The Climate Finance and Energy Investment Dilemma in Africa

Abstract

Africa is a continent that has abundant renewable and non-renewable energy resources. Regardless of the presence of these resources, it is noted that the continent has significant challenges in providing reliable and modern energy services to most of its population, thereby increasing people’s dependence on biomass, and consequently hindering their potential to overcome poverty and attain the Millennium Development Goals (MDGs). Through a review of energy policies, energy sector studies, and socioeconomic development reports, this article provides some insights into how the renewable energy and non-renewable energy sectors can be enhanced in the context of current opportunities and challenges in Africa. Since the current state of technology is deemed sufficient to provide adequate energy for Africa, there should be an emphasis on developing the right institutions to make do with local energy resources and capital. Special attention is given to climate financing instruments (such as the Clean Development Mechanism [CDM]) and their potential contribution to African societies and energy sectors. With persistent interest by international donors to encourage CDM projects in least developed countries and growing foreign direct investment in Africa by Chinese firms, there are strong possibilities that Africa’s energy sectors, other infrastructure, and human and institutional capacity building can grow and develop more rapidly than historical trends. Enhanced private sector participation and energy sub-sector policies and strategies might hold the key to achieving this.