In the fall of 2022, EU climate policymakers had a suspicion: the Commission, in coordination with the then-acting Czech EU presidency, would push through as many of the Fit-for-55 climate package files as possible, before Sweden was to take over the Council leadership in January 2023. The worry was that the newly elected right-wing Swedish government, dependent as it is of the far-right, EU-skeptic (and partly climate-denialist) Sweden Democrats, would try to block or at least weaken legislative decisions not only on climate issues but also within the overall European Green Deal-agenda.
With the end of the presidency, those worries turned out to be somewhat justified in the sense that Sweden-the-member-state, in some cases (all related to forestry) went against compromises tabled by Sweden – the EU Council President. In general though, there seems to be agreement that the Swedish government and its civil servants played the role of the “honest broker” well and professionally, steering an impressive pile of dossiers from Commission proposals to decisions or at least agreements between the member states and the European Parliament.
Most important long-term was probably the final adoption of new versions of the three pillars of the EU climate legislation:
In all three cases, the trilogue negotiations (between the Commission, the Council and the Parliament) were concluded already during the Czech presidency, so what remained for the Swedes was to administer the formal decisions, which were taken in March and April 2023. As a consequence, since May there is union legislation in place that (unless it will later be revised) guarantees that the net EU greenhouse gas emissions for 2030 will be 57 percent below the 1990 level. A milestone.
In addition, agreements have been struck on more than ten sector-oriented climate legislations during the Swedish presidency. Among them are:
In the middle of the presidency, the German and French governments surprised and frustrated everybody, when they, as confirming decisions were to be taken, on two different issues, suddenly, no longer supported trilogue agreements that they had previously agreed to:
Those conflicts were ultimately solved, seemingly more through interventions from the Commission than as a result of efforts from the council presidency, it was said in Brussels.
On several occasions, it also became clear that Sweden is at odds with the majority of the Union on forestry issues. Sweden abstained when the final decisions on the regulations on deforestation and carbon sinks (LULUCF) were taken, arguing that the new legislation would harm the development of sustainable forestry.
In coalition with other member states, Sweden also successfully managed to dilute the nature conservation requirements on forest biomass in the directive on renewable energy. Those requirements have to be fulfilled to allow for zero accounting of emissions of biogenic carbon dioxide within the emissions trading system. With stronger ecological requirements on the forestry, Swedish pulp and paper industries as well as the many large biomass-based Swedish district heating plants would have to spend lots of money on buying emission allowances to cover those emissions.
The most notable incident was when Sweden at the last environmental council meeting under its leadership, on June 20th, voted against its own compromise for a common position from the EU governments on the proposed Nature Restoration Regulation. A week before the ministerial meeting Sweden withdrew a compromise text, already supported by a steady majority of member states, from the agenda of the preparatory meeting of the EU ambassadors.
Several member states took this as an indication that Sweden did not intend to put forward the compromise to the ministerial meeting, thereby delaying its adoption. In protest France, Germany, Spain and Luxembourg wrote a letter to Sweden for clarification. Finally, the issue showed up on the council agenda, where the Swedish compromise proposal was broadly adopted, in spite of Sweden’s vote against it.
“In general, the presidency was run in a very professional and successful way, but the handling of the nature restoration regulation might put some dirt on it”, notes Ylva Nilsson, commentator on the daily Expressen. “Sweden is famous for being pretty aggressive when it comes to environmental demands on forestry and the forest industry”.
Mats Engström, senior advisor at the Swedish Institute for European Policy (SIEPS), explains the Swedish vote against its own compromise on the Nature Restoration Law by saying that it fits the presidency’s role as an “honest broker”. He adds: “The behavior is rare, but occurs now and then. What makes it problematic and remarkable is the letter sent in protest from four member states.”
The security of Europe’s raw material supply is increasingly debated. “Better diversification of our raw material supply is economic security,” said Germany’s Economy Minister Robert Habeck on Monday after a meeting with his counterparts from France and Italy, Bruno Le Maire and Adolfo Urso. The ministers want to reduce dependence on individual countries for raw material exports. Green technologies, in particular, are also dependent on many “critical raw materials“.
