Greening Asia for the long haul: What can central banks do?
Here in Hong Kong, Category 8 typhoons used to be infrequent. Just as floods in Germany and massive wildfires in California were disasters we might see every decade or so. Sadly, this is no longer the case. In one week alone this October, Hong Kong saw two Category 8 typhoons. Earlier this year, floods devastated parts of central Germany, and California saw five of the largest wildfires in its history in 2020. Hong Kong, Germany, and California are not outliers. Extreme weather conditions have been documented in much of the world.
It is widely recognized that climate change implies more frequent and severe weather events, greatly increasing the physical risks to financial and economic stability. In the absence of urgent action, the impact will be widespread and affect most countries, people’s lives and livelihoods, and many industries. The financial sector will be no exception.
Central banks have an important role to play in responding to this challenge. They are interested in these issues for at least three reasons: (i) preserving financial stability as societies move toward reducing their carbon footprints; (ii) diversifying the investments of central bank reserves to minimize unnecessary risks; and (iii) in keeping with their mandates and expertise, providing support to global efforts to achieve the objectives of the Paris climate accord.
The Asia-Pacific region has the largest need for infrastructure investments, around $1.7 trillion per year for developing Asia alone, according to the Asian Development Bank (ADB). Much of this needs to be green investment. It is also among the most vulnerable regions if actions to combat climate change are not taken urgently. At the same time, Asia has, relatively speaking, an extremely large pool of foreign exchange reserves, at around $5.7 trillion by the end of 2019. So, there is a clear case that we need to find a way to bring these two together and do so creatively and safely. The BIS Asian Green Bond Fund is an attempt in this direction.
The fund is designed to provide central banks with opportunities to invest in high quality bonds issued by sovereigns, supranationals, and corporations that comply with strict international green standards. It has two distinct features. First—compared to the BIS’ previous green bond funds—it has a broader group of eligible issuers. It will invest in corporations, including financial firms, because much of the financing in Asia is through commercial banks rather than directly from capital markets. Second, the BIS has engaged with multiple international financial institutions and development finance institutions—the ADB, the Asian Infrastructure Investment Bank, the World Bank, and the International Finance Corporation—to explore opportunities for collaboration to develop a pipeline of green products in the region to invest in. These institutions also have expertise on the ground to ensure that the highest standards are being followed in forming these green investment opportunities to allay concerns about greenwashing.
On the technical side, in line with reserve managers’ appetite for safety, liquidity, and return, all central features of the BIS’s financial products, the Asian Green Bond Fund would be established as a BIS Investment Pool (BISIP), a collective investment scheme structured under Swiss law that is commonly used by the BIS for its fixed income investment products.
While the fund would provide the opportunity for central banks to invest their reserves into greening the economies in the region, the fund is not restricted to investors from Asia. Broad interest to invest in the fund has been expressed by central banks well beyond Asia, reflecting the need of the global central banking community for reserve diversification. Regardless of the domicile of the central bank, central bank investments are generally made with a long-term investment horizon in mind. The fund will thus help channel global central bank reserves to green projects for long-term sustainable growth in the region, which has contributed more than two-thirds of global growth in the past decade.
In light of the fast-changing developments of the green bond market in the Asia-Pacific region, the Asian Green Bond Fund will be an evolving fund, allowing it to be agile and make changes as needed. For example, while the fund will be denominated in U.S. dollars initially, green bonds denominated in Asian local currency will be considered at its first and/or second anniversary. Similarly, while ICMA (International Capital Market Association) and CBI (Climate Bond Initiative) standards will be used at the start, the BIS is open to alternative standards, for example, for bonds funding projects that may not be green at present but are aligned with a transition toward low-carbon activities.
Technologists often say: “Think big, start small and scale fast.” That is how the BIS too plans to approach this endeavor. The Asian Green Bond Fund will represent an important addition to the existing suite of green bond funds at the BIS. As the fund evolves, it will also allow central banks to consider ways of expanding green financial markets, either through diversifying into regional currencies, or by considering the next generation of sustainable bonds adhering to even stricter standards and aligned to the objectives of the Paris accord.
Status check: Managing debt sustainability and development priorities through a ‘Big Push’
Executive Summary
Emerging market and developing economies (EMDEs) have seen development prospects fade in the two years since the onset of COVID-19. Growth turned negative in 2020, is forecast to snap back in 2021, but then revert to a declining trend.1 Investment levels in Latin America and Africa are forecast to remain in the range of 20-25 percent of GDP in the medium term. Outside of Asia, prospects for growth and for convergence with advanced economies are dim. Unlike in advanced economies, the GDP trajectory in EMDEs post-COVID-19 is significantly lower than pre-COVID-19 estimates; 31 developing countries may have lower levels of GDP per capita in 2025 than in 2019.
Meanwhile, general government debt levels in EMDEs have risen by 9 percentage points of GDP. At current low levels of world interest rates, the debt service implications are manageable for most countries, but risks remain if inflation causes major central banks to raise interest rates. As a result, EMDEs are under pressure to cut public spending, even in face of higher needs to respond to the pandemic.
The present trajectory, therefore, is one of slow growth, low investment and public spending, and rising debt service burdens in many, if not most, EMDEs. There is significant risk that this trajectory will prove unsustainable for economic, social, or political reasons.
The current trajectory is also highly inefficient, with high-return projects in EMDEs left unfunded due to debt overhang considerations, and highly inequitable, with poor and vulnerable countries and populations left to manage the pandemic with limited support.
Related Content
Global aspirations for a universal transformation to a low-carbon economy and a “just transition” are not likely to be met in the current baseline scenario for the global economy because EMDEs are central to both objectives and without additional public spending neither transition will happen.
There is another way forward, one that offers better prospects for global growth and equity, with lower risks of systemic debt defaults. Rather than relying on austerity, it is a path that seeks to accelerate green, inclusive and resilient growth. This path takes advantage of historically low prices of energy, made possible by technological advances in renewables, and of historically low interest rates on international capital markets to undertake a “big push” to transform economic structures and accelerate growth.
There are four key ingredients of the “big push” approach.
First, a set of investments needs to be identified to achieve the desired transformations. The country-by-country analytical work on which this paper draws suggests that EMDEs (ex-China) should be increasing their investment rates by about 3-4 percent of GDP above pre-pandemic levels in order to provide adequate growth of zero-carbon energy and infrastructure, sustainable agriculture, forestry, and land use (AFOLU), adaptation and resilience, and human capital. This translates into incremental annual investments of about $1.3 trillion by 2025, and more thereafter.
Second, a financing plan is needed that is aligned with the types of expenditures being considered. The proposal advanced here is for an even split between domestic and external financing. The latter, in turn, can be mobilized from ODA, multilateral and other official financial institutions, and private capital. These are not fully fungible—each has a role to play.
Domestic resource mobilization is a core component of any investment strategy. It is essential for general purpose financing like human capital and recurrent spending on nature and adaptation. Thus, a key part of the big push strategy is improving developing country tax administrative capacity, while reducing fossil fuel subsidies. The needed increase of 2.7 percentage points of GDP is well within the range of possibilities identified by the IMF. Additional revenues may accrue from new regulations governing base erosion and profit shifting (BEPS), but the current G-20 agreement may not yield much for many developing countries in the medium term. Stronger international efforts are also needed to stem illicit financial flows and encourage greater information sharing between tax authorities in advanced and developing countries.
Concessional finance is needed to help poor countries, to promote equity, and to incentivize countries to invest adequately in global public goods that have international spillovers—for example, mitigation, nature, and pandemic preparedness. Bilateral donors have already pledged to double climate finance from $30 billion to $60 billion, and agreement seems likely on a $100 billion IDA20 replenishment by year’s end. However, more is needed. ODA in 2020 from DAC countries amounted to only 0.32 percent of their GDP. A new collective agreement is needed to back the transformational change that is proposed here. Our approach calls for a 50 percent increase in concessional finance relative to 2019 levels, an incremental $96 billion by 2025. This is equivalent to 0.15 percent of donor GDP.
Our proposal is not just a call for more ODA, defined as money designed to promote the welfare of developing countries. As the past year has shown, weak health systems and pandemic surveillance in one country have global repercussions. The point is that provision of concessional finance for implementation of global public goods in developing countries benefits advanced countries as well as developing countries. Our proposal calls for a mixture of ODA and a fair funding of global public goods on concessional terms.
Multilateral finance and other official finance. Multilateral development banks (MDBs) are able to offer lower cost loans at longer maturities than other lenders, making debt more sustainable. They could stretch their current balance sheets by making better use of callable capital and reforming statutory lending limits—perhaps freeing up headroom for an additional $750 billion to $1.3 trillion of loans. Other reform efforts, including balance sheet optimization, greater risk pooling, greater use of blended finance and guarantee facilities, and asset sales could also help expand MDB lending. Our proposal calls for MDBs to triple their lending levels, from $63 billion in 2019 to $189 billion by 2025.
Private capital can be attracted into sustainable infrastructure projects, which generate revenue streams to cover equity returns and the debt service associated with the project. There are currently both supply and demand side obstacles that have prevented the scale-up of greater private investment in developing countries: a lack of bankable projects, and a limited appetite for long term investments with perceived high risk. New institutional innovations, such as the development of country platforms, standardized processes, and experience with risk-mitigating official finance suggest that a rapid ramp-up in private finance is now feasible. Our proposal calls for an approximate doubling of the 2019 level of private finance for infrastructure in developing countries by 2025. MDBs and other development partners will need to be more proactive to mobilize and catalyze private finance on this scale.
