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The African Continental Free Trade Area (AfCFTA) brings high hopes for business and socioeconomic development – but the link between the framework and the environment is missing and needs to be included, reveals a UN study.

After being pushed back by six months, the AfCFTA came into effect on January 1, hailing a bright future for the continent’s trade. With 54 out of 55 African Union member states signatories of the deal – Eritrea is yet to sign – the idea that intra-African trade volumes could increase to match that of other continents is closer to becoming reality.

The AfCFTA creates a single market, eliminates tariffs on 90% of goods produced on the continent, and aims to tackle non-tariff barriers to trade that weigh on intra-regional flows.

While sustainable socioeconomic development forms a key pillar of the benefits of the agreement, the relationship between trade and the environment, or the ‘E’ in ESG, is yet to be woven in.

The environment is not the top priority of the deal – but as a forward-looking and long-term framework, it is a critical factor, as the world seeks to lower emissions under the Paris Agreement and recover from the pandemic.

A study published last month by the United Nations Conference on Trade and Development (UNCTAD) outlines the link between trade and biodiversity and the existing commitments under the AfCFTA.

“The link between trade and environment was not fully developed under commitments negotiated up to December 2020. In particular, the content needed to address sustainability had not yet been fully achieved,” it states. “The AfCFTA agreement would benefit from the… introduction of a specific protocol on trade and environment, with bio trade as one of its components.”

The UN defines bio trade as “related to the collection, production, transformation and commercialisation of goods and services derived from biodiversity (genetic resources, species and ecosystems) under environmental, social and economic sustainability criteria”.

It adds that bio trade activities have been implemented in more than 25 countries in Africa by partners in the personal care and food sectors, which make and trade products such as argan oil, baobab pulp, honey, marula oil and shea butter.

The trade of biodiversity-based products makes up an important part of African exports. In 2017, nearly US$78bn-worth of goods with a biological origin were exported by members of the African Union.

 

Looking to green and clean

Many African governments rely on natural resources, including oil and gas and mining, for a large bulk of their revenue. Such extractive industries are not environmentally friendly; in the oil and gas sector for example, extraction as well as burning fossil fuels have proven detrimental to the climate.

African markets do have options to navigate the greener production of energy. Countries across the continent could seize the opportunity to “leapfrog fossil fuel technologies and pursue a climate-friendly, needs-oriented power strategy”, according to a March study conducted on behalf of the German government.

However, the question of how realistic that would be remains unanswered. In the short term, researchers suggest it is unlikely. Earlier this year, Oxford University projected that total electricity generation across Africa will double by 2030, with fossil fuels continuing to dominate the energy mix.

The UN adds that the most difficult aspect of a green economic recovery from the pandemic for Africa will be “orchestrating a just transition for those impacted by a shift away from unsustainable practices or industries”.

Given the challenges in the move away from unsustainable sectors, it would seem even more important for the AfCFTA to include and encourage greener trade.

“More explicit inclusion of environmental provisions could play an important role for Africa as these types of provisions can be a way to ensure policy coherence, promote sustainable development and make sure that countries do not lower their environmental standards or derogate from them to gain trade and investment advantages,” states the UN.

 

Damning evidence

Governments around the world are becoming acutely aware of the impacts of climate change – and concerns have been brought centre stage by a damning report from the Intergovernmental Panel on Climate Change (IPCC). Published earlier this month, it states that people are the biggest driver of higher temperatures and that the main human influence on the climate is via combustion of fossil fuels.

Climate change is already affecting every inhabited region across the globe, with human influence contributing to many observed changes in weather and climate extremes, the IPCC adds. For Africa, it says that the frequency and intensity of heavy rains are projected to increase almost everywhere on the continent.

As a result of fears about climate change, investors are increasingly hesitant to finance fossil fuels, with projects being shelved and more stringent targets imposed for companies operating in the sector. Financiers are limiting their exposure – in part owing to concerns about returns on investment and exposure to losses.

One project that appears to have squeezed through and been kept afloat amid the pandemic is the US$3.5bn East African Crude Oil Pipeline (EACOP).

Earlier this year, operator Total signed agreements with the governments of Uganda and Tanzania and its partners – China National Offshore Oil Corporation, Uganda National Oil Company and Tanzania Petroleum Development Corporation – to launch the Lake Albert development.

But the heated pipeline, from Hoima in Uganda to the port of Tanga in Tanzania, has not escaped fierce criticism from activists. “We are living in a climate crisis fuelled by fossil fuels, which may have catastrophic impacts on the African continent,” Greenpeace stated in a blog in May. “Yet, in the midst of this, the Ugandan and Tanzanian governments together with oil firms have signed an accord to build the East African Crude Oil Pipeline.”