The discussion highlighted associated risks of asset stranding and its impacts on mineral-rich countries in Africa, as well as opportunities related to green transitions and economic diversification.
Stranded assets represent a double burden on countries through revenue losses and decreased economic growth, but can also lead to positive unintended consequences, including a decrease in illicit financial flows.
Participants at a side event held during the the 2019 UN Climate Change Conference in Madrid, Spain, discussed Africa’s development in light of potential asset stranding, and the need for African governments to implement effective natural resource planning to achieve low-carbon economies.
The event titled, ‘Africa’s Development in the Age of Stranded Assets: Managing Risks and Seizing Opportunities,’ defined such assets as “those that have become devalued or that countries are unable to monetize due to policy changes, disruptive innovation and/or social and environmental conditions.”
Facilitator Youba Sokona, Intergovernmental Panel on Climate Change (IPCC) Vice-Chair, explained that the IPCC Special Report on Global Warming of 1.5°C (SR15) indicates that limiting warming has co-benefits for achieving the SDGs and, noting that socioeconomic development and environmental concerns are “at odds” in Africa, stressed the need for political will to reduce emissions.
Africa must address the level of exposure to carbon market risk, burden sharing and knowledge management to ensure more efficient and effective resource use.
Fatima Denton, Director, UN University Institute for Natural Resources in Africa (UNU-INRA), introduced the discussion paper on ‘Africa’s Development in the Age of Stranded Assets,’ which highlights associated risks of stranding and impacts on mineral-rich countries in Africa, as well as opportunities related to green transitions and economic diversification. She said Africa must address the level of exposure to carbon market risk, burden sharing and knowledge management to ensure more efficient and effective resource use.
Jame Murombedzi, UN Economic Commission for Africa (UNECA), emphasized that the relationship between production and exploitation of Africa’s resources is historically linked to external interests, including debt, and that Africa’s ability to disinvest in carbon is related to its ability to pay off its debt.
Selam Kidane Abebe, Legal Advisor, African Group of Negotiators, highlighted risks in the region, including: legal risks due to commitments to treaties; social risks attributed to job losses that would result from decarbonization; and economic risks due to carbon-related foreign direct investment in Africa.
Other issues considered by panelists and participants include:
- stranded assets representing a double burden on countries through revenue losses and decreased economic growth;
- the need to direct benefits of resource exploitation to local communities;
- positive unintended consequences of stranded assets, including a decrease in illicit financial flows;
- legal, economic and social implications of an energy transition, given countries’ contractual obligations to private fossil fuel companies; and
- future fossil fuel discoveries and risks associated with extraction in a 2°C world.
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IISD Reporting Services is providing coverage of selected side events during the UN Climate Change Conference in Madrid.