The third element of the “big push” is policy and institutional reform in countries to ensure that investments generate maximum returns. These reforms are partly sectoral (carbon equivalent taxes and removal of fossil fuel subsidies are clear examples) and partly cross-cutting. Reducing corruption and bureaucratic red tape, increasing voice and citizen participation, and consideration of gender issues are examples. Many countries have the capacity to absorb far larger amounts of investment than they actually receive. To illustrate, the IMF’s public investment management assessment scores African countries at 4.4 compared to 4.5 for Asia. Yet Asian countries profitably invest 15 percentage points of GDP more than African countries. The dispersion in scores is large, suggesting some countries have considerable room to improve, but equally suggesting that other countries have reasonable policy frameworks in place already.
The fourth and final element of the “big push” is international coordination. A “big push” will not work without a concerted global plan and agreement. In some cases, this reflects the need for global policy coordination—the BEPS agreement, proposed measures for carbon taxes and standardized approaches in blended finance are examples. More fundamentally, however, international coordination is needed to change mindsets about appropriate policy. No finance minister in an EMDE will support a big push strategy if this is not approved by the international financial institutions that s/he will rely on to provide needed resources. No private investor will willingly provide funds into a high-debt situation without clarity on how debt work-out mechanisms will operate. No civil society advocate will support a big push without greater transparency on how funds will be spent by their government.
All this suggests the need for a process of consensus building around how to scale up cross-border financing. There are many ongoing discussions and ideas for strengthening parts of the system, but less has been done on forging a common approach so that all parts of the system act in a linked-up fashion. There must be international oversight of core recovery programs, the building of consensus around which individual actors can orient their actions, and the inclusion of regional partners to augment the voice of developing countries. Transparency will be a crucial pillar of any financial architecture reform effort.
The response to COVID-19 thus far has bought us some time, but it is far from enough. The world faces a host of looming medium-term challenges in addition to the short-term imperatives of managing COVID-19 and ensuring recovery. Foremost among these are a low-carbon transition, increasing biodiversity and nature needs, growing adaptation and resilience challenges, and a large deficit in human capital spending. Big problems require big solutions. A stepped-up “big push” investment of around $1.3 trillion in EMDEs by 2025 would enable greater spending on all of these global challenges. A financing strategy must match the right source of financing to each of these needs and deliver this in a timely fashion to enable transformational change over the next decade. The moment is ripe for greater international collaboration and action. In 2020, advanced economies spent over $12 trillion on domestic response efforts. In the next decade, we must mobilize a similarly ambitious effort to tackle a global response.
Download the full working paper
Status check: Managing debt sustainability and development priorities through a ‘Big Push’
Executive Summary
Emerging market and developing economies (EMDEs) have seen development prospects fade in the two years since the onset of COVID-19. Growth turned negative in 2020, is forecast to snap back in 2021, but then revert to a declining trend.1 Investment levels in Latin America and Africa are forecast to remain in the range of 20-25 percent of GDP in the medium term. Outside of Asia, prospects for growth and for convergence with advanced economies are dim. Unlike in advanced economies, the GDP trajectory in EMDEs post-COVID-19 is significantly lower than pre-COVID-19 estimates; 31 developing countries may have lower levels of GDP per capita in 2025 than in 2019.
Meanwhile, general government debt levels in EMDEs have risen by 9 percentage points of GDP. At current low levels of world interest rates, the debt service implications are manageable for most countries, but risks remain if inflation causes major central banks to raise interest rates. As a result, EMDEs are under pressure to cut public spending, even in face of higher needs to respond to the pandemic.
The present trajectory, therefore, is one of slow growth, low investment and public spending, and rising debt service burdens in many, if not most, EMDEs. There is significant risk that this trajectory will prove unsustainable for economic, social, or political reasons.
The current trajectory is also highly inefficient, with high-return projects in EMDEs left unfunded due to debt overhang considerations, and highly inequitable, with poor and vulnerable countries and populations left to manage the pandemic with limited support.
Related Content
Global aspirations for a universal transformation to a low-carbon economy and a “just transition” are not likely to be met in the current baseline scenario for the global economy because EMDEs are central to both objectives and without additional public spending neither transition will happen.
There is another way forward, one that offers better prospects for global growth and equity, with lower risks of systemic debt defaults. Rather than relying on austerity, it is a path that seeks to accelerate green, inclusive and resilient growth. This path takes advantage of historically low prices of energy, made possible by technological advances in renewables, and of historically low interest rates on international capital markets to undertake a “big push” to transform economic structures and accelerate growth.
There are four key ingredients of the “big push” approach.
First, a set of investments needs to be identified to achieve the desired transformations. The country-by-country analytical work on which this paper draws suggests that EMDEs (ex-China) should be increasing their investment rates by about 3-4 percent of GDP above pre-pandemic levels in order to provide adequate growth of zero-carbon energy and infrastructure, sustainable agriculture, forestry, and land use (AFOLU), adaptation and resilience, and human capital. This translates into incremental annual investments of about $1.3 trillion by 2025, and more thereafter.
Second, a financing plan is needed that is aligned with the types of expenditures being considered. The proposal advanced here is for an even split between domestic and external financing. The latter, in turn, can be mobilized from ODA, multilateral and other official financial institutions, and private capital. These are not fully fungible—each has a role to play.
Domestic resource mobilization is a core component of any investment strategy. It is essential for general purpose financing like human capital and recurrent spending on nature and adaptation. Thus, a key part of the big push strategy is improving developing country tax administrative capacity, while reducing fossil fuel subsidies. The needed increase of 2.7 percentage points of GDP is well within the range of possibilities identified by the IMF. Additional revenues may accrue from new regulations governing base erosion and profit shifting (BEPS), but the current G-20 agreement may not yield much for many developing countries in the medium term. Stronger international efforts are also needed to stem illicit financial flows and encourage greater information sharing between tax authorities in advanced and developing countries.
Concessional finance is needed to help poor countries, to promote equity, and to incentivize countries to invest adequately in global public goods that have international spillovers—for example, mitigation, nature, and pandemic preparedness. Bilateral donors have already pledged to double climate finance from $30 billion to $60 billion, and agreement seems likely on a $100 billion IDA20 replenishment by year’s end. However, more is needed. ODA in 2020 from DAC countries amounted to only 0.32 percent of their GDP. A new collective agreement is needed to back the transformational change that is proposed here. Our approach calls for a 50 percent increase in concessional finance relative to 2019 levels, an incremental $96 billion by 2025. This is equivalent to 0.15 percent of donor GDP.
Our proposal is not just a call for more ODA, defined as money designed to promote the welfare of developing countries. As the past year has shown, weak health systems and pandemic surveillance in one country have global repercussions. The point is that provision of concessional finance for implementation of global public goods in developing countries benefits advanced countries as well as developing countries. Our proposal calls for a mixture of ODA and a fair funding of global public goods on concessional terms.
Multilateral finance and other official finance. Multilateral development banks (MDBs) are able to offer lower cost loans at longer maturities than other lenders, making debt more sustainable. They could stretch their current balance sheets by making better use of callable capital and reforming statutory lending limits—perhaps freeing up headroom for an additional $750 billion to $1.3 trillion of loans. Other reform efforts, including balance sheet optimization, greater risk pooling, greater use of blended finance and guarantee facilities, and asset sales could also help expand MDB lending. Our proposal calls for MDBs to triple their lending levels, from $63 billion in 2019 to $189 billion by 2025.
Private capital can be attracted into sustainable infrastructure projects, which generate revenue streams to cover equity returns and the debt service associated with the project. There are currently both supply and demand side obstacles that have prevented the scale-up of greater private investment in developing countries: a lack of bankable projects, and a limited appetite for long term investments with perceived high risk. New institutional innovations, such as the development of country platforms, standardized processes, and experience with risk-mitigating official finance suggest that a rapid ramp-up in private finance is now feasible. Our proposal calls for an approximate doubling of the 2019 level of private finance for infrastructure in developing countries by 2025. MDBs and other development partners will need to be more proactive to mobilize and catalyze private finance on this scale.
The third element of the “big push” is policy and institutional reform in countries to ensure that investments generate maximum returns. These reforms are partly sectoral (carbon equivalent taxes and removal of fossil fuel subsidies are clear examples) and partly cross-cutting. Reducing corruption and bureaucratic red tape, increasing voice and citizen participation, and consideration of gender issues are examples. Many countries have the capacity to absorb far larger amounts of investment than they actually receive. To illustrate, the IMF’s public investment management assessment scores African countries at 4.4 compared to 4.5 for Asia. Yet Asian countries profitably invest 15 percentage points of GDP more than African countries. The dispersion in scores is large, suggesting some countries have considerable room to improve, but equally suggesting that other countries have reasonable policy frameworks in place already.
The fourth and final element of the “big push” is international coordination. A “big push” will not work without a concerted global plan and agreement. In some cases, this reflects the need for global policy coordination—the BEPS agreement, proposed measures for carbon taxes and standardized approaches in blended finance are examples. More fundamentally, however, international coordination is needed to change mindsets about appropriate policy. No finance minister in an EMDE will support a big push strategy if this is not approved by the international financial institutions that s/he will rely on to provide needed resources. No private investor will willingly provide funds into a high-debt situation without clarity on how debt work-out mechanisms will operate. No civil society advocate will support a big push without greater transparency on how funds will be spent by their government.
All this suggests the need for a process of consensus building around how to scale up cross-border financing. There are many ongoing discussions and ideas for strengthening parts of the system, but less has been done on forging a common approach so that all parts of the system act in a linked-up fashion. There must be international oversight of core recovery programs, the building of consensus around which individual actors can orient their actions, and the inclusion of regional partners to augment the voice of developing countries. Transparency will be a crucial pillar of any financial architecture reform effort.
