A tunnel through the curve: Africa's green trade

26th May 2022

Africa could show the rest of the world how to achieve economic development without harming the environment, argues Hannah Getachew

Although the entire African continent only produces about 2%–3% of global carbon dioxide (CO2) emissions, it will be gravely affected by the adverse effects of climate change. According to the Intergovernmental Panel on Climate Change, Africa is likely to experience greater rises in land surface temperatures than the global average, increasing the risks of reduced crop productivity, coral reef destruction, species extinction, the degradation of fishery stocks, and changes in the incidence and geographic range of diseases, among other consequences.

To cope with the stresses of climate change, it is expected that Africa will need to invest tens of billions of US dollars a year into mitigation and adaptation. Estimates on the precise amount of funds required vary depending on the temperature increase being modelled. If temperatures increase by 3.5°C–4°C, data from the UN Environmental Programme and its partners suggests that the continent will need to invest US$45-US$50bn a year by 2050, and US$350bn a year by 2070. This financial burden, coupled with Africa’s comparatively low GDP, renders it particularly vulnerable to the effects of climate change. It is therefore imperative for Africa’s development that it both mitigates against and adapts to climate change at the same time.

What’s trade got to do with it?

Africa’s urgent need for economic development, in part due to the current and worsening effects of climate change on its economy, is what spurred the 2019 African Continental Free Trade Area Agreement (AfCFTA), the largest free trade area in the world. It is anticipated that AfCFTA’s implementation will transform the entire continent; studies suggest it will increase intra-African trade by 52.3%, add US$450bn to Africa’s income by 2035, and expand its economy to US$29trn by 2050. It is crucial to seize this opportunity to put the continent on a pathway of economic growth that is climate-compatible – in other words, that operates within planetary boundaries.

As the world grapples with climate change, all new international agreements should be looked at through an environmental lens to test their effects on the environment. This begs the question: how can AfCFTA be harnessed to boost economic growth in a way that is environmentally sustainable, given that there is a global climate emergency?

Trade and environmental policy have historically been tackled independently of one another. One line of reasoning argues that trade and environment should be linked under international trade agreements due to the cross-border nature of planetary boundaries. A healthy environment is valued by all – and if South Africa builds another coal plant, neighbouring Zimbabweans will also suffer from the pollution. Taking it one step further, the increased greenhouse gases caused by a new South African coal plant would also endanger low-lying countries further afield that are affected by rising sea levels, such as Bangladesh. On the other hand, some economists describe this separation as an efficient allocation of resources, stating that linking trade and the environment could allow special interest groups to lobby for trade barriers.

At the end of the day, the links between trade and climate change are hard to dismiss. Chen and Woodland’s 2013 paper ‘International trade and climate change’ (among others) argues that there is a “causal, and empirically verifiable, link between international trade and climate change” – when GDP increases, so, too, do CO2 emissions.

Tunnelling through

The correlation between GDP and CO2 emissions is captured by what is known as the environmental Kuznet’s curve, or EKC (Figure 1). This shows that when income per capita in pre-industrial economies increases, so too does environmental degradation (measured by pollution), until the economy is fully industrialised. At this point, the economy moves towards post-industrial activities and the pollution decreases.

However, it doesn’t have to be this way – countries can boost their economies and develop without harming the planet.

In Transformational Infrastructure for Development of a Wellbeing Economy in Africa, Desta Mebratu and Mark Swilling argue that climate-compatible economic development can create a ‘tunnel’ through the EKC (Figure 2) if lower-income countries are able to grow their economies in an environmentally sustainable way.

“It is crucial to seize this opportunity to put Africa on a pathway of economic growth that is climate-compatible”

What could AfCFTA do?

Despite the links between trade and climate change, there is, as it stands, no explicit mention of climate change or environmentally sustainable green growth in the text of the AfCFTA itself. This is surprising, as AfCFTA was born of the African Union’s blueprint Agenda 2063: The Africa We Want, in which member states recognise the devastation caused by climate change and commit to mainstream climate change adaptation and mitigation into all activities. Since then, the African Union has released its Green Recovery Action Plan in response to the economic challenges posed by the COVID-19 pandemic. The plan is designed to promote “a clean and resilient recovery” that favours climate-compatible growth across the continent. African countries also actively contributed to the UN’s Sustainable Development Goals; Goal 13, in particular, addresses the need to “take urgent action to combat climate change and its impacts”.

AfCFTA’s most significant environment provision is Article 3, which contains a broad clause on its aspiration for “sustainable and inclusive socio-economic development” – but without defining those terms or the means to attain them. It allows for exceptions to be made in certain instances for the sake of environmental protection; however, the Brookings Institution theorises that if future court cases are ruled in the same manner as those under the World Trade Organization, not all environmental measures would be covered. This indicates that AfCFTA will not chart a course of economic development that minimises harm to the environment while maximising the many human development opportunities presented by a low-emissions economic growth model.

Forging a new path

Research by The Economist Intelligence Unit identifies seven opportunities for boosting climate-friendly trade flows: removal of tariff barriers on environmental goods and services; removal of non-tariff barriers on environmental goods and services; explicit limits on fossil fuel subsidies; border adjustment carbon taxes; green procurement; approval of non-discriminatory renewable energy subsidies; and international co-operation on climate change goals.

In practice, these policy recommendations could be incorporated into the AfCFTA through an additional protocol dedicated to the environment, which may be drafted in a way that includes each of these seven measures. Financial support for the research required on how to integrate environmental concerns into the AfCFTA could be obtained through the African Union and its funding partners. Fortunately, Article 8(3) of AfCFTA allows for the addition of new instruments over time, based on the needs of member states. Through this provision, AfCFTA can adopt the aforementioned mechanisms for climate-compatible trade. If African countries choose this route, they can transform the continent into a model for green development and set a shining example for the rest of the world to follow.

Hannah Getachew is a PhD researcher on AfCFTA at King’s College London.

Image credit | Shutterstock | Getty

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