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EU Suggests Green Bonds for Africa Climate Response :: Uganda Radionetwork

EU Suggests Green Bonds for Africa Climate Response

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Green bonds are emerging as possible options for climate change financing in countries to supplement public financing.
06 Sep 2023 16:59
Ursula Von Der Leyen, president of the European Commission (EC) recieved by Kenyan President William Ruto at aunch of gree hydrogen .

Audio 4

Ursula Von Der Leyen, president of the European Commission (EC) suggests green bonds as part of the initiatives to help Africa to attract climate financing.

Von Der Leyen made the commitment on Tuesday at the Africa Climate Summit (ACS) in Kenya.

She said the EU Commission put forward the Global Green Bond Initiative to attract private investment in climate financing.

Green bonds are emerging as possible options for climate change financing in countries to supplement public financing. Ursula Von Der Leyen admits that there is a need for a conversation of climate financing at the global level especially when leaders meet for the UN Climate Change Conference in Dubai in November.  

She notes that the transition to green energy will require an unprecedented scale of private investment. 

“Public Finance will not surface. This is true for Europe, but it is also true for emerging markets and emerging economies” she said. 

////Cue in “Private Capital will need....    

Cue Out.... its called the Global Green Bonds Initiative” ///

The Global Green Bond Initiative is relatively new and yet to spared across the world. It is hoped that bonds can facilitate the flow of private capital from institutional investors into climate and environmental projects in EU partner countries. 

The fund's anticipated impact could spur green investments totaling up to €15-20 billion. As she announced the initiative, Ursula Von Der Leyen recognized the fact that emerging economies can face difficulties in accessing the capital markets but she said the EU is willing to assist. 

“Europe has the most advanced green bond market in the world. So we are ready to share our expertise with your teams on how to develop your own green bond markets” 

She said together with the European Investment Bank, the EU Commission will allocate one billion euros to de-risk private investments in emerging markets. 

With such funding, she hopes that up to twenty billion euros in private investment could be attracted into sustainable investment. 

Some studies have seen a minimal inflow of climate financing to Africa using green bonds. 

According to a recent study by the Nordic Development Fund, out of all globally issued bonds in 2021, only 5.8% were green bonds, and Africa accounted for only 0.077% of issuances. 

According to the World Bank, global sustainable bond issuance reached more than $1.1 trillion in 2021 and is expected to surpass $1.5 trillion in 2022. It however said sovereign sustainable bond issuance was still quite limited representing only 11 percent of the total in 2021. 

In Africa, there have only been four sovereign issuers of global sustainable bonds. Apart from the Green Bond Initiative, the EU Commission President announced a 150-billion-euro investment plan specifically designated for Africa. She revealed that the Global Gateway. 

These EUR 150 billion are aimed to support investments ranging from hydropower plants in the DRC, Burundi, Rwanda, and Tanzania, to the EUR 1 billion Initiative on Climate Adaptation and Resilience in Africa.

///Cue IN “ And Global Gateway is... 

Cue out.... a clear win-win”/// 

The other funding option for climate change financing is the carbon tax. 

But President William Ruto of Kenya called for a debate about tax. 

“This is the continent that is the lungs of the world. We have the largest natural carbon sequestration infrastructure. In fact, we dare say that if there was a company collecting garbage globally, I’m talking about carbon garbage Africa would have the largest shares” said Ruto

“The only problem is that those who produce the garbage refuse to pay their bills and profile the company as broke. When it is actually that have refused to pay the bills”  

/// Cue in “To be able to.... 

Cue Out ....so that we all pay the same” //// 

Ursula Von Der Leyen agreed with President Ruto that setting a carbon price was one of the most effective and efficient tools. “Because it fosters innovation by the private sector that is crucial. Because it makes heavy polluters pay a fair price. And because it creates revenues that can support a green transition in developing countries.

” ////Cue IN “And this includes...

. Cue Out....we have to get there”///

She did not turn a blind eye or a deaf ear to the growing call by African leaders about the need to reform the International financing architecture, especially the World Bank and IMF policies.  

//// Cue In “We fully support....    

Cue Out.... action absolutely”./// 

Her remarks seem to high light some of the EU position/ negotiating issue at the t COP28. Those will include attracting private investment to Africa, carbon pricing and carbon credits, and setting global targets for the energy transition.