The response to COVID-19 thus far has bought us some time, but it is far from enough. The world faces a host of looming medium-term challenges in addition to the short-term imperatives of managing COVID-19 and ensuring recovery. Foremost among these are a low-carbon transition, increasing biodiversity and nature needs, growing adaptation and resilience challenges, and a large deficit in human capital spending. Big problems require big solutions. A stepped-up “big push” investment of around $1.3 trillion in EMDEs by 2025 would enable greater spending on all of these global challenges. A financing strategy must match the right source of financing to each of these needs and deliver this in a timely fashion to enable transformational change over the next decade. The moment is ripe for greater international collaboration and action. In 2020, advanced economies spent over $12 trillion on domestic response efforts. In the next decade, we must mobilize a similarly ambitious effort to tackle a global response.
Download the full working paper
What does success at the Glasgow climate conference (COP26) look like?
Global leaders are gathering in Glasgow in the coming weeks as the United Kingdom hosts the 26th United Nations Climate Change Conference of the Parties, known as COP26. As global temperatures continue to rise, the calls for action on addressing the climate change threat rise as well. On this episode of the Brookings Cafeteria podcast, a leading expert on global climate policy and financing for climate action, Amar Bhattacharya, senior fellow in the Center for Sustainable Development at Brookings, shares his perspective on what will make COP26 successful, what sustainable and inclusive approaches to climate mitigation look like, and what gives him hope for the future.
Also on this episode, John McArthur, senior fellow and director of the Center for Sustainable Development, reflects on the Center’s first anniversary, noting significant accomplishments of Center scholars and looking ahead to projects to come, including the “17 Rooms” podcast. Listen to this segment also on SoundCloud.
Related Content
Climate Change
Our last, best chance on climate
Amar Bhattacharya and Nicholas Stern
Wednesday, September 8, 2021
Follow Brookings podcasts here or on iTunes, send feedback email to BCP@Brookings.edu, and follow us and tweet us at @policypodcasts on Twitter.
The Brookings Cafeteria is part of the Brookings Podcast Network.
Amar Bhattacharya
Senior Fellow – Global Economy and Development, Center for Sustainable Development
Fred Dews
Managing Editor, Podcasts and Digital Projects
Twitter
publichistory
What does success at the Glasgow climate conference (COP26) look like?
Global leaders are gathering in Glasgow in the coming weeks as the United Kingdom hosts the 26th United Nations Climate Change Conference of the Parties, known as COP26. As global temperatures continue to rise, the calls for action on addressing the climate change threat rise as well. On this episode of the Brookings Cafeteria podcast, a leading expert on global climate policy and financing for climate action, Amar Bhattacharya, senior fellow in the Center for Sustainable Development at Brookings, shares his perspective on what will make COP26 successful, what sustainable and inclusive approaches to climate mitigation look like, and what gives him hope for the future.
Also on this episode, John McArthur, senior fellow and director of the Center for Sustainable Development, reflects on the Center’s first anniversary, noting significant accomplishments of Center scholars and looking ahead to projects to come, including the “17 Rooms” podcast. Listen to this segment also on SoundCloud.
Related Content
Climate Change
Our last, best chance on climate
Amar Bhattacharya and Nicholas Stern
Wednesday, September 8, 2021
Follow Brookings podcasts here or on iTunes, send feedback email to BCP@Brookings.edu, and follow us and tweet us at @policypodcasts on Twitter.
The Brookings Cafeteria is part of the Brookings Podcast Network.
Amar Bhattacharya
Senior Fellow – Global Economy and Development, Center for Sustainable Development
Fred Dews
Managing Editor, Podcasts and Digital Projects
Twitter
publichistory
Climate finance meets low-carbon agtech
Headlining the climate finance discussions next week at COP26 may be the shortfall in advanced economies’ $100 billion annual pledge to help low- and middle-income countries (LMICs) adapt and further mitigate climate change. But with actual financing needs quickly approaching the trillions, the more important discussion may be reforming how public climate finance is deployed. Change is needed to mobilize private capital, fill critical gaps, and drive resilient, low-carbon development. Agriculture value chains are a good place to start the conversation.
Solar and other renewables are enabling distributed, low-cost cold storage, irrigation, and processing capabilities that could be transformative for rural communities in Africa and South Asia. Scaling these innovative small and medium enterprises (SMEs) could provide a host of services to help farm households and communities adapt to climate change, including increased income from higher yields and higher-quality produce, reduced risk of crop failure, reduced post-harvest loss, and other resilience gains.
These are real benefits that improve food security and nutritional diversity and help rural communities survive shocks that are becoming more frequent and intense with climate change. Yet of the roughly $600 billion in tracked climate-related financing globally just 0.2 percent goes to small-scale agriculture value chains and financing institutions serving them.
Related Content
And while food systems generate one-third of the 52 gigatons in total greenhouse gas emissions globally, it’s not where climate mitigation investments are flowing. The value of carbon markets hit nearly $280 billion last year, but almost none of the SMEs sending diesel generators to the scrap heap are doing it with the help of carbon financing. As Figure 1 illustrates, agriculture-related emissions projects account for 1 percent of all carbon credits issued.
Figure 1. The agriculture sector accounts for just 1% of the global carbon market
Source: AgFunderNetwork, from Berkeley Carbon Trading Project data.
This is despite considerable potential for CO2 reductions from enterprises powering rural agriculture sector transformation. Our forthcoming research finds:
An investment of $200 million to provide solar irrigation pumps to 1.3 million farmers in Kenya would avert emissions of 6.7 million tons of CO2 annually.
Investing $10 million into solar conduction dryers in India would reduce CO2 emissions by 1.6 million tons per year.
Replacing one-quarter of the 8.8 million diesel irrigation pumps in India with solar pumps would reduce CO2 emissions by 11.5 million tons per year.
As Figure 2 puts in context, the global fleet of Tesla vehicles and solar panels displaced a total of 5.0 million metric tons of CO2e in 2020.
Figure 2. Selected low-carbon agtech mitigation potentials, by market
Source: Catalyzing climate finance for low-carbon ag-tech, James E. Rogers Energy Access Project, Duke University.
These are not garden-variety carbon reductions. Like Tesla, they represent the front end of a low-carbon sectoral transformation that could reverberate years into the future. The space is ripe for donors and ESG departments aiming for catalytic impact with their mitigation investments.
The problems—and some solutions
So why are these companies unable to attract climate finance to accelerate scale-up and what’s needed to mobilize agtech investment in LMICs?
1. Pay companies for climate benefits.
Very few companies enjoy financial benefits from the mitigation and adaptation gains they are providing. Accounting and verifying carbon reductions have high transaction costs at the small scale. Measuring adaptation improvements that are highly location specific or involve long time frames are challenging. But in the Data Age, these are opportunities, not roadblocks. Innovative funds and outcome-oriented financing facilities are emerging that build credible metrics to verify adaptation impacts and blend public, philanthropic, and private capital to align risk.
2. Connect SMEs to the climate policy ecosystem, mobilize private investment, and focus on gender.
Billions of dollars for adaptation flow to LMICs through the Green Climate Fund, Global Environment Facility, and other UNFCCC financing entities based on adaptation plans that countries are required to develop. With 80 percent of the food and 40 percent of jobs tied to small-scale agriculture across sub-Saharan Africa and South Asia, the sector is central to these plans. However, none of the SMEs we spoke with were engaged in adaptation planning processes or aware of the content of country plans where they operate. This is because there is little to no role for SMEs in most plans, a troubling gap that UNFCCC funders are realizing.
Targeting support for SMEs under climate plans could also motivate private investment, another area where climate finance is badly underperforming. Of the $30 billion in annual adaptation investment, just 1.6 percent is from private sources. Rather than financing projects directly, public funders must pivot hard to delivering financial products that de-risk private investment—be it through blending, credit enhancement, currency coverage, demonstrating unproven models, or other measures.
Investing with a gender lens might help too. Female-owned SMEs account for roughly a third of formal SMEs in emerging markets, and our sample within agtech was well below that. Women produce an estimated 70 percent of the food in Africa, but women-owned SMEs tend to be far more capital constrained than their male counterparts. Outdated laws and cultural customs often keep female land ownership—and loan collateral—low. To fully leverage the potential of agtech, some investors are moving to non-asset-based lending and other forms of security like future cash flows, purchase order contracts, or accounts receivables.
3. Empower smallholders and address affordability.
Consumers of low-carbon agtech are extremely price sensitive. For SunCulture, a 25 percent reduction in the price of its solar irrigation pump increases the addressable market by 100 percent. Demand-side subsidies or results-based financing—essentially paying an operator for a specific outcome—can be instrumental in bringing scale to a sector and incentivizing expansion into new markets.
We also discovered that SMEs across agriculture value chains face roadblocks, but also offer solutions. Their products routinely offer customers paybacks of 6-24 months, but that makes little difference to customers facing borrowing costs of 30-45 percent annually. Of SMEs interviewed, nearly 60 percent either became consumer finance organizations directly or invested in third-party relationships to solve for a lack of consumer credit access. Improving access to credit—through banks, microfinance institutions, coops, and other nonbank financial institutions—directly benefits farmers and allows SMEs to focus on core competencies
Small agriculture enterprises are addressing the energy access and reliability problems en route to improving the productivity and resilience of rural communities. It’s a snapshot of what low-carbon development could look like. The task before climate investors is to identify these transformative models, demonstrate their benefits and de-risk them, and bring along the private sector to deliver scale.
