Osinbajo pushes for debt-for-climate swap

In a call that can both significantly advance the trajectory of global net-zero emissions goals, facilitate energy access and development for African countries, Vice President Yemi Osinbajo, SAN is proposing an agreement to debt-for-climate (DFC) swap.

Explaining the DFC concept at a conference on Just and Equitable Energy Transition for Africa at the Center for Global Development in Washington DC, Osinbajo said that “debt for climate trading is a type of debt swap where the Bilateral or multilateral debt is canceled by creditors in exchange for a commitment by the debtor to use outstanding debt service payments for national climate action programs.

“As a rule, the creditor country or institution agrees to cancel part of a debt, if the debtor country would pay the payment of the avoided debt service in a local currency into an escrow or other transparent fund and the funds must then be used for agreed climate projects in the debtor country”.

Justifying the rationale for such a debt swap agreement, the Vice President argued that the commitment in this regard would “increase fiscal space for climate-related investments and reduce the debt burden“. participating developing countries.

“For the creditor, the swap can be made to count as a component of its Nationally Determined Contributions (NDCs).”

He added that to make this effective “there are of course significant political actions needed to make this acceptable and sustainable”.

The Vice President also proposed greater participation of African countries in the global carbon market while exploring financing options for the energy transition.

According to him, it is necessary to adopt a holistic approach by working jointly towards common objectives, including the commercial and environmental opportunities presented by the financing of clean energy assets in growing energy markets.

His words: “In addition to conventional capital flows from public and private sources, it is also essential that Africa can participate more fully in the global carbon finance market.

“Currently, direct carbon pricing systems through carbon taxes are largely concentrated in high- and middle-income countries. However, carbon markets can play an important role in catalysing the deployment of sustainable energy by channeling private capital into climate action, improving global energy security, providing diversified incentive structures, especially in developing countries, and giving a boost to clean energy markets when the economics of prices seem less compelling – as it is today.

He encouraged developed countries to help “Africa become a global provider of carbon credits, ranging from biodiversity to energy credits,” which would be a leap forward in aligning carbon pricing and policy. related around a just transition.

While also addressing the concerns of the African continent and other developing countries regarding a just transition, Professor Osinbajo noted that “the central thought for most developing countries is that we are faced on this issue of a just transition just two existential crises, not one; the climate crisis and extreme poverty.

“The clear implication of this reality is that our plans and commitments to carbon neutrality must include clear plans on energy access if we are to tackle poverty. This includes access to energy for both consumptive and productive use and covering electricity, heating, cooking and other end-use sectors.

According to him, “nearly 90 million people in Asia and Africa who previously had access to electricity can no longer afford to pay for their basic energy needs. Inflationary pressures caused by the COVID-19 pandemic and other macroeconomic trends have been further exacerbated by the ongoing war in Ukraine.

“Countries around the world have been hit with record high prices on all forms of energy. Electricity prices are breaking records around the world, especially in countries or markets where natural gas plays a key role in the energy mix.

Members of the Energy Transition Implementation Working Group (ETWG) present at the conference included the Minister of Public Works and Housing, Babatunde Raji Fashola; Minister of Finance, Budget and National Planning, Dr. (Ms.) Zainab Ahmed; Minister of the Environment, Mohammed Abdullahi; Director General and CEO of the National Council on Climate Change, Salisu Dahiru; the Ambassador of Nigeria to the United States of America, Dr. Uzoma Emenike, the Special Representative of the United Nations Secretary General for Sustainable Energy for All (SEforALL), Ms. Damilola Ogunbiyi; Managing Director of Niger Delta Power Holding Company Limited, Chiedu Ugbo; and other senior officials.

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