Nairobi Declaration: A Global Imperative for Climate Action
Co-authored by: Timothy Rann, Managing Partner, Mercy Corps Ventures and Sieka Gatabaki, Program Director, Mercy Corps Agrifin
At the conclusion of the Africa Climate Summit held in Kenya’s capital, leaders revealed the Nairobi Declaration and with it, a bold agenda: to establish a global carbon tax to finance climate adaptation efforts in Africa. This call to action is grounded in the stark reality that Africa is still waiting for the $100 billion per year for climate finance promised over 14 years ago. And the costs are rising. New estimates now place the need at over $250 billion per year as Africa continues facing the most catastrophic effects of climate change while still only contributing 3% of global carbon emissions.
Moreover, the Nairobi Declaration demands fundamental reforms to the global financial system. African nations face exorbitant borrowing costs — up to eight times higher than those in other regions. This financial burden severely hampers the continent’s capacity to invest in a sustainable, green future — a future that will benefit communities beyond Africa’s borders. For Africa to adapt to climate change and continue green growth, it is imperative that we simultaneously increase the availability of capital while dramatically reducing the prohibitively high interest rates.
Shared Responsibility & Unparalleled Opportunity
Establishing a global carbon tax supported by a blend of incentives and regulations is critical, particularly in countries with the highest historical emissions. This year’s spike in ocean surface temperatures to the highest levels recorded since the 1950s, coupled with more frequent and catastrophic weather disasters, demonstrates unequivocally that we must take immediate action to curb our emissions.
While most countries are setting emissions targets, according to the latest UN Global Stocktake, country emission reduction pledges are still not in line with the Paris Agreement and it is now highly unlikely that we will limit global warming to under 2°C let alone to the 1.5°C aspirational temperature target. For communities in Africa, the almost-certain rise in temperature will only further exacerbate the felt hardships of food insecurity and livelihood challenges.
This is a critical moment for action and partnership. Africa can be a major destination for climate investments. It possesses unparalleled talent, resources and sustainable growth opportunities. More than 90 percent of Kenya’s electricity is renewable, including geothermal sources in the Great Rift Valley. It is endowed with solar, wind, thermal and mineral resources that could power green industrialization and the global energy transition.
Additionally, Africa is home to dozens of cutting edge climate, agricultural, and financial tech startups building the future of climate resilient growth on the continent. Some of these companies, like Ignitia and Pula, are already serving millions of people across Africa and beyond. We anticipate some of the next great “green unicorns” will emerge from the continent, as entrepreneurs here deeply understand how the key current systems will need to evolve to be climate resilient in the coming decade.
The Costs Are Too High
While we urge the United States (U.S.), United Kingdom, European Union, and China to adopt more robust emissions reduction measures, current local political and macroeconomic landscapes suggest this may not occur within the next five years or at the scale that is necessary.
The cost of the global failure to invest now could spiral into a staggering $376 billion annually. Every dollar allocated to climate adaptation in this decade could generate twelve dollars in benefits. Simultaneously, our efforts to conserve critical ecosystems, biodiversity, and carbon sequestration are regressing. To cap warming at 2°C, at least 350 million hectares of threatened ecosystems need better management by 2030.
We cannot continue to “wait and see” if the carbon markets will correct themselves and scale from less than $2 billion today to the $100- $200 billion needed by 2030. Just like we do not have time for the U.S. and United Nations to design, debate and implement a global carbon tax, or wait for future adaptation investments in Africa to materialize. Because while pledges and promises are made around large tables, floods kill thousands in Libya and the Horn of Africa faced six consecutive droughts. The costs of waiting are simply too high.
The Path Forward: Bolstering African Solutions
Investing in Africa is not just the right thing to do, it’s also a tremendous global opportunity. With the right financing, Africa has the talent, resources and proximity to leapfrog other continents in creating climate resilient economic systems.
We believe that the path forward has five key components:
- Donors and development finance institutions need to invest in African innovation ecosystems and entrepreneurs: Increased funding is needed to catalyze the next wave of climate tech innovation and partnerships on the continent. African-led solutions are emerging, but we believe these can be accelerated ten-fold with more capital as we have seen in the U.S. and EU within climate tech ecosystems. In order to drive more capital to the continent, we need to generate more pipeline and illustrate the potential for compelling returns.
- Global funding allocators must activate climate funding, now: Instead of retreating from emerging markets and risk, development funding institutions need to be investing in companies and funds with an explicit climate orientation. They should increase investments across all modalities: debt, guarantees, technical assistance, equity, infrastructure project financing. We do not need new and more complex climate financial structures. Instead, we should focus on simple, scalable investment instruments successfully employed by major sectors, such as energy, infrastructure, and financial services. These investments will have a lag time of multiple years before they bear fruit, so we need to initiate them now.
- African governments must ensure policy and regulatory clarity in the carbon markets: Regulatory ambiguity is hampering the development of new carbon projects on the continent, and we cannot afford these delays if Africa is to achieve its goal of generating $100B annually from the carbon markets. In consultation with civil society and the private sector, African governments should clarify their policies regarding Article 6, the international trade of carbon, and the associated taxation. Given the estimated $150 billion a year invested into Nature-Based Solutions, African governments have an opportunity to establish the continent as a clear, inclusive and attractive market for financiers and developers.
- Align on regulation and frameworks that ensure financial markets drive nature-positive outcomes: The Taskforce for Nature-Related Financial Disclosures can become a framework for investors, companies and regulators to align on the holistic and risk-adjusted valuation of nature. The European Union’s groundbreaking regulations on supply chain transparency and the emerging climate / ESG disclosures should become the bedrock of major Global North markets. These initiatives must be coupled with funding that allows supply chains in Africa to reorient themselves to be transparent and compliant.
- Build resilience through increased public-private partnerships: The public-private partnership (PPP) in Kenya that established its subsea data cables played a major role in Kenya’s ascent as the “Silicon Savannah”, its groundbreaking mobile payment platform (M-PESA), and one of the most dynamic information and communications technology sectors in Africa. Many of the most pressing climate adaptation opportunities require collaboration between national governments and bleeding edge technology companies: integrated early warning systems, insurance for climate-related risks and agriculture, renewable energy and e-mobility solutions, anticipatory cash payments for disasters, and climate-resilient housing. Efforts to finance and streamline complex PPPs will be crucial to accelerate the widespread adoption of these climate adaptation solutions amongst those most in need.
The urgency of the climate crisis demands immediate, coordinated action. The Nairobi Declaration is a reminder that we are running out of time. It’s imperative that we come together as a global community to support these critical initiatives and ensure a more sustainable future for Africa and the world. With its talent, rising power and resources, Africa can, as declared by Kenyan President Ruto, “guide the globe towards inclusive climate action.” This is the world’s opportunity to advocate, support and finance this vision.