Climate finance meets low-carbon agtech
Headlining the climate finance discussions next week at COP26 may be the shortfall in advanced economies’ $100 billion annual pledge to help low- and middle-income countries (LMICs) adapt and further mitigate climate change. But with actual financing needs quickly approaching the trillions, the more important discussion may be reforming how public climate finance is deployed. Change is needed to mobilize private capital, fill critical gaps, and drive resilient, low-carbon development. Agriculture value chains are a good place to start the conversation.
Jonathan Phillips
Director, Energy Access Project – Duke University
Victoria Plutshack
Policy Associate, Energy Access Project – Duke University
Rob Fetter
Senior Policy Associate – Energy Access Project, Duke University
Solar and other renewables are enabling distributed, low-cost cold storage, irrigation, and processing capabilities that could be transformative for rural communities in Africa and South Asia. Scaling these innovative small and medium enterprises (SMEs) could provide a host of services to help farm households and communities adapt to climate change, including increased income from higher yields and higher-quality produce, reduced risk of crop failure, reduced post-harvest loss, and other resilience gains.
These are real benefits that improve food security and nutritional diversity and help rural communities survive shocks that are becoming more frequent and intense with climate change. Yet of the roughly $600 billion in tracked climate-related financing globally just 0.2 percent goes to small-scale agriculture value chains and financing institutions serving them.
Related Content
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Digital technology and African smallholder agriculture: Implications for public policy
Aloysius Uche Ordu, Larry Cooley, and Lesly Goh
Monday, August 16, 2021
Future Development
Why we need increased investment in food and agriculture in developing countries and international organizations that support them
Uma Lele
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And while food systems generate one-third of the 52 gigatons in total greenhouse gas emissions globally, it’s not where climate mitigation investments are flowing. The value of carbon markets hit nearly $280 billion last year, but almost none of the SMEs sending diesel generators to the scrap heap are doing it with the help of carbon financing. As Figure 1 illustrates, agriculture-related emissions projects account for 1 percent of all carbon credits issued.
Figure 1. The agriculture sector accounts for just 1% of the global carbon market
Source: AgFunderNetwork, from Berkeley Carbon Trading Project data.
This is despite considerable potential for CO2 reductions from enterprises powering rural agriculture sector transformation. Our forthcoming research finds:
An investment of $200 million to provide solar irrigation pumps to 1.3 million farmers in Kenya would avert emissions of 6.7 million tons of CO2 annually.
Investing $10 million into solar conduction dryers in India would reduce CO2 emissions by 1.6 million tons per year.
Replacing one-quarter of the 8.8 million diesel irrigation pumps in India with solar pumps would reduce CO2 emissions by 11.5 million tons per year.
As Figure 2 puts in context, the global fleet of Tesla vehicles and solar panels displaced a total of 5.0 million metric tons of CO2e in 2020.
Figure 2. Selected low-carbon agtech mitigation potentials, by market
Source: Catalyzing climate finance for low-carbon ag-tech, James E. Rogers Energy Access Project, Duke University.
These are not garden-variety carbon reductions. Like Tesla, they represent the front end of a low-carbon sectoral transformation that could reverberate years into the future. The space is ripe for donors and ESG departments aiming for catalytic impact with their mitigation investments.
The problems—and some solutions
So why are these companies unable to attract climate finance to accelerate scale-up and what’s needed to mobilize agtech investment in LMICs?
1. Pay companies for climate benefits.
Very few companies enjoy financial benefits from the mitigation and adaptation gains they are providing. Accounting and verifying carbon reductions have high transaction costs at the small scale. Measuring adaptation improvements that are highly location specific or involve long time frames are challenging. But in the Data Age, these are opportunities, not roadblocks. Innovative funds and outcome-oriented financing facilities are emerging that build credible metrics to verify adaptation impacts and blend public, philanthropic, and private capital to align risk.
2. Connect SMEs to the climate policy ecosystem, mobilize private investment, and focus on gender.
Billions of dollars for adaptation flow to LMICs through the Green Climate Fund, Global Environment Facility, and other UNFCCC financing entities based on adaptation plans that countries are required to develop. With 80 percent of the food and 40 percent of jobs tied to small-scale agriculture across sub-Saharan Africa and South Asia, the sector is central to these plans. However, none of the SMEs we spoke with were engaged in adaptation planning processes or aware of the content of country plans where they operate. This is because there is little to no role for SMEs in most plans, a troubling gap that UNFCCC funders are realizing.
Targeting support for SMEs under climate plans could also motivate private investment, another area where climate finance is badly underperforming. Of the $30 billion in annual adaptation investment, just 1.6 percent is from private sources. Rather than financing projects directly, public funders must pivot hard to delivering financial products that de-risk private investment—be it through blending, credit enhancement, currency coverage, demonstrating unproven models, or other measures.
Investing with a gender lens might help too. Female-owned SMEs account for roughly a third of formal SMEs in emerging markets, and our sample within agtech was well below that. Women produce an estimated 70 percent of the food in Africa, but women-owned SMEs tend to be far more capital constrained than their male counterparts. Outdated laws and cultural customs often keep female land ownership—and loan collateral—low. To fully leverage the potential of agtech, some investors are moving to non-asset-based lending and other forms of security like future cash flows, purchase order contracts, or accounts receivables.
3. Empower smallholders and address affordability.
Consumers of low-carbon agtech are extremely price sensitive. For SunCulture, a 25 percent reduction in the price of its solar irrigation pump increases the addressable market by 100 percent. Demand-side subsidies or results-based financing—essentially paying an operator for a specific outcome—can be instrumental in bringing scale to a sector and incentivizing expansion into new markets.
We also discovered that SMEs across agriculture value chains face roadblocks, but also offer solutions. Their products routinely offer customers paybacks of 6-24 months, but that makes little difference to customers facing borrowing costs of 30-45 percent annually. Of SMEs interviewed, nearly 60 percent either became consumer finance organizations directly or invested in third-party relationships to solve for a lack of consumer credit access. Improving access to credit—through banks, microfinance institutions, coops, and other nonbank financial institutions—directly benefits farmers and allows SMEs to focus on core competencies
Small agriculture enterprises are addressing the energy access and reliability problems en route to improving the productivity and resilience of rural communities. It’s a snapshot of what low-carbon development could look like. The task before climate investors is to identify these transformative models, demonstrate their benefits and de-risk them, and bring along the private sector to deliver scale.
Around the halls: Examining the impact of what does (or doesn’t) happen at COP26
The 26th U.N. Climate Change Conference (COP26) is scheduled to take place in Glasgow from October 31 to November 12, under the co-presidency of the United Kingdom and Italy. Brookings scholars from around the institution weigh in on how what does (or does not) happen at the conference will impact their area of expertise.
Climate change finance at the macro level
AMAR BHATTACHARYASenior Fellow, Center for Sustainable Development
Earlier this year, Special Presidential Envoy for Climate John Kerry described COP26 as “our last, best, chance on climate.” Since then, evidence has mounted on the costs of climate change and the urgency of action. Most compellingly, the United Nations’ 2021 Intergovernmental Panel on Climate Change report amasses the scientific evidence on the rapid acceleration of climate change, dramatically narrowing the window for limiting global warming from 2°C to 1.5°C and underscoring the imperative to reach net zero emissions by 2050.
The U.K. COP26 presidency aims to respond to this urgency through four priorities: secure global net zero by mid-century and keep 1.5°C within reach; adapt to protect communities and natural habitats; mobilize finance; and work together to deliver. In each of these four areas there has been a substantial ramp up in ambition. But this progress still falls short of what is needed.
One hundred and thirty countries have committed to net zero, and several — including the G-7 — have set much more ambitious targets for emission reductions by 2030. But many major emitters have not, and the aggregate commitment will fall far short. Many donors have stepped up their climate finance commitments, and a new delivery plan indicates that the $100 billion of climate finance per annum by 2020 commitment will be met no later than 2023. But we now know that around $1 trillion per annum will be needed in developing countries other than China, to accelerate climate investments at the pace needed.
All efforts must be made at COP26 to press for ambitious, concrete deliverables. Inevitably though, much more will need to be done. It will be a success, not a failure, for COP26 to clearly recognize the shortfalls and set a path that can allow us not just to deliver on climate goals but also realize the growth and development opportunities that lie in a low-carbon future.
China’s economic calculations on climate
DAVID DOLLAR (@davidrdollar)Senior Fellow, John L. Thornton China Center
China has put itself in a tough situation heading into the Glasgow conference. It has created problems in its own power sector for reasons not directly related to climate change. It stopped importing coal from Australia because that country called for an independent international effort to find the origins of COVID-19. Strong rebound in China’s economy in the first half of the year then led to a surge in the price of coal. But prices for electricity were kept at arbitrary low levels, so that it was not economically efficient to use coal to generate power. The result has been the worst power shortages in 20 years, and still high prices of coal as China heads into the winter season.
Meanwhile, the world is looking to China — by far the largest emitter of greenhouse gases — to lay out bold new measures and targets for carbon reduction. But it is difficult for the government to make concrete commitments as long as its immediate energy crisis continues. With the right policies, Beijing could address both short and long-term issues at once. Most important would be a higher price for power and energy more generally, which would discourage wasteful use and solve the immediate power shortage. China has ambitious plans to increase reliance on solar, wind, hydro, and nuclear to generate power, and to transition its vehicle fleet to electric vehicles. But its plans still rely on coal for a long time. More commitment to energy efficiency and use of gas as a transition fuel would significantly reduce its near-term carbon footprint.
