How Legislation Can Help Boost Renewable Energy Investments In Africa
- Africa and its 54 countries have an important role to play in the energy transition.
- But its success depends on how governments use legal frameworks to support investment in renewable energy.
- Here are six ways legislation can promote investment in renewable energy.
Africa plays a vital role in the global energy transition, which places the onus on African countries to use legal means to promote investment in the renewable energy industry. For example, in order to promote investment in renewable energy in Rwanda, the government promulgated the Rwanda Energy Subsidy Tariff Regulations in 2012 to create a favorable environment for renewable energy power generation and increased investment in renewable energy. This decision, along with other innovative measures, helped increase Rwanda’s electricity supply 6% in 2009 to 75% Its Ruzizi III hydropower project will add 145MW to the country’s total power generation capacity by 2024, which currently stands at 332.6MW.
Rwanda has been able to accelerate investment in renewable energy because it has effective laws in place to support energy production. Other African governments need to review their laws to create an enabling environment for investment in the renewable energy sector. Global and regional laws that support climate change adaptation efforts are critical to Africa’s role in the energy transition.
What is the legal and economic situation in Africa?
African countries are working hard to invest in renewable energy to grow their economies and achieve net-zero emissions in line with the United Nations Framework Convention on Climate Change and the Paris Agreement. Notably, Mauritania in northwest Africa is implementing a Green hydrogen energy project It is expected to generate $34 billion in investment, which will significantly improve the country’s economy.
However, as most African countries have yet to adopt the United Nations Framework Convention on Climate Change and supporting legal frameworks, more can be done to accelerate investment in renewable energy. Once incorporated into domestic law, these global legal treaties will be internally binding on countries.
The African Continental Agreement on Free Trade (AfCFTA) is another important legal framework for Africa’s energy transition and has been ratified by more than 48 countries. Accra, Ghana, hosts the AfCFTA Guided Trade Initiative (GTI), which involves 12 African countries as a pilot for a trade policy environment. Once the agreement enters into force in more than 50 contracting countries, it will promote the free flow of renewable energy investment in Africa.
Additionally, the African Energy Commission Convention aims to promote cooperation within the African Union (AU) to develop the continent’s energy capabilities. But financial cooperation among AU member states should include greater private sector participation. For example, a few weeks ago, Coscharis Technologies Limited (a subsidiary of the Coscharis Group) recently finalized the execution of a $4 billion in renewable energy projects Revolutionizing Nigeria’s power sector. It is West Africa’s largest green energy project and will use solar energy to reduce the country’s dependence on fossil fuels. This kind of investment in Africa highlights what is possible when the private sector is encouraged and its role is seen as vital.
Six ways the law could help boost renewable energy investment in Africa
- Legislation could be used to dictate the percentage of national budgets needed to combat climate change. This will prioritize renewable energy generation and kick-start investment in this sector. Tanzania, for example, has received $786 million from the International Monetary Fund to fund its 2024 climate change budget, while Nigeria will spend 2.2% of its $17 billion 2024 national budget on climate change.
- African countries need to enact laws requiring commercial banks to set up a fund or account to provide loans to small and medium-sized enterprises wishing to invest in renewable energy. Severe penalties can be prescribed for banks that fail to comply, such as temporary seizure of banking licenses or suspension of operations. For example, in India, Reserve Bank of India (RBI) Promote renewable energy by including it in the Renewable Energy Act priority sector loans (PSL) category. This requires banks to allocate a certain proportion of their loans to renewable energy projects, ensuring the industry receives the necessary financial support.
- More African governments should adopt tax laws to incentivize private sector renewable energy generation. This can be achieved through tax incentives and duty exemptions. It will also make it easier to do business in African countries and attract foreign direct investment in renewable energy. For example, Norwegian renewable energy tax regime These include a commendable 22% corporate income tax on hydropower and wind power.
- For countries promoting renewable energy investments in Africa, there is a corresponding obligation to promote the rights and welfare of communities where renewable energy projects are located. Without such provisions of the law, community residents may discourage renewable energy investments. Therefore, monitoring of compliance with Environmental Impact Assessment (EIA) requirements should be intensified, and national agencies and safety agencies must ensure that companies comply with EIA requirements.
- Furthermore, African countries follow the law dualism There must be a shift from ratifying global climate treaties to domesticating them so that they are binding on countries and their citizens.
- African countries can ensure that consumer protection laws provide for tough penalties for anti-competitive schemes or practices that promote fossil fuel imports instead of renewable energy production.
Ultimately, effective laws must be the foundation upon which other renewable energy reforms and solutions can flourish. This means African governments must leverage effective laws, as well as policies, state institutions, stakeholders and security agencies to ensure increased investment in renewable energy to address the climate crisis.
source: world economic forum
