africa many basic needs – food, housing, and access to energy  – are unmet, and the triple shocks of climate change, the COVID-19 pandemic and the Ukraine conflict have made a bad situation worse.

The Food and Agriculture Organization of the United Nations (FAO) estimates that in 2021, 278 million (or more than one in five) Africans were malnourished – a massive 22 per cent increase compared with 2019. Given the current prevalence of food price inflation, high prices of agricultural inputs, and extreme climate events, the expectation is that things are likely to get worse before they start getting better.

More intra-regional trade in food crops and industrial goods

A more vibrant regional market in food items under the AfCFTA will go a long way to addressing some of these challenges. Topographic and climatic differences across the continent mean that there is great potential for more intra-African trade in food crops. For example, when Kenya suffered a severe drought in 2016-17, imports from neighbouring Uganda cushioned the effects.

A study by the UN Economic Commission for Africa (UNECA) argues that more intra-regional trade like this could significantly help improve food security across Eastern Africa. It is a contention underpinned at the continental level by the Framework for Boosting Intra-African Trade in Agricultural Commodities and Services, jointly developed by the African Union Commission (AUC) and the FAO.

To achieve sustainable development, Africa also needs to quicken the pace of industrialisation and reduce its reliance on manufactured imports. Studies repeatedly show that the manufacturing sector will be the main beneficiary of the AfCFTA.

Yet industrialisation has historically been associated with rising energy needs. So the continent should better leverage new technologies to leap-frog towards a less energy-intensive economic growth. Six years ago, a UNECA  report advocated for the “green industrialisation” of the continent. Those arguments still stand.

A greater reliance on intra- and inter-regional power pools such as the Zambia-Tanzania-Kenya (ZTK) interconnector for the Eastern Africa and Southern Africa Power Pools could reduce even further the dependence on traditional fossil fuels. Africa has the potential to lead the world in this sphere.

The power of regional energy markets

Stronger regional energy markets could also prove strategic in reducing emissions. Africa is rich in renewable energy sources such as geothermal, wind-power and hydro-electric. Kenya, for instance, is one of the world leaders in renewable energies, deriving most of its energy from geothermal sources.

Similarly, with an abundance of hydropower and solar, Ethiopia has the potential to generate upwards of 60,000 MW from renewable sources. Approximately 90% of Ethiopia’s power generation is derived from hydro-electric sources, with the remaining 10% generated from wind and thermal.

A greater reliance on intra- and inter-regional power pools such as the Zambia-Tanzania-Kenya (ZTK) interconnector for the Eastern Africa and Southern Africa Power Pools could reduce even further the dependence on traditional fossil fuels. Africa has the potential to lead the world in this sphere.

Reducing risks

Another major benefit of the AfCFTA is that the agreement provides for reciprocal binding market access, making it less risky than trade under preferential market access schemes to distant high-income markets.

There have been multiple instances of restrictions being imposed on African exports under these schemes. In 2018, for instance, Rwanda was partially suspended from the African Growth and Opportunity Act (AGOA) preferences to the US market because of a policy restricting the import of American second-hand clothing.

Former Secretary-General of the UN Conference on Trade and Development Mukhisa Kituyi once remarked that Kenya exports more than $350 million of new clothing to the US market each year only to see the clothes sent back to Kenya as used clothes, thus undermining the region’s textile industry and adding to carbon emissions. Wouldn’t it make more sense, he asked rhetorically, for regional textile manufactures to make more new clothes for their own citizens to wear?

In a similar vein, nearly 80 per cent of vehicles in Eastern Africa are old second-hand vehicles imported from Europe and Asia that do not meet modern emissions standards. Automobile manufacturers like Volkswagen have been quite explicit about wanting to manufacture new cars regionally which comply to high emission standards, but are reluctant to do so until the continental market is fully operational.

Technological changes – the much trumpeted ‘Fourth Industrial Revolution’ – are now facilitating smaller scale production in manufacturing, making a localized approach to production much more viable. In the face of significant disruptions to global trade in recent years, shortening supply chains and producing more for the regional market is advisable. Crucially, greater intra-regional trade will be less damaging to the global environment than long-distance value-chains.

Given that Africa already has among the lowest per capita emissions in the world, the continent needs to achieve greater leeway in the COP27 negotiations. The continent’s long-term developmental aspirations should be accommodated, including the implementation of the AfCFTA, alongside the provision of the necessary financing to help mitigate the negative impacts of climate change.

Embracing a New Approach Under the AfCFTA

One of the first studies by Bengoa et. al (2021) on the environmental consequences of the AfCFTA concedes that the agreement could lead to a marginal 0.3% increase in CO2 emissions, but at the same time it will also improve air quality. This is significant given that in the last two decades of rapid economic growth, air quality in many African cities has plummeted.

Given that Africa already has among the lowest per capita emissions in the world, the continent needs to achieve greater leeway in the COP27 negotiations. The continent’s long-term developmental aspirations should be accommodated, including the implementation of the AfCFTA, alongside the provision of the necessary financing to help mitigate the negative impacts of climate change.

Yet one recent analysis carried out by the Climate Policy Initiative calculated that climate financing for the continent stands at only around $30 billion per year — just a tenth of the $277 billion per year needed to mitigate climate change, and far below the $100 billion of additional finance promised by high income countries under the Paris Agreement of 2009 to help low-income countries implement their climate plans.

In sum, the AfCFTA is not a plea for regional autarky; rather, it is an appeal for priming regional trade and encouraging businesses to cater more to local tastes and demands. In the long run, it will also make the continental economy more competitive and better able to compete on global markets.

Above all, if accompanied by the necessary climate financing, greater investments in renewable energy, increased energy efficiency and measures to improve food security, it will be kinder to the planet too.

Source

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Grace Khoza – Principal Communications Advisor
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