Biodiversity
VANDA FELBAB-BROWN (@VFelbabBrown)Senior Fellow, Center for Security, Strategy, and Technology and Director, Initiative on Nonstate Armed Actors
Coming on the heels of the first part of COP15 to the Convention on Biodiversity, COP26 is an opportunity not only to implement meaningful climate commitments, but also to integrate them with biodiversity conservation. Climate change is one — but only one — manmade cause of critical biodiversity loss. Our current rate of biodiversity loss is the highest since the extinction of dinosaurs, and about one thousand times the historic average. Climate change compounds the extinction of species, yet biodiversity loss also hampers the planet’s natural climate control systems. In other words, the greater the biodiversity loss, the more the planet will heat up. This is merely one example of how many of the planet’s self-sustaining ecological systems are undermined by biodiversity loss.
Yet biodiversity protection has been the poor relation of climate mitigation efforts in international diplomacy. Worse yet, many proposed and even implemented climate mitigation measures ignore biodiversity protection, such as when they predominantly focus on urban areas and do not focus on preserving natural ecosystems like forests.
Some presumed climate mitigation measures even directly contradict biodiversity conservation. Take, for example, subsidized programs for planting trees. If such programs do not also provide funding for the conservation of mature and diverse forests and their biodiversity — and if such payments for conserving ecosystems are not significantly higher than the subsidies for cultivating new trees — local communities or industries frequently tend to fell existing forests (thus undermining or destroying the entire ecosystem) to qualify for subsidies for monocrop plantations. The resulting carbon capture is smaller, and biodiversity is lost.
Security around the Arctic
JEREMY GREENWOODFederal Executive Fellow, Center for Security, Strategy, and Technology
It’s been well-documented that the Arctic is the bellwether for how global warming is impacting our planet. So, it’s no surprise that leaders gathering for the 26th U.N. Climate Change Conference in Glasgow next week have been laser-focused on the Arctic.
Russia is often accused of doubling down on its future in fossil fuel development, much of it from its melting northern coastline that is rich in offshore oil and gas deposits. That same melting ice has opened up a transport corridor that Moscow has unilaterally formed as a maritime “toll road” — known as the “Northern Sea Route” — which has the potential to decrease sailing times from Europe to Asia by 40% compared to traditional Suez Canal routes. Moscow seems to have bet part of its future on these two cash cows, despite the worldwide focus on limiting carbon emissions from fossil fuels and preventing the very ice melt that is opening up this speedy shipping route.
With Russian President Vladimir Putin’s announcement that he will not attend in person, most have consigned the Russian delegation to a spoiler role, for which there is much evidence to support. But it might behoove Moscow to think a few steps ahead, as the melting Arctic may bring more chaos than treasure in the long run. Rampant climate change is likely to bring severe weather to the very offshore rigs that float in treacherous waters, and international law may eventually strip them of the thin veil by which they portend to control the Northern Sea Route. A recent major oil spill in Norilsk demonstrated the risks posed by melting permafrost to even land-based industrial activities. Meanwhile, Article 234 of the U.N. Convention on the Law of the Sea only allows coastal states to adopt regulatory measures for passing ships “where…the presence of ice covering such areas for most of the year create obstructions or exceptional hazards to navigation.” It’s only a matter of time until Russia’s northern coastline is not covered by ice most of the year, a planetary climate warning that terrifies most of the COP26 delegates and, if they had a longer vision beyond the increased shipping traffic, should also scare Russia.
The energy transition
SAMANTHA GROSS (@samanthaenergy)Director and Fellow, Energy Security and Climate Initiative
COP26 is facing the highest expectations of any climate meeting since Paris in 2015. This marks the five-year point in the Paris Agreement, when countries are expected to renew and deepen their commitment to fighting climate change.
The United States and Europe, along with a varied slate of other countries that together account for most of the world’s emissions, have pledged to achieve net zero greenhouse gas emissions by mid-century. Even China and Saudi Arabia are pledging net zero emissions by 2060. But the burning question in my mind going into Glasgow is whether countries are on track to achieve those long-term commitments.
For now, the answer is no. The formal goals at Glasgow are for the near term, through 2030. If countries achieve these goals (Nationally Determined Contributions, in the lingo of the Paris Agreement), emissions in 2030 will be 16% greater than they were in 2010. To be on a path that limits warming to 1.5°C, the level scientist say is necessary to avoid the worst impacts of climate change, we need a 45% reduction in emissions instead.
My hopes for the COP are twofold. First, I hope to see a spirit of cooperation to encourage further action to reduce emissions. The real action here won’t happen at Glasgow, but afterward, when leaders go back to their capitals to establish policy to actually implement their emissions goals. Sharing technology and policy successes among countries could help. Second, I hope to see a renewed commitment from wealthy countries to fund the low-carbon transition in the developing world, along with funding for resilience projects to help these countries adapt to our changing world. Using public funding as leverage to encourage more private investment will be particularly important to achieve a just transition.
Maritime security in Asia
SHUXIAN LUO (@joy_shuxian_luo)Post-Doctoral Research Fellow, John L. Thornton China Center
There is a maritime security dimension as to why it is an imperative for leaders gathering in Glasgow to act collaboratively to tackle climate change. Global warming and the resulting rise of sea level is likely to affect Asia’s maritime security landscape in at least three ways.
First, available fish stock may further decline as ocean warming can cause fish populations to be less productive and/or migrate to other regions, aggravating the problem of fish depletion, intensifying fishery-related disputes and conflict, and negatively impacting millions of marine workers in coastal states who rely on fishing for their livelihood.
Second, it can alter the nature of a land feature in a way that raises questions about the maritime zones that the feature is entitled to. For example, a “high-tide elevation” is entitled to the surrounding 12 nautical miles as territorial sea (and an exclusive economic zone or continental shelf as well if it is capable of sustaining human habitation or economic life). But as the sea level rises, the feature may become submerged at high tide and remain above water only at low tide, making it “a low-tide elevation” which is not entitled to a territorial sea if it is located outside an existing territorial sea.
Third, and related to the second point, states might be tempted to protect their land features from being submerged by engaging in more land reclamation activities, which would likely exacerbate maritime environmental degradation and further complicate Asia’s existing maritime territorial disputes.
U.S. economic and financial implications of climate policy
SANJAY PATNAIK (@sanjay_patnaik)Fellow, Economic Studies and Director, Center on Regulation and Markets
One of the most important aspects of climate change is that it is fundamentally an economic issue and a problem of risk management. Therefore, climate change itself, and any climate policies (and the lack thereof) will have significant implications for our economic and financial system. As the rest of the world and especially the EU move quickly to facilitate a transition towards a low-carbon economy, it will become even more important for the United States to follow the same path. Policy measures like a price on carbon, mandatory climate risk disclosures for publicly traded companies, and climate stress testing in the financial system are being implemented in countries around the world. These policies are critical to prepare countries for a low-carbon future, and are also significantly shaping global markets.
Without implementing a policy plan at home that can credibly lead to the reductions in greenhouse gas emissions needed to reach the Biden’s administration’s stated goals by 2030, the U.S. will have a difficult standing in Glasgow. Importantly, without credible climate policies, U.S. firms’ ability to remain competitive when operating in global markets will be impeded and the potential for the U.S. to become a leader in new, low-carbon technologies and industries will be reduced. It is therefore more critical than ever that the Biden administration and Congress implement a wide range of carrot and stick policies that address climate change and bring us in line with other developed nations. This will also strengthen our negotiating position at COP26.
Climate as a threat multiplier in the Middle East
NATAN SACHS (@natansachs)Director and Fellow, Center for Middle East Policy
COP26 is an instance of the gaping disconnect between Middle Eastern stakes in climate change and the marginal role Middle Eastern countries assume in combating it and adapting to it. The region is already one of the worst affected by climate change, and the potential for future damage is huge. The Nile Delta for example, with dozens of millions of people, is at direct risk of rising sea levels, with the city of Alexandria facing potential inundation. Water insecurity throughout the region could worsen dramatically, necessitating costly and energy-intensive desalination, and fueling political crises in and between states. Millions could find themselves living in areas where working outside during the day becomes impossible due to heat. And many millions will likely find themselves seeking refuge in new places, exacerbating the already-acute refugee crises in and around the Middle East.
The challenges are truly immense. Yet in many countries, the political structures are incapable or unwilling to meet them, busying themselves instead with geopolitical, ideological, and especially domestic rivalries. There are a few exceptions where capacity or resources allow for efforts to combat climate change on a serious scale, including the Gulf States and Israel. But the wealthiest countries in the Gulf, who could finance regional efforts, are also the major producers of fossil fuels, creating a conflict of interest on mitigation. So far, they’ve also exhibited vastly insufficient efforts on adaptation, as they prepare for a potential change in energy markets away from the oil and gas that provide their wealth and sustain their political model. As a result, most Middle East countries will not feature prominently at COP26 — a telling sign of historic political failure.
U.S. as a global leader on climate
TODD STERN (@tsterndc)Nonresident Senior Fellow, Energy Security and Climate Initiative
The central measure of success for COP26 in Glasgow will be whether countries have ramped up their Paris emission targets enough in 2021 to “keep 1.5 alive.” This COP coincides with the first of the five-year cycles for countries to ratchet up their targets. And it is all the more important because the broad consensus of climate opinion has shifted since Paris from embracing a below 2°C temperature goal to embracing a limit on temperature increase of 1.5°C. This is an enormously challenging target, thought to require net zero global emissions by 2050 and a roughly 50% global emissions cut within this decade.
