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tralac Newsletter • Issue 46 • December 1, 2022
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Welcome to the tralac Newsletter
In this Newsletter we reflect and review the key developments at the United Nations Climate Summit, COP27, which came to a close on the 20th of November after two weeks of negotiations in Sharm El-Sheikh, Egypt. While it is highly questionable whether COP27 has lived up to its name as the ‘implementation COP’, a number of developments and ‘firsts’ are notable:
On the issue of curbing global greenhouse gas emissions and achieving the Paris Agreement goal of keeping global warming below 1.5C, many environmentalists are disappointed with the outcomes of COP27. In formal negotiations and the adopted text, Parties failed to agree to the calls of more than 80 countries to include a commitment to phase out all fossil fuels[1]. This is unsurprising given many countries’ current concerns about the availability and cost of energy as a result of Russia’s invasion of Ukraine. Instead, the final COP27 text, titled the Sharm el-Sheikh Implementation Plan, reused language from COP26’s climate pact which called on Parties to accelerate “efforts towards the phase-down of unabated coal power and phase-out of inefficient fossil fuel subsidies”.
While the negotiations were left wanting stronger emissions reductions and fossil fuel phase-out, a breakthrough was made on the issue of loss and damage. On the conference’s final day, Parties agreed to set up a fund for climate change ‘loss and damage’ to compensate vulnerable countries for the consequences of climate-related disasters[2]. Key decisions still need to be made on how the fund will operate, until which time its benefits for vulnerable countries, many of which are in Africa, will not materialise. However, reaching an agreement on the creation of the fund is still viewed as a surprising and promising development as reluctance from developed countries to even negotiate the issue had persisted for decades.
Another key development, that could set significant changes in motion in the global financial system, was growing calls from Parties for the reform of multilateral development banks (MDBs). A report presented at COP27, commissioned by the UK and Egyptian governments, shows that for developing countries to meet their financing needs, flows from MDBs should triple from $60bn annually to around $180bn annually within the next five years. This will require these institutions to improve the alignment of their spending with global climate goals. The World Bank has been singled out in this regard, in light of recent criticism around its perceived failure to provide adequate climate funding for poor countries[3]. Nicholas Stern, who co-authored the report, estimates that, with substantial reform, the World Bank could provide about half of the $2.4tn (£2tn) a year that the developing world will need for climate action from 2030[4]. These sentiments were reflected, for the first time, in the COP text. The Sharm el-Sheikh Implementation Plan states that delivering the funding for a global transition to a low-carbon economy requires ‘a transformation of the financial system and its structures and processes’.
The Implementation plan also emphasises the need for a robust global climate observing system, recognising that 60% of Africa does not have access to early warning systems. It highlights the need for achieving universal access to early warning systems in the next five years. Nature-based solutions were also included in the COP27 text for the first time (their mention was removed from COP26 at the last minute), recognising their value for mitigation and adaptation action when implemented with integrity[5].
While a single summit cannot be expected to resolve the climate crisis, COP27 will not be remembered for taking ambitious steps to address the route of the climate crisis. However, the focus on adaptation, financing, and loss and damage shows the important role that developing country groups, most of which prioritised the aforementioned issues, were able to play in steering the narrative.
We’re pleased to share a number of publications on COP27, and some of our other publications.
We look forward to your feedback
The tralac Team
[4] Songwe V., & Stern N, Bhattacharya A. (2022). Finance for climate action: Scaling up investment for climate and development. London: Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science.
[5] Seddon, N., Smith, A., Smith, P., et al. (2021). Getting the message right on nature-based solutions to climate change. Global Change Biology, 27(8), 1518–1546. https://doi.org/10.1111/GCB.15513
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UN Climate Change Conference (COP27)
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The United Nations Climate Change Conference (COP27) closed on 20 November 2022, delivering a package of decisions aimed at strengthening action by countries to cut greenhouse gas emissions and adapt to the inevitable impacts of climate change, as well as boosting the support of finance, technology and capacity building needed by developing countries. Take a look at some of our resources and commentary below.
COP27 Resources page
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COP27 outcomes – a reality check
A Promising Start to COP27: Climate Change Loss and Damage Makes it onto the Agenda
5 Key Developments from COP27
Downbeat start to funding South Africa’s carbon transition
Trade Report
Climate change, trade, and food security in Africa
The relationship between food security, trade and the environment is a complex but increasingly important one. The impacts of climate change have undermined progress in food security and threaten to continue setting Africa back in achieving the UN Sustainable Development Goal 2 of Zero Hunger by 2030. Trade plays a critical role in food security in the face of climate change, ensuring that food can move from areas with food surpluses to those facing food shortages. As climate change impacts regions and their food production differently, this balancing-out function will become increasingly important.
