PROPOSALS FOR A CLEAN ENERGY INVESTMENT FRAMEWORK FOR AFRICA: Role of the African Development Bank Group

PROPOSALS FOR A CLEAN ENERGY INVESTMENT FRAMEWORK FOR AFRICA: Role of the African Development Bank Group

Executive Summary

1. Climate change has emerged as an important challenge facing Africa and, indeed, much of the world in the 21st century. In the light of the mounting evidence of its causes and effects, the Heads of State and Government of the G8 States, at their Gleneagles Summit in July 2005, called upon the World Bank and other multilateral development banks (MDBs) to prepare specific proposals to address three inter-related challenges: expanding access to reliable energy supplies particularly for the world’s poor; promoting investment in clean energy and low-carbon approaches to economic
development; and supporting developing countries in undertaking concrete measures to adapt to climate
change and strengthen their capacities to manage increasing climate variability and extreme weather
events .

2. This framework paper contains the response of the African Development Bank to the request of the G-8. It presents a comprehensive framework for dealing with the challenges of increasing energy access; at the same time, making maximum use of clean energy options in Africa. The paper focuses on the energy aspects. It deals with the key issues, challenges, opportunities as well as the resource requirements and the role the Bank will play in expanding energy access and developing clean energy – contributing to global climate change mitigation efforts – in its regional member countries (RMCs).

However, work also continues in parallel to develop the AfDB Group’s Climate Change Risk Management Strategy. Indeed, Senior Management has reviewed and approved a Concept Note on the preparation of the strategy. The full report is expected early 2008. All aspects of the energy access, climate change mitigation, and adaptation challenges will then be addressed holistically in an Action Plan on Clean Energy and Climate Change that will be finalized by mid 2008.

3. Expanding energy access is a priority for Africa. Rational long-term planning taking into account economic, social and environmental costs would increasingly shift the balance in favour of a low-carbon path to development and poverty reduction. As one of the regions most vulnerable to global warming, Africa has a vested interest in rendering effective support for global mitigation efforts. The continent has a number of options for clean energy development with enormous potential. African countries, especially in Sub-Sahara Africa, need to make greater use of their huge largely untapped renewable energy potential – especially hydro-power, geothermal energy, solar and wind power, and more efficient
utilisation of biomass. The development of such energy options could be financed in part by sale of CDM-certified carbon emission credits.

4. Financing requirements for clean energy are enormous and call for concerted efforts by development partners and governments alike. The Bank Group will endeavour to provide financing through its concessional and non-concessional windows. With a view to mobilising greater resources for the continent, the Bank will seek greater leverage for its resources by working more closely with RMCs on creating enabling policy and institutional environments conducive to private sector investment. To the same end, the Bank will build stronger collaboration with partner institutions. As the unique multilateral financing institution dedicated exclusively to Africa, the AfDB is in a position to take on the role of providing coordination, brokerage and syndication services to RMCs, bilateral and multilateral institutions, and private development partners, in support of energy access and low-carbon development strategies. This paper proposes the
creation of a multi-donor trust fund on clean energy access and climate adaptation for Africa, to spearhead Bank support to RMCs on the three challenges, including provision of pre-investment support at the national and sub-regional level. As part of the follow-up actions, Management will commission a feasibility study on creating the proposed facility.
5. The Boards of Directors are invited to approve the proposed Clean Energy Investment Framework for Africa and the timeline of activities as outlined in this report

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