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African Energy Futures Mafalda Duarte African Development Bank Outline • Africa Today • Global and Africa’s Income Inequality • Global and Africa’s Environmental Degradation • Additional Challenges due to Climate Change • How to Support Transformation • What is needed • Innovative finance • Opportunities in the Post-Rio+20 Landscape Africa Today: Continued and robust growth…but mostly driven by commodity prices Africa Today: Business climate is improving…but private sector still faces bottlenecks Africa Today: Poverty is falling but unequally Global Income Inequality Substantial But Uneven Progress 1975 650 1995 600 550 GDP per Capita Index 1960=100 500 450 400 350 300 250 200 150 100 50 0 2010 Source: World Bank, World Development Indicators; OECD, DAC Statistics 2008 Bottom 25, 1960-2010 2006 2004 2002 2000 1998 1996 1994 1992 Top 25, 1960-2010 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 Average Africa Today: Massive infrastructure deficit Africa Today: Regional integration and intra-regional trade needs deepening Global Environmental Degradation ? ? Source: Rockström et al., Nature (2009) Additional Challenges Due to Climate Change Pictures: AfDB Impacts on water resources • Warming expected to increase up to 1.4 ° C by 2020; 5.1 ° C by 2080 • Increase in temperature = greater evapostranspiration; e.g. 1° C warming results 10% reduction in surface runoff (Morocco) • Changes in variability - more severe, intense, prolonged droughts and floods • Changes in groundwater recharge • By 2020, up to 250 million people in Africa are projected to be exposed to increased water stress Impact on Agriculture • Changes in pests, diseases, growing seasons, land-use • Temperature-induced crop yield losses of up to 16% per 1° C • Overall reductions of up to 22% across 5 crops • By 2020, yields from rain-fed agriculture could be 50% less in some countries, affecting food security and exacerbating malnutrition Impact on Coastal Zone and Marine Resources African Cities at Risk • 19 big cities (1 million +) in LECZ* • Mombasa: 17% city below 0.3m • Banjul: most below 1m • Egypt: 2 million people below 0.5m • Abidjan, Lagos at high risk Marine Resources at Risk • 22 of 33 coastal countries “highly vulnerable” to CC impacts on fisheries are in Africa But Opportunities Too How to Support Transformation Across Age Inclusive Growth Across Gender Across Geography Building Resilience Gradual Transition to Green Growth Managing Natural Resources Sustainable Infrastructure How to Support Transformation Infrastructure development $30-50 Billion Annual Gap 2% of Lost Annual GDP Growth • Improve transport & logistics chains • • • • Meet rising demand for energy Enhance water resources Expand broadband telecommunications Integrate urban infrastructure How to Support Transformation Regional integration Only 12% of Africa’s Trade is Intra-Regional • • • • • Hard infrastructure Support soft infrastructure Trade and Customs procedures Movement of labor and capital One stop border posts How to Support Transformation Private sector development 50 million MSMEs 22% Access to Finance Low productivity • Improve investment and business climate • Expand access to infrastructure • Promote enterprise development • Improve access to finance • Scale up support to MSMEs How to Support Transformation Governance & accountability 20% live in fragile states Weak institutions Poor service delivery Build accountability: public spending, delivery Support anti-corruption initiatives Strengthen debt-management capacity Promote fiscal decentralization Bolster property rights, access to justice Improve natural resource management How to Support Transformation Skills & technology 250 million Africans between 15 and 24 15 million new job seekers annually Build skills: science, technology, engineering Support women in technical & scientific study Support innovation & entrepreneurship Develop networks of excellence and mentoring programs What is Needed TAILORED STRATEGIES, POLICIES THAT PROMOTE SMART BEHAVIOR AND TACKLE UPFRONT CAPITAL CONSTRAINTS Innovative Finance • Focus on upfront financing: – Need for new sources, but also project preparation finance and risk-management schemes – Borrowing constraints – SMEs and local governments • Green finance, but also: – Leverage public and IFI resources: engage private banks; Fundof-funds; buy down interest rates – Local public finance – Payment for environmental services Opportunities in the Post-Rio+20 Landscape • SDGs and the post-2015 int’l development agenda – “Shared prosperity” and the challenge and imperative of integrating sustainability into the poverty-centric MDG framework • Natural Capital Accounting (NCA) + WAVES – UN Statistical Commission adopted a System for EnvironmentalEconomic Accounts, and 60+ countries embraced NCA at Rio • Data, tools and knowledge – Clear demand from advanced and developing countries for better information and methods and opportunities to share good (and failed) practices Targeting and Tailoring Thank You!! Mafalda Duarte [email protected]