Africa’s Green Transition Carries Economic and Social Costs – UNU-INRA Report Reveals Critical Path Forward

A new report from the United Nations University Institute for Natural Resources in Africa (UNU-INRA) confronts one of the most urgent questions of our time: how can Africa navigate the global green transition while safeguarding development, ensuring justice, and protecting sovereignty?

The comprehensive study, Counting the Cost: From Extraction to Green Transition – Tackling the Dealbreakers of Finance, Justice and Development, reveals Africa’s unique paradox: it is the world’s lowest emitter of greenhouse gases yet among the most vulnerable to climate impacts. Simultaneously, the continent holds vast renewable and mineral wealth critical for the global green economy.

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Africa’s Strategic Resource Position in the Global Green Economy

With 75% of global cobalt reserves, abundant solar and wind resources, and rapidly emerging hydrogen potential, Africa stands at a critical inflection point. The continent possesses 60% of the world’s best solar resources globally, yet only 1% of installed solar photovoltaic capacity, highlighting the vast untapped potential for renewable energy development.

Renewable Energy Potential Across the Continent

Recent analysis shows that Africa’s renewable hydrogen economy potential ranges dramatically across different technologies. Regional solar, wind, concentrated solar power (CSP), and bio hydrogen potential ranges from 366 to 1,311 gigatonnes per year, 162 to 1,782 gigatonnes per year, 463 to 2,738 gigatonnes per year, and 0.03 to 0.06 gigatonnes per year respectively.

Countries across the continent are already demonstrating leadership in renewable energy development. Morocco’s Noor Ouarzazate Solar Complex, one of the world’s largest concentrated solar power plants with 580 MW capacity, represents a flagship project in the continent’s energy transition. Similarly, Kenya’s Olkaria geothermal complex contributes over 700 MW to the national grid, accounting for nearly 50% of the country’s electricity supply.

Green Hydrogen: The Next Frontier

Africa’s green hydrogen potential is particularly promising. Research indicates that the continent could produce green hydrogen at globally competitive costs as low as $1.80/kg by 2030. With further cost declines, Africa has the potential to produce 5,000 megatonnes of hydrogen per year at less than $2 per kilogramme—equivalent to global total energy supply today.

Countries such as Namibia, Egypt, Morocco, and South Africa are spearheading ambitious green hydrogen projects. Namibia’s planned green hydrogen hubs alone are expected to attract $9.4 billion in investment and generate 15,000 direct jobs in the coming decade.

The Climate Finance Challenge: A Mounting Crisis

The study warns that multiple global crises are undermining sustainable development and increasing vulnerability across Africa, while debt burdens and weak adaptive capacity compound the pressures of climate change. Although Africa contributes little to global emissions, it is showing leadership in green development. Yet fossil-fuel dependent countries face the risk of stranded assets, with far-reaching consequences for jobs, incomes, and stability.

Massive Financial Requirements

The report underscores that energy insecurity remains acute across the continent. Africa requires $25–50 billion annually to achieve universal energy access by 2030, and a further $200 billion each year to finance its climate commitments under the Nationally Determined Contributions (NDCs).

However, current climate finance mechanisms continue to favour loans over grants, exposing the continent to new layers of debt. This approach creates a vicious cycle where African countries become increasingly burdened with debt while trying to address climate challenges they did not create.

Historical Climate Finance Shortfalls

The historical failure of developed countries to meet their climate finance commitments has severely hampered Africa’s ability to build adaptive capacity. Developed nations pledged to mobilize $100 billion annually from 2020 to 2025 to support climate-related actions in developing countries, acknowledging their historical responsibility for greenhouse gas emissions. However, until recently, this promise remained unfulfilled, hindering Africa’s economic resilience against climate change impacts.

EU Carbon Border Adjustment Mechanism: A New Trade Barrier

Meanwhile, the EU’s Carbon Border Adjustment Mechanism (CBAM) threatens to erode Africa’s export earnings, raising fundamental equity concerns. The mechanism, which became operational in its transitional phase in October 2023, will impose full charges from 2026 on imports of carbon-intensive goods including cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.

Projected Economic Impact on African Exports

Research indicates that CBAM could result in significant decreases in African exports to the EU: aluminum exports could decline by up to 13.9%, iron and steel by 8.2%, fertilizer by 3.9%, and cement by 3.1%. While some of these exports might be diverted to other destinations including China and India, the overall impact could reduce Africa’s GDP by 0.5%.

For individual countries, the impact could be even more severe. In a scenario where all exports to the EU would be covered by CBAM at a carbon price of €87 per tonne, African exports to the EU could be reduced by 5.72% and the region’s GDP by 1.12%.

Limited Carbon Pricing Implementation

The challenge is compounded by the fact that only one of 70 low and lower-middle income countries have implemented a carbon price to date, with only six more planning to do so. This contrasts sharply with high-income countries, where almost a third have carbon pricing mechanisms in place.

The Call for Climate Justice

Speaking at the Second African Climate Summit in Addis Ababa, Prof. Fatima Denton, UNU-INRA Director and lead author of the report, highlighted the fundamental injustice of current arrangements: “Africa is asked to act as a carbon sink for the world, but there is no compensation or support mechanism to match this demand.”

