Summary
- Africa faces a climate financing shortfall of 5% to 10% of GDP, with the carbo-intensive economies of North and Southern Africa contending with an even bigger financing gap.
- Fossil fuel subsidies and environmental taxes are potential sources of additional finance, constituting around 1.7% and 1.1% of Africa’s GDP, but their use in fuel or electricity price stabilisation limits climate mitigation funding.
- African countries must establish independent, self-financing and off-budget fuel and energy reserve authorities and redirect fossil fuel subsidy funding from pro-cyclical price management to climate mitigation.
- Africa’s largest, most energy-intensive and internally subsidised economies have more leeway for redirecting additional fiscal resources towards gearing in the climate transition.
- Countries must also review domestic financing commitments to Nationally Determined Contribution plans and introduce new environmental tax instruments with which to create national climate adaptation funds.
