Climate Change: Africa s Development Opportunity

Transcription

1 Climate Change: Africa s Development Opportunity Energy-Climate Change Technology (ETC) Conference Bergen, September 2009 Aziz Bouzaher and Shanta Devarajan World Bank 1

2 Two facts Africa is likely to be worst hit by climate change 2

3 It Will Get Worse Potential Impact on Agriculture Projected Percentage Change in Agricultural Productivity in 2080 Note: Scenario: SRES A2. Source: Cline 2007.

4 Potential impacts Decreases in: crop yields, drinking water shortages, reduced hydro potential Increases in: diseases, migration, social strife, cost of infrastructure maintenance By 2020 a projected million Africans will be exposed to water stress By 2020 some countries rain-fed agricultural yields could be reduced by an estimated 50% Climate variability creates annual loss of 1-2% GDP Adaptation costs could amount to 5-10% GDP Note: Africa produces 4% of global GHG emissions 4

5 Two facts Africa is likely to be worst hit by climate change Africa is the poorest region in the world 5

6 Highest poverty rate 6

7 Yield ( =100) Lowest agricultural productivity ASIA AFRICA SSA Other LDC Area ( =100) 0 Area expansion Yield Increase

8 Irrigated Area (% of cropland ) Irrigated Area (% of cropland ) Cereal Yield (MT/Ha) Cereal Yield (MT/Ha) SSA Latin America South Asia 0 SSA Latin America South Asia Fertilizer Use (Kg/Ha arable land) Fertilizer Use (Kg/Ha arable land) SSA Latin America South Asia 8

9 Measures of Infrastructure (see note) Massive infrastructure deficit SSA's LICs Other LICs Paved road density Total road density Generation capacity Electricity coverage Improved water Improved sanitation Note: Road density is in kilometers per kilometer squared; telephone density is in lines per thousand population; generation capacity is in megawatts per million population; electricity, water and sanitation coverage are in percentage of population

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11 What Opportunity? Only 12% of cultivated land is irrigated Yet irrigated land has 5-6 times the yield as irrigated land Threat of climate change may tip the balance in favor of irrigation Only 8% of hydropower potential exploited Benefits from water management and clean energy may relax constraints to hydropower investment Sustainable soil management practices provide cropland/nutrient management, degraded soil restoration, bioenergy, and mitigation benefits (harvesting soil carbon) 11

12 What Opportunity? Avoided deforestation could generate significant revenues Increased potential malaria victims reduces the unit (economic and political) costs of malaria control 12

13 Analytical Framework 13

14 MC MC MB MB Q Q* 14

15 Case 1: Irrigation Investment 15

16 Costs & Benefits of Irrigation in the Zambezi River Basin (US$ million) Value added of baseline irrigation (VB) Cost of tripling irrigation (C) (+367,000 ha) Value added of Trippling Irrigation (VA) Benefits of irrigation (avoided damages of CC) (B) Adapatation benefits (B - VA) Maize: From 1.06 Mt/hectare to 7.5 Mt/ha Rice: From 1.1 Mt/ha to 4-5 Mt/ha 16

17 Case 2: Harvesting Soil Carbon 17

18 African agriculture accounts for 13% of global agricultural GHG emissions, and the amount is expected to rise rapidly in the future Sustainable practices (cropland/nutrient management, degraded soil restoration, bioenergy, etc.) are essential for adaptation and have significant mitigation potential: African smallholders could boost earnings if soil carbon was included in future compliance markets Assuming an economic mitigation potential of 265 million tons CO2e per year by 2030 (IPCC, 2007) and a price of US$ 5-10 per ton of CO2e, an income stream of US$ billion per year could be realized. This amount is almost twice as high as the annual ODA flow to African agriculture between 1996 and At farm level, with an estimated sequestration potential of 3 tco2e per ha and year, African farmers could receive additional revenues of US$ 30 per ha per year. This amount would constitute significant additional resources, since for example most Ugandan farmers receive a net income from maize of about US$15-30 per ha per year. Incremental cost - Requires investment in extension & farmers training, correcting market failures

19 Collective action failures? Market failures (e.g., land markets, access to credit, access to markets) Institutional failures (weak public technical agencies, weak extension and research) Commercial vs subsistence/small farmers 19

20 Case 3: Hydropower Huge potential in Africa: 93% unexploited potential (some 1.1 million Gwh/year) 20

21 Potential (Multiple) Benefits of Hydropower in Africa Domestic electricity generation Management of floods and droughts Improved water resources allocation across a complex set of users Potential benefits to regional development. Stabilization of regional electricity grid systems Supports CC mitigation by providing a low carbon energy future Supports adaptation to hydrologic risk through water regulation and storage and mitigation of flood and drought shocks. 21

22 Water management in Africa is particularly challenging, because international river basins are predominant

23 ETHIOPIA Developed Energy : 800 MW (mostly hydro) Access to Electricity : 31 % (rural less than 5%) Biomass More than 94 % of the country s energy consumption SUPPLY SOURCE Hydropower Potential: 45,000 MW Some 3,500 MW under development Geothermal Potential : 5,000 MW in the Rift Valley Supply Cost (US c/kwhr) 3? Co-generation (biogas) 6 Wind 6-10 Solar Biofuels na Petroleum (diesel) Some 52 trillion cf gas reserves