This Trade Report discusses some key asymmetries in the multilateral trade negotiations that need to be addressed in order to overcome long-standing inequities in the agricultural trade system and bridge the differences between developed and developing members. This will be necessary to strengthen the resilience of vulnerable countries’ agri-food systems to shocks. Key issues include public stockholding programmes, AMS allowances, and special and differential treatment provisions. It also discusses some adaptation measures that address the continent’s key climate-related challenges in the agricultural sector, outlining the potential of deeper regional integration to accelerate the transition to food system resilience.
See the related Infographic here.
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How the AfCFTA fits into Africa’s existing regional integration scheme The AfCFTA is a member-driven free trade area (FTA), not a customs union (CU), and has no supra-national institutions. It will not replace the RECs which have already formed FTAs, CUs, or common markets. It will exist alongside them and will preserve the acquis, meaning what has already been achieved in terms of regional integration, remains binding.
Floating LNG vessels in Africa: Africa’s gas future is floating offshore There is a growing trend in sub-Saharan Africa to deploy Floating Liquified Natural Gas (FLNG) technology to develop gas resources. Although generally much smaller (in terms of output), these units can be brought on-stream much more rapidly and cheaply than traditional on-shore LNG trains. FLNGs are increasingly seen as the solution to the problem of monetising African gas.
Kenya and South Africa sign deals to deepen bilateral relations South Africa and Kenya are taking steps to promote bilateral relations and to pursue strategic and political objectives. On 9 November 2022, the South African President visited Kenya and held talks with President William Ruto to explore areas of mutual interest and cooperation. They agreed on a reciprocal visa-free entry deal that will be rolled out from January 2023. The two Presidents also signed several Memoranda of Understanding (MoU’s).
Could Safeguards be used to promote Industrialisation? African countries face unique challenges and must develop industrialisation policies suitable for their conditions. Trade remedies and safeguards are not widely used in Africa, but detailed trade remedy and safeguard clauses are included in regional trade agreements. The African Continental Free Trade Area (AfCFTA) Agreement is an example. It has a dedicated Annex on Trade Remedies and Safeguards and detailed Guidelines, while REC FTA Protocols also provide for trade remedies and safeguards. How could they become more widely used and how could they support national industrialisation plans?
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The AfCFTA design will determine how it will function and evolve
Gerhard Erasmus
The African Continental Free Trade Area (AfCFTA) is anchored in legal instruments concluded by sovereign states. For trade in goods, the AfCFTA establishes, through its Protocol on Trade in Goods, a new Free Trade Area (FTA), not a Customs Union (CU). All 55 African Union (AU) Member States are expected to become AfCFTA State Parties, after they have ratified the AfCFTA Agreement or have acceded to it. Forty-four have already done so.
A pilot AfCFTA project, the Guided Trade Initiative (GTI), was launched in October 2022. Eight African States have signed up for this initiative, which allows for preferential trade in a limited number of products. However, this is not yet what the AfCFTA envisages. The Guided Trade Initiative is an interim trial run. It would be preferable if the whole scheme of things is put in place in order for the benefits to accrue.
This Trade Report discusses the process in terms of which the outstanding tariff schedules and RoO of the AfCFTA are being negotiated and how this arrangement can be expected to function.
How the AfCFTA began and evolved
Gerhard Erasmus
African economic integration has a long history, but 10 years ago the African Union (AU) Assembly adopted a decision that put matters on a new course. This decision dealt with boosting intra-African trade and fast tracking the establishment of the Continental Free Trade Area (CFTA), as it was then called.
When announced, the strategy for a continental trade arrangement contained little in terms of technical detail but chose to align existing African trade arrangements (the Regional Economic Community (REC) Free Trade Areas (FTAs)) with a new African continental trade regime. The fact that the Tripartite Free Trade Area (TFTA) was singled out as the first milestone event for a continental trade deal, is notable. Looking back, the TFTA made a significant contribution in terms of the principles on which the subsequent AfCFTA was built. The recognition that the REC FTAs would continue with the implementation of their own integration agendas and that other intra-African regional integration initiatives should be supported, was a deliberate and important choice.
This Trade Report discusses the TFTA and the impact it has on the AfCFTA negotiations in Africa’s quest for greater continental integration.
Profiling African value chains: Basic and gender dimensions
John Stuart
The AfCFTA Secretariat, in a recent report entitled The Futures Report 2021: Which Value Chains for a Made in Africa Revolution, identified certain industrial sectors and sub-sectors as potential candidates for value chain development under the AfCFTA agreement. The broad sectors included in their list were agricultural/agro-processing, textiles and leather, automotive, pharmaceuticals, mobile financial services and cultural industries. The intention of these Trade Briefs is to present the basic value chain metrics of the sector, including gender-disaggregated employment metrics, as a precursor to several more extensive studies forthcoming from tralac over the next few months.
The African Agricultural Value Chain
The African Clothing, Textile & Leather Value Chain
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