This stark observation underscores the asymmetry in global climate action, where Africa bears disproportionate costs while receiving inadequate support. The continent’s forests and ecosystems provide crucial carbon sequestration services for the planet, yet these environmental services remain largely uncompensated.

Opportunities for Green Industrialization

Despite these challenges, the report highlights significant opportunities for Africa. The continent’s vast renewable and mineral wealth offers a unique chance to lead in the green economy, but only if countries retain ownership and ensure domestic value addition. Without this approach, Africa risks repeating the extractive patterns of the past that have limited its development prospects.

The Imperative of Domestic Value Addition

What is needed, the report argues, is green industrialization: powered by clean energy, anchored in critical mineral value chains, and designed to create jobs, build resilient infrastructure, and foster prosperity while respecting planetary boundaries. This approach represents a fundamental shift from traditional extractive models toward value-added production and processing.

Regional Integration as a Strategic Imperative

Regional integration through intra-African trade, policy alignment, and joint infrastructure development will be essential to strengthen bargaining power and maximize the continent’s resource potential. The African Continental Free Trade Area (AfCFTA) provides a framework for this integration, offering alternative markets that do not impose CBAM levies.

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Country-Level Green Energy Leadership

Several African countries are already demonstrating what effective green transition leadership looks like:

Morocco’s Comprehensive Approach

Morocco aims to generate 52% of its energy from renewables by 2030, supported by major wind farms including the 850 MW Tarfaya wind farm. The country is also focusing on green hydrogen as part of its energy strategy, with several projects under development to export clean energy to Europe.

Egypt’s Green Hydrogen Hub Development

Egypt has entered into agreements with international partners to develop a green hydrogen hub, capitalizing on its solar and wind potential for sustainable hydrogen production. The country is positioning itself as a potential supplier of 8% of the global hydrogen market.

South Africa’s Wind Energy Expansion

Recent developments include South Africa’s largest permitted wind farm, the 1000MW Carissa Wind Energy Facility, which will power green ammonia production and advance the country’s green hydrogen ambitions.

International Support and Partnership Models

The European Union has launched initiatives to support Africa’s renewable energy development. The ‘Scaling up Renewables in Africa’ campaign aims to mobilize public and private investments to accelerate renewable energy projects across the continent and help provide affordable energy access.

The campaign aligns with ‘Mission 300’, an initiative by the World Bank Group and African Development Bank that aims to provide electricity to 300 million people in Africa by 2030. This represents a comprehensive approach to addressing energy poverty while supporting climate objectives.

Multilateral Financial Support

Recent analysis confirms that Africa’s extraordinary green hydrogen potential could be worth €1 trillion, with green hydrogen becoming economically viable at €2/kg and capable of accelerating low-carbon economic growth across the continent while reducing emissions by 40%.

The Path Forward: Justice and Sovereignty

Prof. Denton emphasized the fundamental principle that must guide Africa’s green transition: “Justice must be at the heart of the green transition. Africa cannot remain a cheap carbon sink or a raw materials supplier for the world. The transition must deliver sovereignty, resilience, and prosperity for African people.”

Transforming the Narrative

The report argues that counting the costs of green transition compared to inaction will enable proactive planning and early action to avoid economic disruptions and ensure a just, resilient and inclusive transition. “Until Africa gives itself the space to change the narrative radically, countries that are high polluters will continue to dictate,” Denton advised.

This transformation requires African countries to move beyond passive participation in global climate action toward active leadership in defining terms that serve their development needs while contributing to global climate objectives.

Strategic Recommendations for Implementation

The report outlines several key strategic areas for action:

Carbon Market Development

Investing in carbon credit projects could provide African firms with alternative revenue streams and CBAM mitigation strategies. Developing domestic carbon markets and pricing mechanisms can help African countries capture value from their climate action while reducing exposure to external trade measures.

Green Industrialization Investment

Strategic investments in renewable energy infrastructure and manufacturing capabilities can position African countries to capture more value from their natural resources while creating employment opportunities and building technological capabilities.

Policy Advocacy and International Negotiation

African countries need to engage more actively in international climate and trade negotiations to ensure that global mechanisms like CBAM are designed to support rather than hinder sustainable development.

Conclusion: A Critical Juncture for African Development

Africa stands at a critical juncture where the global green transition presents both unprecedented opportunities and significant risks. The continent’s vast renewable energy resources and critical mineral reserves position it to become a global leader in the green economy, but only if the transition is managed in a way that ensures African ownership, value addition, and equitable benefit distribution.

The UNU-INRA report makes clear that business as usual is not an option. Without fundamental changes to climate finance mechanisms, trade policies, and development approaches, Africa risks being further marginalized in the global economy despite holding the keys to sustainable global development.

The path forward requires bold action from African governments, international partners, and the global community to ensure that Africa’s green transition delivers justice, sovereignty, and prosperity for its people while contributing to global climate objectives. The window for action is narrow, but the potential rewards – for Africa and the world – are enormous.

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By: Montel Kamau

Serrari Financial Analyst

15th September, 2025