If fully implemented, the Africa Continental Free Trade Area (AfCFTA) will considerably increase African trade without adding significant pressure on climate change, according to experts who presented their research findings at a session on AfCFTA and industrialization in Africa. They agree that whether establishing a single or several carbon markets in Africa, continental coordination through AfCFTA around carbon pricing is desired.
The research session was held on day-2 of the African Economic Conference taking place in Addis Ababa, Ethiopia.
Simon Mavel an economist at the Economic Commission for Africa (ECA) presented a paper on Greening the AfCFTA. His findings showed that pursuing existing National Determined Contributions (NDCs), or establishing an African carbon market on top of the AfCFTA reforms, would substantially reduce greenhouse gas (GHG) emissions.
“Although there is a trade-off between reducing GHG emissions and spurring economic benefits, establishing an African carbon market is particularly effective at reducing GHG emissions, while largely preserving foreseen economic benefits from AfCFTA,” said Mavel. He added that an African carbon market is more efficient than existing NDCs in meeting Africa’s climate objectives.
Seutame Maimele, an economist at Trade & Industrial Policy Strategies (TIPS), explained that to mitigate the impact of the European Green Deal (EGD) in Africa, countries need to advance climate-resilient development through the creation of a regional green industrial policy for the continent, utilizing the AfCFTA and creating transformative industrialization.
“The African Union within the AfCFTA could lead to the creation of a regional carbon market which can be utilized for selling carbon credits. This market can also be used to retain the funds collected by the EU from the continent,” said Seutame in his research paper on the EGD and its implication for Africa. Regarding the debt for climate swaps, he said that to anticipate the climate debt that Africa will pay, it is important to put measures in place to hold the global north responsible for climate change.
In his paper on whether the Belt and Road Initiative (BRI) boosts industrialization in Africa, Abas Omar, a PhD candidate in Economics at the Research Institute of Economics and Management in China, indicated that the BRI is an alternative industrialization model for Africa. The push and pull factors for China’s go-global strategy.
“The BRI accelerated China-Africa investment. The majority of funds are in energy and infrastructure. Combining BRI membership and the value of infrastructure contributions is an indicator of the BRI’s channel of impact on Africa’s industrialization,” he said. Omar noted that, “The BRI significantly promoted Africa’s industry value addition. And while infrastructure alone is not effective for African industrialization, the BRI augments infrastructure to promote African industrialization. BRI matters for industrialization. Our study findings recommend an extended period of BRI membership, broader institutional and investment climate enhancements and a revision of national/continental priorities for the BRI’s second phase.
On how trade in services affects industrialization in sub-Saharan Africa, Bouraima Sawadogo, a Regional Integration Consultant at the African Development Bank (AfDB), said African countries need to include services as strategies in their industrial policies. “The acceleration of implementation of AfCFTA’s protocol will increase trade in services within the region resulting in a higher impact on industries that import services as inputs,” he added.