There has been some striking progress this year. The U.S., EU, and U.K., among a number of others, have announced 2030 emission reductions at the right scale. But other big players have not cranked up their Paris targets consistent with a 1.5°C effort, and the biggest and most important is China, responsible for 27% of global CO2 emissions — more than all developed countries put together. A strong move by China would also encourage other big emitters to follow their lead. However, if, as is likely, China does not make a serious move in Glasgow, it will be vital that the COP outcome send a clear message that 1.5 must still be kept alive and that countries who have not yet met their climate responsibility will be expected to do so in 2022. Failing to act in Glasgow should get no one off the hook.
India, net-zero, and equity
RAHUL TONGIA (@DrTongia)Nonresident Senior Fellow, Energy Security and Climate Initiative
There is immense pressure on India to announce a carbon net-zero pledge at COP26. With emissions under half the world average, it would be rational for Delhi to avoid doing so just yet. India could announce a later date than China, which pledged net-zero by 2060. Or it could make sectoral plans, such as the aim to more than quadruple renewables in 10 years, or even to peak use of coal in the power sector. However, some plans could be conditional on global support, especially finance.
India, with others, will argue that we cannot entirely ignore equity issues. This is likely to come up in contentious issues like Article 6, which will set the rules for markets, transfers, and offsets. A number of countries are banding together for negotiations. The Like Minded Developing Countries (LMDCs), including China, India, and a few dozen others, have the clout of representing some half the world’s population, but it’s also questionable to speak of Saudi Arabia or China, who are not “low-emitters,” in the same vein as Mali or even India.
Once again, India risks being pegged, unfairly, as possible spoilsport. Delhi will have to walk a tightrope to show its actions, with or without a net-zero pledge, are globally leading but also don’t cap inevitable growth in emissions in the coming years. More meaningful than a grand ambition decades out is what India (or anyone else) does in the short and medium term. Watch for that.
Innovation and decarbonization
DAVID G. VICTORNonresident Senior Fellow, Energy Security and Climate Initiative
Diplomacy will be in the spotlight at COP26 — along with a lot of posturing about which countries are making big enough efforts to cut emissions. But diplomacy, for the most part, is overrated. At best, it sets a general direction for cutting emissions. When the diplomats reach consensus, as they usually do, they make legitimate the efforts to push governments and firms to make deeper cuts in emissions.
But what really matters is innovation that disrupts old industries. As new technologies get cheaper they also rewrite the politics of decarbonization — making it easier to build and hold together the political coalitions for supporting policies.
COP26, while formally a diplomatic event, will also be a watering hole for the firms and governments that are doing the most to back innovation. Leaders from industries on the front lines — such as oil and gas, electricity, and transportation — will show up, keen to show serious plans that take decarbonization seriously. The bankers will be there too, for capital is already shifting into decarbonization.
A technological perspective helps explain why most people overestimate how quickly the world economy will decarbonize in the short term — disruptive change is slow to take hold, and the incumbents don’t leave quietly — but underestimate just how transformative all the changes will be over the long haul. And when you look at entry of new low-carbon technologies you see quite a lot of hope. This hope comes from working on decarbonization sector by sector, not pretending that a global diplomatic committee will do the job.
Related Content
Around the halls: Examining the impact of what does (or doesn’t) happen at COP26
The 26th U.N. Climate Change Conference (COP26) is scheduled to take place in Glasgow from October 31 to November 12, under the co-presidency of the United Kingdom and Italy. Brookings scholars from around the institution weigh in on how what does (or does not) happen at the conference will impact their area of expertise.
Climate change finance at the macro level
AMAR BHATTACHARYA
Senior Fellow, Center for Sustainable Development
Earlier this year, Special Presidential Envoy for Climate John Kerry described COP26 as “our last, best, chance on climate.” Since then, evidence has mounted on the costs of climate change and the urgency of action. Most compellingly, the United Nations’ 2021 Intergovernmental Panel on Climate Change report amasses the scientific evidence on the rapid acceleration of climate change, dramatically narrowing the window for limiting global warming from 2°C to 1.5°C and underscoring the imperative to reach net zero emissions by 2050.
Amar Bhattacharya
Senior Fellow – Global Economy and Development, Center for Sustainable Development
David Dollar
Senior Fellow – Foreign Policy, Global Economy and Development, John L. Thornton China Center
Twitter
davidrdollar
Vanda Felbab-Brown
Director – Initiative on Nonstate Armed Actors
Co-Director – Africa Security Initiative
Senior Fellow – Foreign Policy, Center for Security, Strategy, and Technology
Twitter
VFelbabBrown
Jeremy Greenwood
Federal Executive Fellow – The Brookings Institution
Samantha Gross
Director – Energy Security and Climate Initiative
Fellow – Foreign Policy, Energy Security and Climate Initiative
Twitter
samanthaenergy
Shuxian Luo
Post-Doctoral Research Fellow – Foreign Policy, John L. Thornton China Center
Twitter
joy_shuxian_luo
Sanjay Patnaik
Director – Center on Regulation and Markets
Bernard L. Schwartz Chair in Economic Policy Development
Fellow – Economic Studies
Twitter
sanjay_patnaik
Natan Sachs
Director – Center for Middle East Policy
Fellow – Foreign Policy, Center for Middle East Policy
Twitter
natansachs
Todd Stern
Nonresident Senior Fellow – Foreign Policy, Energy Security and Climate Initiative
Twitter
tsterndc
Rahul Tongia
Nonresident Senior Fellow – Foreign Policy, Energy Security and Climate Initiative
Twitter
@DrTongia
David G. Victor
Nonresident Senior Fellow – Foreign Policy, Global Economy and Development, Energy Security and Climate Initiative
The U.K. COP26 presidency aims to respond to this urgency through four priorities: secure global net zero by mid-century and keep 1.5°C within reach; adapt to protect communities and natural habitats; mobilize finance; and work together to deliver. In each of these four areas there has been a substantial ramp up in ambition. But this progress still falls short of what is needed.
One hundred and thirty countries have committed to net zero, and several — including the G-7 — have set much more ambitious targets for emission reductions by 2030. But many major emitters have not, and the aggregate commitment will fall far short. Many donors have stepped up their climate finance commitments, and a new delivery plan indicates that the $100 billion of climate finance per annum by 2020 commitment will be met no later than 2023. But we now know that around $1 trillion per annum will be needed in developing countries other than China, to accelerate climate investments at the pace needed.
All efforts must be made at COP26 to press for ambitious, concrete deliverables. Inevitably though, much more will need to be done. It will be a success, not a failure, for COP26 to clearly recognize the shortfalls and set a path that can allow us not just to deliver on climate goals but also realize the growth and development opportunities that lie in a low-carbon future.
China’s economic calculations on climate
DAVID DOLLAR (@davidrdollar)
Senior Fellow, John L. Thornton China Center
China has put itself in a tough situation heading into the Glasgow conference. It has created problems in its own power sector for reasons not directly related to climate change. It stopped importing coal from Australia because that country called for an independent international effort to find the origins of COVID-19. Strong rebound in China’s economy in the first half of the year then led to a surge in the price of coal. But prices for electricity were kept at arbitrary low levels, so that it was not economically efficient to use coal to generate power. The result has been the worst power shortages in 20 years, and still high prices of coal as China heads into the winter season.
Meanwhile, the world is looking to China — by far the largest emitter of greenhouse gases — to lay out bold new measures and targets for carbon reduction. But it is difficult for the government to make concrete commitments as long as its immediate energy crisis continues. With the right policies, Beijing could address both short and long-term issues at once. Most important would be a higher price for power and energy more generally, which would discourage wasteful use and solve the immediate power shortage. China has ambitious plans to increase reliance on solar, wind, hydro, and nuclear to generate power, and to transition its vehicle fleet to electric vehicles. But its plans still rely on coal for a long time. More commitment to energy efficiency and use of gas as a transition fuel would significantly reduce its near-term carbon footprint.
Biodiversity
VANDA FELBAB-BROWN (@VFelbabBrown)
Senior Fellow, Center for Security, Strategy, and Technology and Director, Initiative on Nonstate Armed Actors
Coming on the heels of the first part of COP15 to the Convention on Biodiversity, COP26 is an opportunity not only to implement meaningful climate commitments, but also to integrate them with biodiversity conservation. Climate change is one — but only one — manmade cause of critical biodiversity loss. Our current rate of biodiversity loss is the highest since the extinction of dinosaurs, and about one thousand times the historic average. Climate change compounds the extinction of species, yet biodiversity loss also hampers the planet’s natural climate control systems. In other words, the greater the biodiversity loss, the more the planet will heat up. This is merely one example of how many of the planet’s self-sustaining ecological systems are undermined by biodiversity loss.
Yet biodiversity protection has been the poor relation of climate mitigation efforts in international diplomacy. Worse yet, many proposed and even implemented climate mitigation measures ignore biodiversity protection, such as when they predominantly focus on urban areas and do not focus on preserving natural ecosystems like forests.
Some presumed climate mitigation measures even directly contradict biodiversity conservation. Take, for example, subsidized programs for planting trees. If such programs do not also provide funding for the conservation of mature and diverse forests and their biodiversity — and if such payments for conserving ecosystems are not significantly higher than the subsidies for cultivating new trees — local communities or industries frequently tend to fell existing forests (thus undermining or destroying the entire ecosystem) to qualify for subsidies for monocrop plantations. The resulting carbon capture is smaller, and biodiversity is lost.
Security around the Arctic
JEREMY GREENWOOD
Federal Executive Fellow, Center for Security, Strategy, and Technology
It’s been well-documented that the Arctic is the bellwether for how global warming is impacting our planet. So, it’s no surprise that leaders gathering for the 26th U.N. Climate Change Conference in Glasgow next week have been laser-focused on the Arctic.
