Nigeria: Osinbajo Advocates Debt-for-Local weather Swap Deal

In a name that may directly considerably advance the course of world net-zero emissions targets, facilitate power entry and the event of African international locations, Vice President Yemi Osinbajo has proposed a Debt-For-Local weather (DFC) swap deal.

Explaining the idea yesterday at a lecture on a simply and equitable power transition for Africa on the Heart for International Improvement in Washington D.C, Prof Osinbajo said that debt for local weather swaps is a kind of debt swap the place bilateral or multilateral debt is forgiven by collectors in trade for a dedication by the debtor to make use of the excellent debt service funds for nationwide local weather motion packages.

He mentioned; “Sometimes, the creditor nation or establishment agrees to forgive a part of a debt if the debtor nation would pay the averted debt service cost in an area forex into an escrow or another clear fund and the funds should then be used for agreed local weather tasks within the debtor nation.”

Justifying the rationale behind such a deal in a press release by his media aide, Laolu Akande, the vp submitted that the dedication to it could enhance the fiscal area for climate-related investments and cut back the debt burden for collaborating growing international locations.

“For the creditor the swap might be made to rely as a part of their Nationally Decided Contributions (NDC),” he mentioned, including; that “To make this environment friendly, there are in fact important coverage actions essential to make this acceptable and sustainable.”

The vp additionally proposed the better participation of African international locations within the world carbon market whereas exploring financing choices for power transition.

In response to him, there’s a must take a complete method in working collectively in the direction of frequent targets, together with the market and environmental alternatives offered by the financing of fresh power belongings in rising power markets.

He mentioned; “Along with standard capital flows each from private and non-private sources, it’s also important that Africa can take part extra absolutely within the world carbon finance market.

“At present, direct carbon pricing methods by carbon taxes have largely been concentrated in excessive and middle-income international locations. Nevertheless, carbon markets can play a big position in catalyzing sustainable power deployment by directing non-public capital into local weather motion, enhancing world power safety, offering diversified incentive buildings, particularly in growing international locations, and offering an impetus for clear power markets when the value economics appears to be like much less compelling – as is the case at the moment.”

He inspired developed international locations to help Africa to become a world provider of carbon credit, starting from bio-diversity to energy-based credit, which might be a leap ahead in aligning carbon pricing and associated coverage round attaining a simply transition.

Whereas additionally addressing the considerations of the African continent and different growing international locations concerning a simply transition, Prof Osinbajo famous that the central pondering for many growing international locations is that we’re confronted on this situation of a simply transition with two, not one, existential crises; the local weather disaster and excessive poverty.

“The clear implication of this actuality is that our plans and commitments to carbon neutrality should embrace clear plans on power entry if we’re to confront poverty. This contains entry to power for consumptive and productive use and spanning throughout electrical energy, heating, cooking, and different end-use sectors,” he mentioned.

In response to him, practically 90 million folks in Asia and Africa who had beforehand gained entry to electrical energy can now not afford to pay for his or her primary power wants. The inflationary pressures attributable to the COVID-19 pandemic and different macroeconomic developments have been additional exacerbated by the continuing battle in Ukraine.

He added; “Nations worldwide have been hit by document costs on all types of power. Energy costs are breaking data throughout the globe, particularly in international locations or markets the place pure gasoline performs a key position within the power combine.”

Prof Osinbajo nonetheless sounded a observe of warning, saying that in such a world actuality, limiting financing of gasoline tasks for home use would pose a extreme problem to the tempo of financial improvement, supply of electrical energy entry and clear cooking options, and the scale-up and integration of renewable power into the power combine.

Talking on Nigeria’s initiative to fight the unfolding disaster, he revealed that the nation’s Power Transition Plan was designed to sort out the twin crises of power poverty and local weather change and ship SDG-7 by 2030 and net-zero by 2060 whereas centering on the availability of power for improvement, industrialization, and financial development.