The EU is working hard on the Critical Raw Materials Act to secure the supply of raw materials. The hydrogen industry is also worried about the issue of raw materials. According to a joint statement with the EU Commission, there are significant dependencies on South Africa for iridium and platinum that “cannot be avoided”.
But experts sound the all-clear: The EU is not walking into an iridium trap. Experts believe that the dependencies can be managed well.
Many hopes rest on hydrogen. The energy carrier is supposed to help make industries that are difficult to decarbonize, such as cement and steel, more climate-friendly. It is supposed to solve the climate problem of container ships, and some even hope to use hydrogen in fuel-cell cars and for heating. But so far, the substance remains rare and is considered the “champagne of the energy transition”.
The EU and its member states seek to change this. By 2030, ten million tonnes of hydrogen are to be produced across the EU, and electrolyzers with a capacity of 40 gigawatts are to be installed – currently, the industry is able to produce a good 3 GW of capacity annually. Most of the hydrogen is to be produced climate-friendly from renewables. This requires billions of euros of investment in electrolyzers for the production of hydrogen.
Business representatives fear a shortage of iridium in the process. This raw material is required for an important electrolyzer technology (polymer electrolyte membrane electrolyzers (PEMEL)), which are considered particularly well suited for fluctuating renewable energies. And at first glance, this seems to be the “perfect storm” of a raw material shortage:
Although there are deposits in Scandinavia and Canada., it would take years to tap them. The German Mineral Resources Agency (DERA) therefore, expects a “high supply risk,” the Fraunhofer Institute, even an “extremely high supply risk”.
So will an iridium shortage slow down the expansion of the hydrogen economy? Other experts give the all-clear. “As things stand, we are not running into an iridium dead end with electrolyzers,” says Felix Müller, raw materials expert at the German Federal Environment Agency.
Although raw material issues have to be monitored, an iridium shortage would hardly slow down the emerging hydrogen industry, according to other experts.
Three factors are listed:
Michael Haendel, the author of the chapter on hydrogen in the DERA study, told Table.Media: “In most applications for hydrogen production, both PEM electrolyzers (PEMEL) and alkaline electrolyzers (AEL) can be used synonymously. AELs usually do not rely on critical noble metals in this case and do not require iridium.” AELs can also be reconciled with fluctuating renewable energies, according to the Fraunhofer ISI expert.
Haendel also expects that the “iridium requirement for PEM electrolyzers can be reduced in the near future through innovations”. According to a Fraunhofer study, the iridium amount can be reduced from 0.667 grams per kilowatt at that time (2018) to 0.05 grams in 2035. According to the Fraunhofer scenario, Germany’s iridium demand for the construction of electrolyzers would peak at around 540 kilograms in 2027. As other countries are also installing electrolyzers, a shortage of iridium could theoretically occur. But Haendel gives the all-clear: “If there were to be an iridium shortage, it can be assumed that people would increasingly rely on other hydrogen electrolyzer technologies.”
Müller also warns against panic. Naturally, raw material issues have to be considered when it comes to new technologies. But “the global hydrogen scenarios and political plans are very ambitious“. There are “numerous hurdles” to the necessary hydrogen infrastructure and the transport of this volatile raw material. “Even if these hurdles can be overcome, it will not fail because of iridium. There will then be second-best solutions and electrolyzers will be used that manage without the use of iridium,” says the raw materials expert from the German Environment Agency.
The EU Commission is now working on a pricing model for the agricultural sector to achieve the ambitious EU climate goals. This is intended to help make agriculture more climate-friendly. According to the European Commission, the sector’s greenhouse gas emissions (GHG) in the EU have hardly changed over the past 20 years on average, accounting for more than 10 percent of all emissions in the EU.
Since the extension of the European Emissions Trading Scheme to the transport and buildings sectors (ETS2), agriculture is the only relevant sector whose greenhouse gas emissions are still not subject to any pricing. As before, emissions from the agricultural sector fall under the so-called Effort Sharing Regulation (ESR), which provides for national reduction targets. Until now, these were to be achieved primarily by aligning the Common Agricultural Policy (CAP) subsidies accordingly.
This is based on a report by the European Court of Auditors from the end of 2021, according to which around 100 billion euros were earmarked for climate protection measures in the last CAP funding period, more than a quarter of the total budget. The results were: nothing.