Russia is often accused of doubling down on its future in fossil fuel development, much of it from its melting northern coastline that is rich in offshore oil and gas deposits. That same melting ice has opened up a transport corridor that Moscow has unilaterally formed as a maritime “toll road” — known as the “Northern Sea Route” — which has the potential to decrease sailing times from Europe to Asia by 40% compared to traditional Suez Canal routes. Moscow seems to have bet part of its future on these two cash cows, despite the worldwide focus on limiting carbon emissions from fossil fuels and preventing the very ice melt that is opening up this speedy shipping route.
With Russian President Vladimir Putin’s announcement that he will not attend in person, most have consigned the Russian delegation to a spoiler role, for which there is much evidence to support. But it might behoove Moscow to think a few steps ahead, as the melting Arctic may bring more chaos than treasure in the long run. Rampant climate change is likely to bring severe weather to the very offshore rigs that float in treacherous waters, and international law may eventually strip them of the thin veil by which they portend to control the Northern Sea Route. A recent major oil spill in Norilsk demonstrated the risks posed by melting permafrost to even land-based industrial activities. Meanwhile, Article 234 of the U.N. Convention on the Law of the Sea only allows coastal states to adopt regulatory measures for passing ships “where…the presence of ice covering such areas for most of the year create obstructions or exceptional hazards to navigation.” It’s only a matter of time until Russia’s northern coastline is not covered by ice most of the year, a planetary climate warning that terrifies most of the COP26 delegates and, if they had a longer vision beyond the increased shipping traffic, should also scare Russia.
The energy transition
SAMANTHA GROSS (@samanthaenergy)
Director and Fellow, Energy Security and Climate Initiative
COP26 is facing the highest expectations of any climate meeting since Paris in 2015. This marks the five-year point in the Paris Agreement, when countries are expected to renew and deepen their commitment to fighting climate change.
The United States and Europe, along with a varied slate of other countries that together account for most of the world’s emissions, have pledged to achieve net zero greenhouse gas emissions by mid-century. Even China and Saudi Arabia are pledging net zero emissions by 2060. But the burning question in my mind going into Glasgow is whether countries are on track to achieve those long-term commitments.
For now, the answer is no. The formal goals at Glasgow are for the near term, through 2030. If countries achieve these goals (Nationally Determined Contributions, in the lingo of the Paris Agreement), emissions in 2030 will be 16% greater than they were in 2010. To be on a path that limits warming to 1.5°C, the level scientist say is necessary to avoid the worst impacts of climate change, we need a 45% reduction in emissions instead.
My hopes for the COP are twofold. First, I hope to see a spirit of cooperation to encourage further action to reduce emissions. The real action here won’t happen at Glasgow, but afterward, when leaders go back to their capitals to establish policy to actually implement their emissions goals. Sharing technology and policy successes among countries could help. Second, I hope to see a renewed commitment from wealthy countries to fund the low-carbon transition in the developing world, along with funding for resilience projects to help these countries adapt to our changing world. Using public funding as leverage to encourage more private investment will be particularly important to achieve a just transition.
Maritime security in Asia
SHUXIAN LUO (@joy_shuxian_luo)
Post-Doctoral Research Fellow, John L. Thornton China Center
There is a maritime security dimension as to why it is an imperative for leaders gathering in Glasgow to act collaboratively to tackle climate change. Global warming and the resulting rise of sea level is likely to affect Asia’s maritime security landscape in at least three ways.
First, available fish stock may further decline as ocean warming can cause fish populations to be less productive and/or migrate to other regions, aggravating the problem of fish depletion, intensifying fishery-related disputes and conflict, and negatively impacting millions of marine workers in coastal states who rely on fishing for their livelihood.
Related Books
Making Climate Policy Work
By Danny Cullenward and David G. Victor
2020
To Rule the Waves: How Control of the World’s Oceans Shapes the Fate of the Superpowers
By Bruce Jones
2021
Leave No One Behind
Edited by Homi Kharas, John McArthur, and Izumi Ohno
2019
Second, it can alter the nature of a land feature in a way that raises questions about the maritime zones that the feature is entitled to. For example, a “high-tide elevation” is entitled to the surrounding 12 nautical miles as territorial sea (and an exclusive economic zone or continental shelf as well if it is capable of sustaining human habitation or economic life). But as the sea level rises, the feature may become submerged at high tide and remain above water only at low tide, making it “a low-tide elevation” which is not entitled to a territorial sea if it is located outside an existing territorial sea.
Third, and related to the second point, states might be tempted to protect their land features from being submerged by engaging in more land reclamation activities, which would likely exacerbate maritime environmental degradation and further complicate Asia’s existing maritime territorial disputes.
U.S. economic and financial implications of climate policy
SANJAY PATNAIK (@sanjay_patnaik)
Fellow, Economic Studies and Director, Center on Regulation and Markets
One of the most important aspects of climate change is that it is fundamentally an economic issue and a problem of risk management. Therefore, climate change itself, and any climate policies (and the lack thereof) will have significant implications for our economic and financial system. As the rest of the world and especially the EU move quickly to facilitate a transition towards a low-carbon economy, it will become even more important for the United States to follow the same path. Policy measures like a price on carbon, mandatory climate risk disclosures for publicly traded companies, and climate stress testing in the financial system are being implemented in countries around the world. These policies are critical to prepare countries for a low-carbon future, and are also significantly shaping global markets.
Without implementing a policy plan at home that can credibly lead to the reductions in greenhouse gas emissions needed to reach the Biden’s administration’s stated goals by 2030, the U.S. will have a difficult standing in Glasgow. Importantly, without credible climate policies, U.S. firms’ ability to remain competitive when operating in global markets will be impeded and the potential for the U.S. to become a leader in new, low-carbon technologies and industries will be reduced. It is therefore more critical than ever that the Biden administration and Congress implement a wide range of carrot and stick policies that address climate change and bring us in line with other developed nations. This will also strengthen our negotiating position at COP26.
Climate as a threat multiplier in the Middle East
NATAN SACHS (@natansachs)
Director and Fellow, Center for Middle East Policy
COP26 is an instance of the gaping disconnect between Middle Eastern stakes in climate change and the marginal role Middle Eastern countries assume in combating it and adapting to it. The region is already one of the worst affected by climate change, and the potential for future damage is huge. The Nile Delta for example, with dozens of millions of people, is at direct risk of rising sea levels, with the city of Alexandria facing potential inundation. Water insecurity throughout the region could worsen dramatically, necessitating costly and energy-intensive desalination, and fueling political crises in and between states. Millions could find themselves living in areas where working outside during the day becomes impossible due to heat. And many millions will likely find themselves seeking refuge in new places, exacerbating the already-acute refugee crises in and around the Middle East.
The challenges are truly immense. Yet in many countries, the political structures are incapable or unwilling to meet them, busying themselves instead with geopolitical, ideological, and especially domestic rivalries. There are a few exceptions where capacity or resources allow for efforts to combat climate change on a serious scale, including the Gulf States and Israel. But the wealthiest countries in the Gulf, who could finance regional efforts, are also the major producers of fossil fuels, creating a conflict of interest on mitigation. So far, they’ve also exhibited vastly insufficient efforts on adaptation, as they prepare for a potential change in energy markets away from the oil and gas that provide their wealth and sustain their political model. As a result, most Middle East countries will not feature prominently at COP26 — a telling sign of historic political failure.
U.S. as a global leader on climate
TODD STERN (@tsterndc)
Nonresident Senior Fellow, Energy Security and Climate Initiative
The central measure of success for COP26 in Glasgow will be whether countries have ramped up their Paris emission targets enough in 2021 to “keep 1.5 alive.” This COP coincides with the first of the five-year cycles for countries to ratchet up their targets. And it is all the more important because the broad consensus of climate opinion has shifted since Paris from embracing a below 2°C temperature goal to embracing a limit on temperature increase of 1.5°C. This is an enormously challenging target, thought to require net zero global emissions by 2050 and a roughly 50% global emissions cut within this decade.
There has been some striking progress this year. The U.S., EU, and U.K., among a number of others, have announced 2030 emission reductions at the right scale. But other big players have not cranked up their Paris targets consistent with a 1.5°C effort, and the biggest and most important is China, responsible for 27% of global CO2 emissions — more than all developed countries put together. A strong move by China would also encourage other big emitters to follow their lead. However, if, as is likely, China does not make a serious move in Glasgow, it will be vital that the COP outcome send a clear message that 1.5 must still be kept alive and that countries who have not yet met their climate responsibility will be expected to do so in 2022. Failing to act in Glasgow should get no one off the hook.
India, net-zero, and equity
RAHUL TONGIA (@DrTongia)
Nonresident Senior Fellow, Energy Security and Climate Initiative
There is immense pressure on India to announce a carbon net-zero pledge at COP26. With emissions under half the world average, it would be rational for Delhi to avoid doing so just yet. India could announce a later date than China, which pledged net-zero by 2060. Or it could make sectoral plans, such as the aim to more than quadruple renewables in 10 years, or even to peak use of coal in the power sector. However, some plans could be conditional on global support, especially finance.
India, with others, will argue that we cannot entirely ignore equity issues. This is likely to come up in contentious issues like Article 6, which will set the rules for markets, transfers, and offsets. A number of countries are banding together for negotiations. The Like Minded Developing Countries (LMDCs), including China, India, and a few dozen others, have the clout of representing some half the world’s population, but it’s also questionable to speak of Saudi Arabia or China, who are not “low-emitters,” in the same vein as Mali or even India.
