Africa needs a transformative methane strategy at COP28

To accelerate methane action, Africa needs a transformative strategy that will reduce perceptions of risk associated with investment projects, introduce sustainable financial models, and foster cooperation with multidevelopment institutions.

The call for action was emphasized during a high-level panel titled “Financing Methane Action in Africa”, that was organized by AfriCatalyst, a leading global development advisory firm.

While discussions about carbon have dominated pre-COP28 conversation, methane, is becoming a serious challenge across the continent. The African Development Bank (AfDB) reports that methane emissions in Africa reached a critical 4.7 million tons in 2022, and the continent now accounts for a third of the world’s total methane emissions.

However, only 2 percent of climate financial flows are dedicated to combatting this challenge, and just 25 countries have signed up to the Global Methane Pledge, that seeks to reduce methane emissions by 30% by 2030.

“Financing methane action faces a number of challenges. First, is the limited awareness and the debate on methane abatement in Africa and how to finance methane abatement efforts across the continent. There is strong evidence that if we do have ambitious methane abatement objectives in Africa, certainly we will be able to make the continent meet its commitments under the Paris Accord,” Daouda Sembene, Africatalyst CEO remarked.

At the Africa Climate Summit in Nairobi this September, a unified call emerged from African leaders: a push for developed nations to increase climate financing to Africa. The continent faces a staggering annual loss of 9% of its GDP due to climate disasters. This economic strain is compounded by the ongoing repercussions of the COVID-19 pandemic and geopolitical instabilities, such as those in Russia-Ukraine and Israel-Palestine. Amidst these challenges, there’s a growing recognition of the need for local strategies in mobilizing finance for methane action, viewed as a critical step in turning the tide against climate change in Africa.

“Last year, the African Development Bank allocated 45% of its budget financing to climate action, and we are committed to meeting the Paris Agreement targets by 2025 through applying greenhouse gas accounting tools to estimate methane emissions reduction from each of our projects. We are also championing the Africa Climate Change Fund that will be launching the call for project applications early next year around four key methane emitting areas: agriculture, waste, mining, and energy,” said Dr. Al-Hamndou Dorsouma, Division Manager, Climate and Green Growth Development at African Development Bank Group.

As the world focuses on carbon credits, little attention has been paid to initiatives such as a methane tax which could reach up to $70 per tonne. These could play a significant role in unlocking new streams of financing for climate action. However, without careful implementation and collaboration with key private sector players, methane tax could inadvertently place a financial burden on consumers.

“There is a need to scale up the applicability and accessibility of carbon markets, how do we do cross-border financing and not deal with unintended consequences. Any investment in methane abatement should be seen not as a fossil fuel – oil and gas – issue, rather as decarbonization efforts,” emphasized Mark Jonathan Davis, Chief Executive Officer at Capterio.

The perception of risk attached to Africa by global rating agencies plays a significant role in hindering investment, despite it being untrue. “Africa is the least risky region to do investment in infrastructures – the default rate for financed projects is only 5.5%, the lowest in the world,” Abdoul Salam Bello, Executive Director of the Africa Group II, at the World Bank Group observed.

To attract additional investment in methane action, Africa will need to change global perceptions of risk and make methane projects risk-free and attractive to investors.

“We need to change the narrative of risk by harnessing digital technologies, exploring concessional funding, and establishing a one-stop shop for all investing instruments,” added Bello.

Katherine Stodulka, Director for the Blended Finance Taskforce & Partner at Systemiq, further implored, “Multi development banks (MDBs) should push rating agencies to understand the benefits of investment projects in Africa, the low levels of default, and to have a clear dialogue with African countries that urgently need the investment to carry out methane action.”