24 Interconnecting Ethiopia s and Kenya s Power System: Understanding the Hydrologic Opportunities and Risks Potential benefits of the Ethiopia and Kenya interconnection which, through their hydrologic complementarity, could contribute to hedge hydrologic risks and contribute to increase total firm energy of the join system Red to blue = higher to lower hydrologic risk - Shows potential for lowering risk through interconnecting systems in Ethiopia and Kenya 24

25 Case 3: Malaria Control 25

26 Malaria, already the biggest killer in Sub-Saharan Africa, is spreading to higher altitudes. Climate change is expected to expose 90 million more people in Africa to malaria by 2030 a 14 percent increase 26

27 Investing in Malaria Control The economic justification for government intervention in malaria control: Equity (high correlation between poverty and malaria incidence (the driving forces behind malaria include population growth, increasing mobility of people, deforestation, irrigation, deteriorating health infrastructures, drug resistance, and war and civil strife) Market failure (public goods, externalities, and information) Compared to many of malaria control considered highly cost effective (cost per DALY averted is SSA is way below US$ 150 in most cases) 27

28 Intervention type Cost per DALY averted (US$) Insecticide treatment 4-10 Insecticide treatment + Nets Antenatal care Improved case management 2-8 Measles vaccination 2-17 River blindness vector control Medical management of hypertension > 2,000 Source : London School of Hygiene and Tropical Medicine / WHO

29 Case 4: Avoided deforestation 29

30 Average annual emission of carbon for different land uses (Million Tons of Carbon/year) Cropland Pasture Shifting Cultivation Timber Harvest Forest Plantations TOTAL West East Central South All SSA Proport ion 35% 1% 54% 10% 0% 100%

31 Break-Even Opportunity Cost of Land (*) Assuming 65tons of carbon per hectare NPV(10%, 25 years) ($/Ha) Business as usual (extensive use) Break-Even NPV/[CO2] ($/TCO2e) (*) Conservation programs Low impact timber prod. 7, Cereal production Maize Wheat Rice 1,875 2,832 5, Plantation crops Bananas Palm oil 29,880 90,

32 Case 5: Taxing Carbon Emissions 32

33 Taxing Carbon Emissions in South Africa South Africa is a major source of CO 2 emissions Ranks 11 th globally 65 percent of Africa s and 1.5 percent of the world s carbon emissions Only behind China, India, South Korea, and Iran among developing countries Coal use is the source of 82% of total emissions These emissions can be reduced significantly at a low cost in welfare Taxation reducing CO2 emissions offers chance to better use indirect taxes: reducing taxes that create distortions adding to taxes that internalize externalities Targeting of CO2 emissions and welfare outcomes tend to be best for a carbon tax, followed by a tax on energy use. A tax on energy-intensive sectors is a distant third New tax revenue and rates are lower if taxes are better targeted and if the economy is more flexible The fact that CO2 taxation pulls labor into relatively highproductivity sectors reduces its welfare cost 33

34 Development synergy Irrigation Malaria Hydropower Adaptation Mitigation Land use Carbon tax Revenue generation potential 34

35 The End 35

36 ITRRIGATION - CASE OF THE ZAMBEZI RIVER BASIN ANG BOT MAL NAM MOZ TANZ ZAM ZIM TOTAL GDP (US$ B) AG (% of GDP) population (M) AG (part of GDP) (US B) CC damage (15% of AG GDP) CC damage (10% of AG GDP) CC damage (5% of AG GDP) B = SUM,*p*(1/(1+α))**n+*Vn} = p*vo/(α-r) (if damages grow at same rate as ag growth) Scenario 1 p (probability of occurrence) Vo (initial damages from CC-$B) (5% damage du to CC) α (5%) r (3.2% Africa wide) B ($B) Scanario 2 p (probability of occurrence) Vo (initial damages from CC-$B) (10% damage du to CC) α (5%) r (3.2% Africa wide) B ($B) B= expected benfeits Vo = damage at t=0 (n = time period - from 0 to infinity α = discount rate r = rate of agricultural growth `**Avoided damages in very conservative scenario 1 (drought every 10 years and only 5% damage) = $ 5.8 Billion - (underestimate since floods are not included) **Cost of tripling irrigation (extra 367,000 $4000/ha - $1.5 Billion, leading to increased value added of $1.1 Billion [value addition = extra $300/ha and i = 10%) - [Costs equal benefits at i=7.5%] **Avoided damages can help buy over a million hectares of irrigation (with spillover effects in technology, nutrition, etc ) Thus investment in irrigation would make Agriculture more resilient 36

37 Indicative Annual Adaptation Costs (based on current development gap) Based on 5-year plan Annual (US million) % of GDP Socio-economic targets Agriculture and RD 440 3% Double ag production in 5 years (#) Roads 860 6% Increase network density 10%/yr Water & Sanitation 320 2% Increase access/cpverage (@) Irrigation 320 2% 80,000 ha/yr Power 1,012 7% Five-fold increase Total 2,952 20% GDP ( ) 15,000 PASDEP ( )* 6,660 44% (*) Includes also: health, education/population & devpt, private sector, Urban, telecom, gender (#) Covers crops and livestock, technology, NRM, Ag research & extension, marketing, and food security and productive safety net (@) Includes--very importantly--improved maintenance 37