Experts highlight AfCFTA’s role in balancing economic growth against climate action

Joy Agwunobi 

Implementing the African Continental Free Trade Area (AfCFTA) is projected to boost intra-African trade by 35 per cent by 2045, while increasing greenhouse gas emissions by less than 1 per cent . This was one of the key insights presented during the 8th Babacar Ndiaye Lecture, held at the Four Seasons Hotel in Washington D.C.

The event brought together a distinguished audience of policymakers, academics, financial experts, and climate advocates to explore the intersection of trade and climate change, emphasising the urgent need for African nations to harmonise immediate developmental goals with long-term environmental sustainability.

The lecture themed “Saving Lives Today versus Saving the Planet for the Future: Can the AfCFTA Resolve the Climate Change Dilemma?”underscored the importance of finding a balance between the pressing need for economic growth and the imperative of protecting the environment. The discussions aimed to showcase how the AfCFTA could serve as a vehicle for not only economic growth but also for fostering a greener economy across the continent.

Yemi Osinbajo, former vice president of Nigeria, delivered a  keynote address titled “Sustainable Infrastructure for Africa’s Future: Harnessing Innovation and Partnerships.” In his address, Osinbajo referenced a ECA/CEPII study published in December 2023, which found that implementing the AfCFTA could lead to significant economic benefits while ensuring minimal environmental impact.

He emphasised that the study’s projections do not factor in the potential use of renewable energy sources for processing and manufacturing traded goods—a critical aspect of the Climate Positive Growth paradigm that could further mitigate emissions.

Osinbajo pointed out, “There are two obvious advantages to a fully operational AfCFTA. The first is that 42 per cent of African countries, aside from North Africa, now have legislation prohibiting the export of raw ores or minerals before they are processed. This legislation allows African countries to benefit from job creation and increased revenues through local processing and manufacturing.”

Secondly, according to him, the current trade practices contribute extensively  to carbon emissions due to the long-distance shipping of raw materials for processing in regions powered by fossil fuels before being shipped back to Africa for consumption. He stated that by enhancing intra-African trade in finished goods, the AfCFTA could drastically reduce these emissions and create a more sustainable economic model for the continent.

He further referenced the findings of the ECA/CEPII study, which indicated that implementing the AfCFTA could increase intra-African trade by 35 per cent  by 2045 while raising greenhouse gas emissions by less than 1 per cent .

To illustrate his point, Osinbajo cited Guinea’s vast bauxite reserves, noting, “If Guinea, which holds 25 per cent  of global bauxite deposits, processes the bauxite it mines into aluminium using renewable energy before export, it could save the world 335 million tonnes of carbon dioxide equivalent (CO2e) per year, representing roughly 1% of global emissions. This would also create 280,000 jobs and generate an additional $37 billion in revenue. Selling the aluminium within Africa would again save on substantial shipping costs.”

 According to a study conducted by Bloomberg for the African Development Bank (AfDB) in 2021, manufacturing battery precursors in the Democratic Republic of the Congo (DRC),which is rich in lithium and cobalt—is three times cheaper than in the US, EU, or China. This manufacturing hub in the DRC could create value chain opportunities for other African nations, as they would supply essential manganese from Zambia, Tanzania, Gabon, and South Africa. Additionally, utilising Africa’s abundant renewable energy could further lower manufacturing costs, providing a reliable and continuous power source for industrial production due to its minimal seasonality and intermittency.

“The AfCFTA empowers African countries to add value to materials and specialise in areas of national comparative advantage, enabling them to trade more beneficially with the rest of the world,” Osibanjo noted.

He noted that many African countries rely heavily on fossil fuels for energy and as a key source of export earnings “With a growing trend among development finance institutions to withdraw from fossil fuel investments, including the World Bank’s decision to cease funding for upstream oil and gas development in Africa, the implications of these actions are dire,” Osinbajo stated,adding t that divesting from fossil fuels could result in significant GDP losses,with Nigeria potentially losing up to $30 billion, Algeria $22 billion, and Angola $19.3 billion.

Other speakers  shared Osinbajo’s views, emphasising similar concerns and insights, Rania A Al-Mashat, Egypt’s minister for planning, economic development and international cooperation, emphasising that while Africa is the least responsible for carbon emissions, it bears the heaviest burden in financing climate change initiatives.

She advocated for increased collaboration among national and international stakeholders to enhance Africa’s capacity for sustainable development.

Amina J. Mohammed, the deputy secretary-general of the United Nations, highlighted the rapidly closing window to prevent the worst impacts of climate change. She expressed concern over many African nations’ debt levels and limited access to long-term concessional financing for sustainable development.

“With adequate access to financial resources at a reasonable cost, renewables can dramatically boost economies, grow new industries, create jobs and drive development, including by reaching the over 600 million Africans living without access to power,” Mohammed said.

She also stressed the importance of prioritising inclusive policies that empower women and youth when building climate-resilient economies. Mohammed noted that by leveraging the collective strength of the African Continental Free Trade Area (AfCFTA), Africa could advance both climate action and sustainable development, promote regional integration, and encourage green industrialisation.

“The AfCFTA can contribute to building resilient economies while generating jobs, alleviating poverty, and improving food security,” she added.

Benedict Oramah, president and chairman of the board of directors of Afreximbank Group, expressed concern that the global debate on climate change often focuses primarily on emissions reduction, sidelining the impacts on Africa and other developing nations.

He noted “the global debate on climate has been so much focused on emissions reduction with the question of reducing its impact on Africa and other developing countries always reduced to a footnote. A call for Africa to decarbonise, when the continent has not even carbonised, poses a serious threat to the socio-economic development of a gas-rich continent that has at least six hundred million people without electricity.”

Oramah highlighted that the African Continental Free Trade Area (AfCFTA) represents an opportunity for reducing carbon emissions. He explained that the AfCFTA facilitates the localisation of industrial activities, which minimises emissions associated with shipping commodities long distances for processing and resale. “We believe the AfCFTA could provide a pathway to a just transition, enabling local industrial value addition while also safeguarding the planet,” he added.