“We anchored the plan on key targets together with lifting 100 million folks out of poverty in a decade, driving financial development, bringing trendy power companies to the total inhabitants and managing the anticipated long-term job losses within the oil sector resulting from world decarbonization,” he mentioned

He additionally emphasised the position that pure gasoline should play within the short-medium time period to facilitate the institution of baseload power capability and handle the nation’s clear cooking deficit within the type of LPG.

Moreover, the vp recognized some double requirements evident within the response to the present power disaster by many international locations within the world North.

In response to him, at the moment excluding South Africa, the remaining one billion folks in Sub-Saharan Africa are serviced by an put in capability of simply 81 gigawatts. Sub-Saharan Africa has contributed, primarily based on info that’s already on the market, lower than one % of cumulative CO.2 2 emissions.

“By comparability, america has an put in capability of 1,200 gigawatts to energy a inhabitants of 331 million folks, whereas the UK has 76 gigawatts of put in capability for its 67 million folks. The per capita power capability in the UK is nearly fifteen occasions than in Sub-Saharan Africa.”

“Many of those international locations had barely a yr in the past severely advocated or carried out insurance policies on limiting public funding for fossil gasoline tasks in growing international locations, making no distinction between upstream oil and coal exploration; and gasoline energy crops for grid balancing.

“However at the moment within the wake of the power disaster, many European nations have made latest bulletins to extend or lengthen their use of coal-fired energy era by 2023, and probably past. That is in violation of their local weather commitments and evaluation means that this may increase energy sector emissions of the EU by 4%, a big quantity given the excessive base denominator of EU emissions,” he mentioned.

Prof Osinbajo then noticed that Europe’s power disaster has not been ignored, it continues to be met with help, and worldwide sources. In stark distinction, the growing world continues to be being held to account for its emission discount with out sufficient help and funding for its power transitions.

Acknowledging the distinction to the broader responses to the local weather disaster on the African continent, the vp mentioned, “We aren’t seeing cautious consideration and acknowledgement of Africa’s aspirations. As an illustration, regardless of the super power gaps, world insurance policies are more and more constraining Africa’s power expertise selections.”

However, he confirmed that with the Kigali communique and a number of other different formal and casual consultations, African nations at the moment are fortunately extra intentional in taking joint possession of our transition pathways and designing climate-sensitive methods that handle our development targets. That is what Nigeria has accomplished with our Power Transition Plan.

“Our Power Transition Plan finds that an extra $10 billion over enterprise as typical is required yearly until 2060 to shift the complete financial system to a net-zero pathway.”

As regards to power investments, he recognized the mismatch within the quantity of investments skilled in developed international locations versus growing international locations.

In response to him, whereas representing simply 15% of the world’s inhabitants, high-income international locations obtained 40% of world power funding in 2018. Conversely, growing international locations with 40% of the world’s inhabitants obtained simply 15% of world power funding. This hasn’t improved a lot in recent times.

Addressing what the last word aim of the worldwide power transition ought to be, Prof Osinbajo said that it’s in attaining dependable net-zero carbon power methods to energy affluent, inclusive economies.

Talking on the Nigerian context, he added that it means constructing sustainability into our financial planning, which we had developed in an Financial Sustainability Plan within the aftermath of the COVID-19 pandemic. This contains an formidable plan over the close to time period to supply 5 million properties and SMEs with cleaner power by its decentralized solar energy program.

After he delivered remarks on the American think-tank, the vp took questions across the theme of a simply power transition and the not too long ago launched Nigerian Power Transition Plan.

Members of the Power Transition Implementation Working Group (ETWG) current on the lecture included the Minister of Works & Housing, Babatunde Raji Fashola; Minister of Finance, Finances and Nationwide Planning, Dr. (Mrs) Zainab Ahmed; Minister of Atmosphere, Mohammed Abdullahi; Director-Common and CEO of the Nationwide Council on Local weather Change, Salisu Dahiru; Nigeria’s Ambassador to america of America, Dr. Uzoma Emenike, Particular Consultant of the UN Secretary-Common for Sustainable Power for All (SEforALL), Ms Damilola Ogunbiyi; Managing Director of Niger Delta Energy Holding Firm Restricted, Chiedu Ugbo; and different senior authorities officers.