For example, the CAP was not designed to limit livestock farming, which accounts for about 50 percent of agricultural emissions. Farmers who cultivate drained peat soils (about 20 percent of emissions) have even been supported. This is profoundly contrary to the polluter pays principle prescribed by law, says ACA agricultural expert Jonas Kathage, co-author of the report.
This is now set to change, as the potential is great: “The agricultural sector, including its value chain, can become the first sector to achieve climate neutrality“, said Alexandre Paquot, Director of the Directorate-General for Climate at the EU Commission, at an event in Brussels. The authority has already commissioned a study on pricing, involving the Institute for Environmental European Policy (IEEP) and the Ecologic Institute, among others.
IEEP agricultural expert and co-author Julia Bognar provides initial insights into the study, which is still underway. What is clear is that the challenges are great:
The existing ETS covers around 10,000 emitters from industry and energy, which are responsible for around 1.5 gigatons of CO2 equivalents. This contrasts with more than nine million, predominantly small agricultural operations, which emit around 0.4 gigatons of CO2 equivalents.
“Getting them all involved is highly complicated administratively”, Bognar says. The effort required to implement a pricing model must be as low as possible in order to achieve a meaningful cost-benefit effect. Especially since there is still no adequate solution for the necessary monitoring of emissions on the individual farms.
In addition, emissions in agriculture come from heterogeneous sources. Most of them are in the form of methane from animal husbandry or nitrous oxide from overfertilization. According to IEEP, it would, therefore, also be conceivable to cover only individual areas and thus at least a large part of agricultural emissions. Another possibility is to look at the value chain rather than the farms themselves and to start with fertilizer manufacturers (upstream) or milk and meat processing (downstream), for example.
Another difficulty is that agricultural products are traded internationally on a large scale. Similar to the existing ETS, pricing could therefore lead to emissions-intensive production sectors being relocated to third countries (carbon leakage). To prevent this, a kind of border adjustment (CBAM) or free allowances could also be introduced in the agricultural sector, Bognar said. In addition, social compensation must be provided and it must be ensured that no one is left behind. Smaller farms could be exempted altogether, if necessary.
Despite all the challenges, an emissions trading system is still the only right thing to do, Bogner states. A market-based instrument is the most efficient way to ensure climate-friendly innovations and achieve the reduction targets. The principle of cap and trade is more promising than, for example, an EU-wide tax on emissions, which is currently not legally feasible anyway.
The German government has also already shown itself to be open to emissions trading in the agricultural sector. All sectors should be covered by the European ETS, it was recently said from the ranks of the Federal Ministry for Economic Affairs and Climate Action.
The German Farmers’ Association (DBV), on the other hand, rejects the proposal outright. “An ETS for agriculture is neither reasonable nor feasible. This is because the principle of cap and trade only works if the players have equal opportunities to control emissions and these can be concretely measured or determined”, says Udo Hemmerling, DBV Deputy Secretary-General. But that is not the case in agriculture, he says. This is because emissions of methane or nitrous oxide depend heavily on external factors such as weather or region.
Moreover, the natural processes involved in food production could not be replaced by alternative technologies, as is the case in the energy sector, for example. “In Germany, agriculture has already significantly reduced its emissions in recent years and many farms are willing to reduce their emissions further, but don’t know how. For that, we would need changes in other policy areas, such as breeding or construction law, not emissions trading”, Hemmerling explained.
In view of the numerous challenges, it will probably be some time before an agricultural ETS is actually introduced throughout the EU. On the other hand, emissions from agriculture must already be significantly reduced to meet the 2030 climate targets. Time is running out.
The Potsdam Institute for Climate Impact Research (PIK) goes even further and calls for pricing emissions from land-use changes. With the phasing out of fossil fuels, the market for bioenergy is expected to grow to several hundred billion euros by the mid-century. The agricultural sector will want to take advantage of these opportunities. This could lead to “enormous emissions,” according to the PIK experts.
The CO2 emissions from modern biofuels could be even higher due to the large-scale deforestation for biomass cultivation than those from diesel combustion, as shown in a new study published in the journal Nature Climate Change. “Food production could shift, and agricultural land could expand at the expense of natural areas,” explains Leon Merfort, lead author of the study.