Once again, India risks being pegged, unfairly, as possible spoilsport. Delhi will have to walk a tightrope to show its actions, with or without a net-zero pledge, are globally leading but also don’t cap inevitable growth in emissions in the coming years. More meaningful than a grand ambition decades out is what India (or anyone else) does in the short and medium term. Watch for that.
Innovation and decarbonization
DAVID G. VICTOR
Nonresident Senior Fellow, Energy Security and Climate Initiative
Diplomacy will be in the spotlight at COP26 — along with a lot of posturing about which countries are making big enough efforts to cut emissions. But diplomacy, for the most part, is overrated. At best, it sets a general direction for cutting emissions. When the diplomats reach consensus, as they usually do, they make legitimate the efforts to push governments and firms to make deeper cuts in emissions.
But what really matters is innovation that disrupts old industries. As new technologies get cheaper they also rewrite the politics of decarbonization — making it easier to build and hold together the political coalitions for supporting policies.
COP26, while formally a diplomatic event, will also be a watering hole for the firms and governments that are doing the most to back innovation. Leaders from industries on the front lines — such as oil and gas, electricity, and transportation — will show up, keen to show serious plans that take decarbonization seriously. The bankers will be there too, for capital is already shifting into decarbonization.
A technological perspective helps explain why most people overestimate how quickly the world economy will decarbonize in the short term — disruptive change is slow to take hold, and the incumbents don’t leave quietly — but underestimate just how transformative all the changes will be over the long haul. And when you look at entry of new low-carbon technologies you see quite a lot of hope. This hope comes from working on decarbonization sector by sector, not pretending that a global diplomatic committee will do the job.
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South Africa’s municipal elections: A referendum on political parties and local democracy
On November 1, South Africans will go to the polls in the sixth round of local government elections since the country’s democratic transition in 1994. Voters will be able to choose among 60,000 candidates and more than 300 political parties to elect councilors for 257 municipalities.
Typically, local elections in sub-Saharan Africa rarely receive much attention. South Africa, however is an exception: Not only is it the region’s most decentralized country, so that local governments have substantive autonomy over services citizens care about, but it’s also a place where local elections are seen as a bellwether for party performance in the general elections. Notably, this electoral contest will be the first since the deadly riots that rocked the country back in July when supporters of the former president, Jacob Zuma, rebelled against his conviction for contempt of court when he failed to attend a corruption inquiry. In addition, with more than 60 percent of South Africa’s population classified as urban, control of the country’s eight large metropolitan areas (known as metros) provides both political leverage and economic clout.
How do the elections work?
South Africa operates a mixed member electoral system for municipal elections, meaning that half the seats on the councils are chosen through proportional representation—whereby the parties receive seats in proportion to the share of votes they receive—and half are chosen through a single-member constituency-based system so that individual candidates who receive the most votes in their ward gain their ward’s seat. In the metros, voters receive two ballots: one for a party and one for a ward councilor. In smaller cities and rural areas, voters also receive a third ballot to choose a party for a district municipality, which encompasses about four to six local municipalities and coordinates cross-boundary development issues. According to the Municipal Structures Act, the newly elected council then chooses an executive committee among their members, which in turn selects the mayor and deputy for the municipality. Compared to a system of direct elections for mayor by voters, this approach encourages more upward accountability to the party, causing the local elections to strongly reflect parties’ organizational capabilities and coherence.
Importance of the 2021 elections to South Africa’s political parties
In the 2016 elections, the African National Congress (ANC)—the leading political party since the end of apartheid in 1994—experienced massive local election losses for the first time ever. Some of the countries’ largest economic centers, including Johannesburg, Tshwane, and Nelson Mandela Bay, went to the opposition because the ANC could not obtain outright majorities and had to enter coalitions with other parties. Much of this shift could be attributed to the low popularity of then-President Jacob Zuma in the aftermath of the “State Capture” controversy and the “Fees Must Fall” protests across universities, as well as to the growing attraction of both the Democratic Alliance (DA) under the leadership at that time of Mmusi Maimane and the surprising endurance of the Economic Freedom Fighters (EFF) under the populist Julius Malema. For the 2021 elections, a poll by the public opinion company Ipsos showed that 49 percent of respondents intend to support the ANC on November 1, falling from the 53.9 percent the party obtained in the 2016 contest. This number is still massively higher than the DA and EFF—which respondents claim to support at 17.9 and 14.5 percent, respectively—but depending on the distribution of those votes and seat allocations, could leave the ANC again scrambling to gain majorities in the coveted metros.
Will this contest largely amount to a referendum on the ruling ANC and more importantly, for Cyril Ramaphosa’s presidency? The ruling party has intense competing factions, including a divide between pro-Zuma loyalists who could be implicated for corruption, and pro-Ramaphosa supporters who believe internal party reform is critical for regaining citizen support. Already, such rivalries have affected the ability of the ANC to agree on candidates to represent the party across more than 90 wards. More worryingly, they’ve contributed to large-scale political violence and several killings, mostly concentrated in Zuma’s stronghold of Kwa-Zulu Natal province.
The anti-Ramaphosa faction may be hoping that a poor showing will hurt the sitting president and allow others in the party to justify competing against him in the party’s national conference next December. His deputy vice president, David Mabuza, already has announced his intentions to compete against Ramaphosa at that conference. However, control of municipal councils provides the ANC with a huge source of patronage—particularly via access to municipal jobs for local-level party branch members. Therefore, if rivalries among party elites cost the ANC control of major councils, especially the metros, it could affect the party’s ability to retain support among the rank and file in the 2024 general elections.
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The electoral outcome will be equally consequential for the other two main opposition parties, the DA and EFF. The DA recently has faced a series of defections, including in 2019 by Maimane who created the Movement for One South Africa, and Herman Mashaba, the former mayor of Johannesburg, who established the Action South Africa party. Now under the leadership of John Steenhuisen, the party may not be able to break perceptions that it is mostly representative of white privilege and may not gain much ground beyond its traditional stronghold of Cape Town and the Western Province.
The EFF, which took away black votes from the ANC in 2016, could pose a bigger threat for the ruling party in Limpopo—Malema’s home province—and in Gauteng and Northwest. Reports indicate the EFF has gained much more financing for advertisements and handouts than were available in the previous local contest. However, the party’s growing popularity creates a challenge: Unlikely to win outright majorities in most councils, the EFF’s path to governing will rely on entering coalitions with one of the other two big parties. On the one hand, the party’s left-wing, nationalist platform contrasts sharply with the pro-market position of the DA. In fact, DA-EFF coalitions established after the 2016 elections ultimately crumbled in several councils because the two parties operate at opposite sides of the ideological spectrum. By the same token, Malema, who relishes attacking the ANC with his combative rhetoric and populist style, would be wary that a compromise with the ANC would alienate EFF supporters. On the other hand, without more substantive experience governing at the local level through such coalitions, it will be difficult for the EFF to gain widespread voter confidence in national elections.
Reinvigorating faith in local government
Perhaps more substantively than foreshadowing political parties’ electoral fortunes in 2024, the elections on November 1 are critical to strengthening local democracy and serve as a mechanism to encourage municipal governments to improve their performance. Based on recently released data from Afrobarometer that was collected in May-June of this year, close to 45 percent of South Africans claim they do “not at all” trust their local government council, and more than 60 percent disapprove or strongly disapprove of the performance of their elected local government councilor. Trust has declined over the last six years while disapproval rates remain stubbornly high (Figure 1). Moreover, South Africa continues to have the highest rates of distrust in local government across the continent, rivaling only more politically restricted regimes like Gabon, Morocco, and Sudan (Figure 2). This trend may paradoxically be due to the range of powers devolved to local governments combined with high expectations that voters have about their ability to deliver.
Figure 1. South Africans’ views on local government
Source: Afrobarometer, Rounds 8 (2021) and Round 6 (2015). Shares do not always total to 100 due to a small percentage of “don’t knows” or “refused to answer.”
Figure 2. Distribution of distrust of local government across Africa
Source: Author. Calculated from Round 7 of Afrobarometer (2018).Note: Countries in grey are those where Afrobarometer did not collect the data for the corresponding round.
Unfortunately, in the last several years, many of the municipal councils have become financially insolvent due to poor budgeting practices and substandard revenue collection. In fact, a report by the country’s auditor general revealed that the situation of one-quarter of municipalities was so dire that it was not clear how they could continue operating. Overall, the report gave only 27 of the country’s 257 councils a clean bill of health. Moreover, the electricity utility, Eskom, recently claimed that the municipalities owed it approximately $2.5 billion and accounted for 10 percent of its total debt. These dynamics, in turn, help explain why service delivery remains one of South Africans’ major grievances: In fact, there have been close to 100 protests and demonstrations over local service delivery in South Africa just since the start of 2021.
Conclusions
Globally, local elections do not lead to high turnout, especially nonconcurrent ones—an often-surprising trend given that most citizens’ engagement with their government is most directly at the local level. Encouragingly, again, South Africa contradicts common trends as it historically has had turnout rates of close to 60 percent in the last two local elections, and the assessment by Ipsos also confirms high levels of voter intentions despite the pandemic.
If the reality matches projections, November 1 will surely be a turning point for all the political parties: solidifying allies and enemies for Ramaphosa’s faction of the ANC, testing the DA’s ability to become a national party without a black leader, and signaling the EFF’s willingness to govern rather than simply oppose. Perhaps more importantly, however, it will serve as a warning sign from South Africans that on the local issues that most affect their everyday lives, they will continue to demand and expect better from their politicians.