During COP29, nearly 200 nations came together with a key priority: addressing the substantial gap in climate financing.

The United Nations Framework Convention on Climate Change (UNFCCC) estimates that by 2030, developing nations will need over $1 trillion each year to adapt to and mitigate the escalating impacts of climate change. Yet, as this year’s summit concluded in Baku, wealthier countries aimed for a more modest target: to increase their annual financial support for less affluent nations from $100 billion to $300 billion by 2035.

Even more groundbreaking is the aim to mobilize $1.3 trillion annually from a blend of public and private investments by 2035. This ambitious objective is expected to stimulate investments in renewable energy, adaptation efforts, and infrastructure that boosts climate resilience across the Global South.

These funds could be crucial for enabling a fair energy transition in African nations while addressing the growing challenges posed by climate change. However, to attract private sector engagement and enhance investment activity, strong political commitment is imperative.

Perception – a significant barrier to investment

Africa exhibits considerable political will when it comes to climate action. Among the 32 countries that signed the Climate Parliament’s recent Green Energy Zones and Corridors Pledge, 20 were African nations.

This is quite understandable, as the continent is one of the most severely impacted by global warming. Yet, it faces a pressing challenge: balancing a rapidly growing population, increasing energy demands, and insufficient climate funding. Africa represents 18% of the global population and bears a significant proportion of climate-related risks, yet, according to the African Development Bank, it receives less than 4% of global climate finance. The continent urgently requires investments in the trillions to construct resilient, low-carbon infrastructure and to meet its energy needs sustainably.

The stakes are extremely high for African countries: rising temperatures and erratic weather patterns threaten food security, livelihoods, and economic stability. However, Africa has immense potential to lead the global transition to green energy, and with adequate support, this shift is feasible. A major obstacle to investment lies in the perception of financial, political, and currency risks. African leaders must confront these challenges by refining the regulatory and legislative framework to attract capital and reshape Africa’s profile as a dependable long-term partner for climate finance.

African parliamentarians as champions of climate finance

Political commitment is essential for achieving climate objectives. The investment gap necessary for reaching net-zero emissions by 2050 is staggering, and closing it requires both public funding and significant private sector involvement. Members of Parliament (MPs) play a critical role in creating an environment conducive to these investments. They have the power to prioritize infrastructure projects, such as transmission systems and interconnections, that are crucial for the advancement of the clean energy movement.

By utilizing their legislative influence, MPs can:

• Pass laws that establish ambitious renewable energy targets and mobilize extra funding for climate initiatives through budgetary allocations.
• Encourage private investment by mitigating perceived risks related to renewable energy projects, enhancing transparency, and endorsing multi-year plans that provide long-term stability for investors.
• Leverage various financial tools, such as tax incentives, subsidies, public-private partnerships, carbon markets, blended finance models, and financial guarantees, to unlock new funding streams.
• Ensure that climate legislation is not only passed but also effectively enforced, compelling governments to honor their international commitments, including those set at COP.

By integrating these strategies into national plans, MPs can convey strong messages to the private sector that sustainable projects in Africa are both viable and backed by solid legislative frameworks.

Additionally, elected officials can guarantee that the green transition incorporates social and economic inclusion. They are instrumental in ensuring that renewable energy projects benefit local communities, especially women and youth.

A bipartisan coalition of legislators is crucial for creating enduring environmental policies that surpass political divides, ensuring consistency in climate action. This unified approach helps mitigate the impact of short-term political fluctuations, ensuring that climate policies remain stable and effective. MPs are ideally positioned to drive solutions to climate change, bridging the gap between ambitious commitments and practical, actionable policies.

The potential of green zones

The Istanbul Green Investment Dialogue, organized by Climate Parliament and UNIDO, sparked an engaging initiative under the Parliamentarians for Climate Finance project, aimed at enhancing the skills of national legislators from 15 Sub-Saharan African countries. The goal is to notably increase the inflow of green investments at the national level. This event brought together MPs from 35 countries, as well as scholars and financial experts, to explore green zones as a crucial investment opportunity. Following this dialogue, a confidential meeting at COP29 in Baku served as a venue for MPs from the participating nations and key GCF representatives to further investigate the economic potential of green zones, solidifying the link between policy, finance, and green investments.

Green zones denote designated areas where limited public investment guarantees can be concentrated to draw significant investment in renewable energy, green hydrogen, and industries that utilize these resources to produce green steel, aluminum, cement, fertilizer, aviation fuel, and other goods.

These green zones offer a chance for developing countries to compete for green investment at a global level and build low-carbon infrastructure for the future, without the need for a comprehensive overhaul of national laws and regulations. However, many of the concepts related to green zones could also be implemented on a national scale by any willing country. The design and details of green zones will vary by country, requiring substantial work at the national level. At the same time, we aim to develop a model that can be replicated internationally.

The idea is both simple and powerful. Green zones can serve as competitive hubs for green investment without needing extensive changes to national policies. They provide flexible frameworks that nations can adapt or expand at the national level, accelerating their transition to low-carbon economies.

The Green Investment Dialogue aspires to pinpoint solutions that render green zones as attractive as possible for investors. The discussions will culminate in a toolkit for MPs, outlining vital factors that make these zones profitable and bankable. These factors encompass:

• Location. Proximity to renewable energy resources, industrial materials, and community involvement in ownership are crucial for ensuring local engagement.
• Connection. Strong transmission lines must link green zones to urban centers and cross-border regional grids, along with transport networks for exporting green industry products.
• Risk Reduction. This includes a streamlined approval process, transparent investment frameworks, and government or multilateral guarantees to diminish risks, ensuring competitive pricing and attracting private investments to these zones.

Climate Parliament and UNIDO will create a Green Zones Toolkit to aid legislators in establishing green zones across their nations. This toolkit will include model legislation, success stories, best practices, and policies that have gained traction internationally. An outcome of the dialogue will be draft concept notes for countries to present to the GCF or other agencies in pursuit of funding for green zone development.

It is clear that African MPs are actively challenging existing perceptions, engaging in discussions, and facilitating investments to ensure that finance reaches those who are most affected by climate change. While the final COP agreement received a tepid reception, with these pioneering parliamentarians and policymakers, a greener, safer, and fairer Africa is well within reach.