The next partnership between the Global North and the Global South (JETP) to support the energy transition has been concluded: As part of this partnership, Senegal will receive 2.5 billion euros for an ecologically and socially just energy transition. This was announced by Senegal in a joint declaration with the contracting partners on the sidelines of the summit for a new financial pact in Paris last week.
The West African country has signed the agreement for a Just Energy Transition Partnership (JETP) with Germany, France, the United Kingdom, Canada and the European Union. The financing pledge for public and private funds applies for three to five years. Further funding could be provided on a complementary basis, even beyond the five-year period.
After South Africa, Senegal is the second country on the African continent to agree on a JETP. Other such partnerships have already been signed with Indonesia and Vietnam, and India is also a potential candidate. The JETPs between the G7, the EU and poorer countries are intended to ensure an efficient and socially cushioned transition from fossil to renewable energies. According to the Senegalese government, 30 percent of the country’s power comes from solar, biomass, wind and hydropower. According to the newly concluded agreement, the government wants to increase this share to 40 percent by 2030.
One controversial part of the JETP’s planning process was Senegal’s gas production plans. If everything goes according to plan, Senegal will begin production at the end of the year. Eight years ago, deposits were found off the coast in the north of the country along the border with Mauritania. In the future, a floating LNG terminal will produce around 2.3 million tons of liquefied gas per year, according to the main operator BP.
The project is known as “Grand Tortue Ahmeyim“. During negotiations, the government of President Macky Sall had attempted to include gas production in the JETP, but this was rejected. Now Senegal has promised to also use natural gas as a resource for the energy transition. The proceeds from the sale of gas are to be channeled into green energies and technologies. The new JETP agreement also reiterates this intention.
The gas project in Senegal has sparked a dispute in Germany’s government coalition. During a visit to the country in the spring of 2022, German Chancellor Olaf Scholz had proposed a cooperation between Germany and Senegal to expand production. The Green coalition partner and environmental organizations criticized that such a commitment would violate a declaration at the COP26 in Glasgow against financing additional investments in foreign fossil fuel infrastructure.
According to the German government, however, there has been no official request from companies for such cooperation so far. Government sources claim that an agreement on how the German government will deal with similar cases in the future is imminent. Only a few weeks ago, the Green parliamentary group in the Bundestag demanded the end of the gas deal with Senegal. The background to this was an expert report by environmental groups that certified Senegal’s potential to cover its energy supply entirely from renewables.
A statement by the German government on the conclusion of the energy partnership stated that the JETP would neither finance nor support gas production. “The JETP only aims at fossil-free energy sources and thus wants to advance decarbonization in parallel. The better this succeeds, the less Senegal’s economic growth will have to go hand in hand with the use of gas.”
The German Government wants to support Senegal financially and with know-how. The German Ministry for Economic Cooperation and Development (BMZ) has a long-standing cooperation with Senegal in the energy sector. “The BMZ is already supporting the modernization as well as rehabilitation of the grid infrastructure, the improvement of the data basis in the field of renewable energies and the development of policies and strategies for the development of the sector. Through KfW, the BMZ has also co-financed the construction of the largest state-owned solar power plant and is now providing funds for additional storage capacities for this power plant.”
The Senegalese government has also promised to provide its population of around 18.4 million people with access to electricity. A 2018 report by the NGO Enda Énergie found that almost one in two people in rural areas still do not have access to electricity. With Bernhard Pötter
The Summit for a New Global Financial Pact in Paris has come to a close. While we are far from where we need to be to make the global financial architecture fit for purpose for Africa today, I am encouraged by some of the steps taken and commitments made over the past few days.
Let me share four examples.
First, we saw a coalition of strong voices agreeing that the current international financial architecture does not work for the world we live in now, especially during overlapping crises, and we need solutions urgently. This wasn’t just global south or global north – these voices came from everywhere, including multilateral development banks, philanthropists, and civil society.
Second, African leaders spoke with one voice. We have been concerned over the last year or so about the apparent lack of a common position from African leaders, which has led to a lack of a strong African voice on how we deal with challenges like climate finance, debt relief, trade, security, and more. But in Paris, we heard very clear asks from our leaders:
Third, the Paris Summit seems to have finally put to bed any real or perceived trade-off between middle-income vs. low-income countries, Bridgetown Agenda vs. African Agenda; and climate finance vs. development finance. It was abundantly clear during those two days that a financing architecture that is truly a fit for today’s world will need to address all of these issues and work hand in hand for real progress.
