Assessing the green wealth and natural capital of Africa

I encourage the co-chairs, His Excellency Presidents William Ruto of Kenya and Sassou Nguesso of the Republic of Congo, for their leadership on this agenda and for getting together with me to make sure that Africa’s abundant natural resources are taken into account when determining the continent’s wealth, or what I refer to as Green GDP.

Some of the world’s greatest natural capital is found in Africa, which also has 20% of the world’s tropical rainforest area, 65% of the world’s uncultivated arable land, 25% of the world’s biodiversity, and more than 40% of the world’s clean energy potential.

The Amazon forest is the world’s largest carbon lung, with the Congo Basin coming in second. Its primary forest covers 1.2 million kilometres and 314 million hectares.

The Congo Basin’s peatlands hold 29 billion tonnes of carbon. That is equal to the greenhouse gas emissions from the entire world for three years. Additionally, the Congo basin absorbs roughly 1.5 billion tonnes of carbon dioxide annually.

The woods of Africa are responsible for 26% of the global carbon sequestration in forests.

The continent is also home to a significant amount of non-renewable natural resources, including more than 80% of the world’s platinum reserves, 50% of the cobalt reserves (used in batteries), 40% of the manganese reserves (used in wind and solar farms), and abundant nickel, copper, and rare earth mineral endowments. With electric cars and battery energy storage systems anticipated to increase in value from $7.5 trillion to $59 trillion, these are essential for the worldwide green energy revolution.

Additionally, Africa has an almost limitless potential for renewable energy, including geothermal (15 GW), wind (110 GW), hydro (350 GW), and solar (10 TW) energy. These resources form the foundation of a more sustainable and low-carbon energy system.cg

Because of this, Africa’s enormous natural wealth has been disregarded, despite the fact that it greatly advances global public welfare by combating climate change. The GDP of African nations is valued without taking into account this enormous natural capital. For instance, the estimated GDP of Africa in 2018 was $2.5 trillion, which was 2.5 times less than the estimated value of its natural capital, which was $6.2 trillion and partially included a valuation of ecosystem services.

Africa is “green-endowed” but “cash poor” as a result.

Africa’s rebased GDP will be significantly larger when the continent’s large forest and environmental services, as well as its natural capital, are appropriately valued.

According to the African Development Bank’s first estimates, which are based on extremely conservative assumptions, adjusting for carbon sequestration alone might have resulted in a $66.1 billion rise in Africa’s nominal GDP in 2022.

That surpasses the GDP of forty-two African nations combined!

In order to increase the continent’s riches and financing, trillions of dollars will come from a realistic appraisal of Africa’s green GDP.

Developing carbon markets in Africa is one of the additional advantages of greening the GDP.

Many African nations are regrettably ceding large tracts of land to carbon credits today. Africa is a carbon price taker and is therefore short-changed, even though this would provide some short-term funding. Africa may have carbon prices as low as $3 to $10 per tonne, whereas Europe may have high prices as high as $200 per tonne due to the stringent EU Emission Trading Standards.

There are five ramifications to the massive sales of large tracts of carbon-rich African land, which I refer to as the “carbon grab.”

First, the undervaluation of Africa’s carbon sinks is causing the countries to get not enough for the carbon.

Secondly, the carbon that has been stored on the lands is no longer relevant to the country’s officially mandated commitments. Thirdly, the nations no longer have control over their territories. Fourthly, the carbon stored in these forests and lands cannot be used to rebase and revalue the nations’ green GDP. Fifth, there is no win-win situation with Africa’s current carbon grab.

Credit rating agencies will be able to take into account the genuine value of the entire asset class, which could improve a country’s risk profile. This is one reason why valuing Africa’s green riches correctly would open up more financial flows.

It is therefore time for Africa’s green environmental assets to be fairly valued so that the continent may profit from its enormous green assets by include them in its “green” GDP.

This will increase the continent’s financial resources significantly, encourage more green investments, and offer improved policies for the greening of African economies in order to promote sustainable development. By properly valuing its carbon sinks and environmental services, Africa would be able to produce far greater income, which will enable it to cover its debts and ensure debt sustainability.

The measurement of Africa’s green wealth is long overdue. It is time for Africa’s natural capital to be taken into account in its GDP. Africa has a lot of money and needs to go green.

The African Development Bank has released a research titled “Measuring the Green Wealth of Nations: Natural Capital and Economic Productivity in Africa,” which I am happy to share with you. Your tables will have the report. This paper lays out important steps to incorporate and value natural capital into the GDP of Africa.