In recent years, there has been a growing movement within the global development community advocating for the transfer of substantial financial resources from wealthier nations to developing countries. This capital infusion is intended to facilitate the transition to low-carbon, sustainable energy systems in these regions, without compromising their economic growth. However, this well-meaning advocacy brings to the forefront a series of intricate economic, engineering, and technological questions that often go unaddressed in mainstream discourse.
Africa, the second-largest continent both in size and population, has historically contributed a minimal amount to global carbon emissions. Current estimates indicate that the continent accounts for only 1% of historical carbon emissions, and today, it produces a modest 4% of global emissions. Africa’s annual anthropogenic emissions of carbon dioxide equivalent (CO2e) total approximately 1.4 billion tonnes, with South Africa responsible for 35% of these emissions. Despite the low contribution to the global carbon footprint, the continent finds itself at the center of discussions around emissions reduction, due to its potential for rapid industrialization.
On a per capita basis, Africans emit only 20% of the global average of CO2, underscoring the disparity in emissions between Africa and the rest of the world. The international community, led by the Intergovernmental Panel on Climate Change (IPCC), has set ambitious targets for reducing global carbon emissions by nearly 10 billion tonnes annually in order to keep the global temperature increase below the critical threshold of 2°C by 2030. However, imposing a stringent net-zero emissions target on Africa would impose a disproportionate share of the global cost of decarbonization on a continent already grappling with numerous development challenges.
Preliminary estimates suggest that achieving net-zero emissions across Africa could require an investment of approximately US$1.3 trillion, a figure that African leaders and economists have highlighted as necessary compensation from wealthier nations. However, a more nuanced economic analysis raises a counterfactual scenario: rather than focusing solely on financing Africa’s decarbonization efforts, what if developed countries incentivized carbon-intensive industrial growth in Africa? This seemingly paradoxical approach merits serious consideration when viewed through the lens of foreign direct investment (FDI) and industrialization metrics.
Currently, Africa receives around US$80 billion annually in FDI. If we benchmark the carbon intensity of industrialization based on existing metrics, the continent could feasibly boost its economic growth by 3 percentage points annually, which would result in a doubling of carbon emissions. This additional growth would require approximately US$40 billion in FDI, though padding this estimate to US$80 billion could create even greater economic multiplier effects. The consequence of such investment would be a significant increase in the continent’s average growth rate, from the current 4.6% to potentially 8% or more, leading to a doubling of per capita income by 2030. This accelerated economic growth could lift up to 90% of Africa’s population out of poverty, provided that the environmental Kuznets curve hypothesis holds true—that is, as income levels rise, carbon emissions eventually begin to decline.
However, Africa’s institutional frameworks, characterized by varying degrees of regulatory capacity and enforcement, are likely to favor the growth of polluting industries over green technologies in the short to medium term. The establishment of green industries requires substantial investments in human capital, technological infrastructure, and purchasing power—elements that many African economies currently lack. Therefore, a pragmatic approach would be to extend the decarbonization timeline for Africa, while allowing more developed economies, which have a comparative advantage in clean energy technologies, to lead the way in green industrialization.
From a purely economic standpoint, the notion of providing “green aid” to Africa is fraught with complexities. Many experts have questioned the efficacy of green financing models, drawing parallels to earlier forms of development aid, which have often produced mixed results. “Climate finance,” while presented as a new initiative, is in many ways a rebranding of traditional development aid, drawn from the same sources. Given the historical challenges in aid effectiveness, particularly with regard to governance, transparency, and accountability, it is far from clear that US$1.3 trillion in green aid would yield the desired outcomes. Trust factors between donor and recipient countries, as well as concerns over corruption and misallocation of funds, further complicate the implementation of such large-scale financing initiatives.
Moreover, there is a growing sentiment that focusing on conventional FDI, without imposing stringent green conditions, may be a more effective strategy for fostering sustainable economic growth in Africa. The continent is already accustomed to such forms of capital inflow, and traditional FDI has demonstrated measurable impacts on economic development. By contrast, the requirement for deep institutional reforms to accommodate green aid is likely to encounter resistance, as evidenced by the cautious reception of initiatives such as the Green Climate Fund. The numerous frameworks designed to prevent corruption in climate finance underscore the skepticism surrounding these new financial models.
While private sector actors may play a role in greening FDI independently, the coordination required to achieve meaningful change across transnational markets presents significant challenges. This reality points to the need for new multilateral, public-private partnerships that can reconcile the moral, political, and economic trade-offs associated with climate finance. However, progress on this front has been slow, as demonstrated by the limited success of the Green Climate Fund and similar initiatives.
Institutionalizing these new structures will be a long-term endeavor, and in the interim, there is considerable doubt as to whether substantial green financing will flow to the developing world, and to Africa in particular, to support a just energy transition. While this pessimism is rarely articulated in formal discussions, it is a sentiment that exists beneath the surface. The question remains: why continue to maintain the illusion of optimism when the prospects for large-scale green financing appear so uncertain? It may be time for a more candid and economically grounded conversation about the trade-offs involved in Africa’s path to industrialization and sustainable development.