And finally, it was great to see several long-awaited announcements and actions that followed through on discussions during the World Bank-IMF Spring Meetings in April.
This is a good start but not sufficient. We have a busy road ahead in the coming months to keep up this momentum. The Paris Summit has published a roadmap of actions into 2024 that identifies key moments for delivery on promises made at this Summit and in previous convenings.
For me and for my colleagues at the African Center for Economic Transformation, there are two very important things to focus on as we move toward the Africa Climate Summit in Nairobi, the World Bank-IMF meetings in Marrakech, COP28 in Dubai, and beyond.
We will continue to build a strong coalition of African leaders and organizations that are advocating for specific changes to the global financial system. At the request of Finance Ministers, we are developing a Marrakech Declaration to be adopted in October that will codify Africa’s position and lay out what is needed to make this agenda a reality – with the support of a broad range of civil society, think tanks, and government partners across the continent and globally.
At the same time, we will continue to push for Africa to have an equal voice and equal participation in global forums and global institutions where decisions that affect Africans are being made. One good start will be the AU seat at the G20, which we hope will happen in the next year after encouraging actions from India’s Prime Minister Modi. but this needs to extend to the World Bank, the IMF, and other global institutions where Africa’s voice is too often drowned out by larger shareholders.
We need to move past a situation where whenever Africa has an idea, we must mount a cumbersome and expensive advocacy campaign rather than sitting down with other countries and simply laying out our needs. In Paris, the table was set for Africa, and we made our voices heard loud and clear. Let’s keep that same energy going until we reach a global financial architecture that delivers for all Africans.
Mavis Owusu-Gyamfi is the Executive Vice President of the African Center for Economic Transformation.
In the fall of 2022, EU climate policymakers had a suspicion: the Commission, in coordination with the then-acting Czech EU presidency, would push through as many of the Fit-for-55 climate package files as possible, before Sweden was to take over the Council leadership in January 2023. The worry was that the newly elected right-wing Swedish government, dependent as it is of the far-right, EU-skeptic (and partly climate-denialist) Sweden Democrats, would try to block or at least weaken legislative decisions not only on climate issues but also within the overall European Green Deal-agenda.
With the end of the presidency, those worries turned out to be somewhat justified in the sense that Sweden-the-member-state, in some cases (all related to forestry) went against compromises tabled by Sweden – the EU Council President. In general though, there seems to be agreement that the Swedish government and its civil servants played the role of the “honest broker” well and professionally, steering an impressive pile of dossiers from Commission proposals to decisions or at least agreements between the member states and the European Parliament.
Most important long-term was probably the final adoption of new versions of the three pillars of the EU climate legislation:
In all three cases, the trilogue negotiations (between the Commission, the Council and the Parliament) were concluded already during the Czech presidency, so what remained for the Swedes was to administer the formal decisions, which were taken in March and April 2023. As a consequence, since May there is union legislation in place that (unless it will later be revised) guarantees that the net EU greenhouse gas emissions for 2030 will be 57 percent below the 1990 level. A milestone.
In addition, agreements have been struck on more than ten sector-oriented climate legislations during the Swedish presidency. Among them are:
In the middle of the presidency, the German and French governments surprised and frustrated everybody, when they, as confirming decisions were to be taken, on two different issues, suddenly, no longer supported trilogue agreements that they had previously agreed to:
Those conflicts were ultimately solved, seemingly more through interventions from the Commission than as a result of efforts from the council presidency, it was said in Brussels.
On several occasions, it also became clear that Sweden is at odds with the majority of the Union on forestry issues. Sweden abstained when the final decisions on the regulations on deforestation and carbon sinks (LULUCF) were taken, arguing that the new legislation would harm the development of sustainable forestry.
In coalition with other member states, Sweden also successfully managed to dilute the nature conservation requirements on forest biomass in the directive on renewable energy. Those requirements have to be fulfilled to allow for zero accounting of emissions of biogenic carbon dioxide within the emissions trading system. With stronger ecological requirements on the forestry, Swedish pulp and paper industries as well as the many large biomass-based Swedish district heating plants would have to spend lots of money on buying emission allowances to cover those emissions.
The most notable incident was when Sweden at the last environmental council meeting under its leadership, on June 20th, voted against its own compromise for a common position from the EU governments on the proposed Nature Restoration Regulation. A week before the ministerial meeting Sweden withdrew a compromise text, already supported by a steady majority of member states, from the agenda of the preparatory meeting of the EU ambassadors.
Several member states took this as an indication that Sweden did not intend to put forward the compromise to the ministerial meeting, thereby delaying its adoption. In protest France, Germany, Spain and Luxembourg wrote a letter to Sweden for clarification. Finally, the issue showed up on the council agenda, where the Swedish compromise proposal was broadly adopted, in spite of Sweden’s vote against it.
“In general, the presidency was run in a very professional and successful way, but the handling of the nature restoration regulation might put some dirt on it”, notes Ylva Nilsson, commentator on the daily Expressen. “Sweden is famous for being pretty aggressive when it comes to environmental demands on forestry and the forest industry”.
Mats Engström, senior advisor at the Swedish Institute for European Policy (SIEPS), explains the Swedish vote against its own compromise on the Nature Restoration Law by saying that it fits the presidency’s role as an “honest broker”. He adds: “The behavior is rare, but occurs now and then. What makes it problematic and remarkable is the letter sent in protest from four member states.”
The security of Europe’s raw material supply is increasingly debated. “Better diversification of our raw material supply is economic security,” said Germany’s Economy Minister Robert Habeck on Monday after a meeting with his counterparts from France and Italy, Bruno Le Maire and Adolfo Urso. The ministers want to reduce dependence on individual countries for raw material exports. Green technologies, in particular, are also dependent on many “critical raw materials“.
The EU is working hard on the Critical Raw Materials Act to secure the supply of raw materials. The hydrogen industry is also worried about the issue of raw materials. According to a joint statement with the EU Commission, there are significant dependencies on South Africa for iridium and platinum that “cannot be avoided”.
But experts sound the all-clear: The EU is not walking into an iridium trap. Experts believe that the dependencies can be managed well.
Many hopes rest on hydrogen. The energy carrier is supposed to help make industries that are difficult to decarbonize, such as cement and steel, more climate-friendly. It is supposed to solve the climate problem of container ships, and some even hope to use hydrogen in fuel-cell cars and for heating. But so far, the substance remains rare and is considered the “champagne of the energy transition”.
The EU and its member states seek to change this. By 2030, ten million tonnes of hydrogen are to be produced across the EU, and electrolyzers with a capacity of 40 gigawatts are to be installed – currently, the industry is able to produce a good 3 GW of capacity annually. Most of the hydrogen is to be produced climate-friendly from renewables. This requires billions of euros of investment in electrolyzers for the production of hydrogen.
Business representatives fear a shortage of iridium in the process. This raw material is required for an important electrolyzer technology (polymer electrolyte membrane electrolyzers (PEMEL)), which are considered particularly well suited for fluctuating renewable energies. And at first glance, this seems to be the “perfect storm” of a raw material shortage:
Although there are deposits in Scandinavia and Canada., it would take years to tap them. The German Mineral Resources Agency (DERA) therefore, expects a “high supply risk,” the Fraunhofer Institute, even an “extremely high supply risk”.
So will an iridium shortage slow down the expansion of the hydrogen economy? Other experts give the all-clear. “As things stand, we are not running into an iridium dead end with electrolyzers,” says Felix Müller, raw materials expert at the German Federal Environment Agency.
Although raw material issues have to be monitored, an iridium shortage would hardly slow down the emerging hydrogen industry, according to other experts.
Three factors are listed:
Michael Haendel, the author of the chapter on hydrogen in the DERA study, told Table.Media: “In most applications for hydrogen production, both PEM electrolyzers (PEMEL) and alkaline electrolyzers (AEL) can be used synonymously. AELs usually do not rely on critical noble metals in this case and do not require iridium.” AELs can also be reconciled with fluctuating renewable energies, according to the Fraunhofer ISI expert.
Haendel also expects that the “iridium requirement for PEM electrolyzers can be reduced in the near future through innovations”. According to a Fraunhofer study, the iridium amount can be reduced from 0.667 grams per kilowatt at that time (2018) to 0.05 grams in 2035. According to the Fraunhofer scenario, Germany’s iridium demand for the construction of electrolyzers would peak at around 540 kilograms in 2027. As other countries are also installing electrolyzers, a shortage of iridium could theoretically occur. But Haendel gives the all-clear: “If there were to be an iridium shortage, it can be assumed that people would increasingly rely on other hydrogen electrolyzer technologies.”
Müller also warns against panic. Naturally, raw material issues have to be considered when it comes to new technologies. But “the global hydrogen scenarios and political plans are very ambitious“. There are “numerous hurdles” to the necessary hydrogen infrastructure and the transport of this volatile raw material. “Even if these hurdles can be overcome, it will not fail because of iridium. There will then be second-best solutions and electrolyzers will be used that manage without the use of iridium,” says the raw materials expert from the German Environment Agency.
The EU Commission is now working on a pricing model for the agricultural sector to achieve the ambitious EU climate goals. This is intended to help make agriculture more climate-friendly. According to the European Commission, the sector’s greenhouse gas emissions (GHG) in the EU have hardly changed over the past 20 years on average, accounting for more than 10 percent of all emissions in the EU.
Since the extension of the European Emissions Trading Scheme to the transport and buildings sectors (ETS2), agriculture is the only relevant sector whose greenhouse gas emissions are still not subject to any pricing. As before, emissions from the agricultural sector fall under the so-called Effort Sharing Regulation (ESR), which provides for national reduction targets. Until now, these were to be achieved primarily by aligning the Common Agricultural Policy (CAP) subsidies accordingly.
This is based on a report by the European Court of Auditors from the end of 2021, according to which around 100 billion euros were earmarked for climate protection measures in the last CAP funding period, more than a quarter of the total budget. The results were: nothing.
For example, the CAP was not designed to limit livestock farming, which accounts for about 50 percent of agricultural emissions. Farmers who cultivate drained peat soils (about 20 percent of emissions) have even been supported. This is profoundly contrary to the polluter pays principle prescribed by law, says ACA agricultural expert Jonas Kathage, co-author of the report.
This is now set to change, as the potential is great: “The agricultural sector, including its value chain, can become the first sector to achieve climate neutrality“, said Alexandre Paquot, Director of the Directorate-General for Climate at the EU Commission, at an event in Brussels. The authority has already commissioned a study on pricing, involving the Institute for Environmental European Policy (IEEP) and the Ecologic Institute, among others.
IEEP agricultural expert and co-author Julia Bognar provides initial insights into the study, which is still underway. What is clear is that the challenges are great:
The existing ETS covers around 10,000 emitters from industry and energy, which are responsible for around 1.5 gigatons of CO2 equivalents. This contrasts with more than nine million, predominantly small agricultural operations, which emit around 0.4 gigatons of CO2 equivalents.
“Getting them all involved is highly complicated administratively”, Bognar says. The effort required to implement a pricing model must be as low as possible in order to achieve a meaningful cost-benefit effect. Especially since there is still no adequate solution for the necessary monitoring of emissions on the individual farms.
In addition, emissions in agriculture come from heterogeneous sources. Most of them are in the form of methane from animal husbandry or nitrous oxide from overfertilization. According to IEEP, it would, therefore, also be conceivable to cover only individual areas and thus at least a large part of agricultural emissions. Another possibility is to look at the value chain rather than the farms themselves and to start with fertilizer manufacturers (upstream) or milk and meat processing (downstream), for example.
Another difficulty is that agricultural products are traded internationally on a large scale. Similar to the existing ETS, pricing could therefore lead to emissions-intensive production sectors being relocated to third countries (carbon leakage). To prevent this, a kind of border adjustment (CBAM) or free allowances could also be introduced in the agricultural sector, Bognar said. In addition, social compensation must be provided and it must be ensured that no one is left behind. Smaller farms could be exempted altogether, if necessary.
Despite all the challenges, an emissions trading system is still the only right thing to do, Bogner states. A market-based instrument is the most efficient way to ensure climate-friendly innovations and achieve the reduction targets. The principle of cap and trade is more promising than, for example, an EU-wide tax on emissions, which is currently not legally feasible anyway.
The German government has also already shown itself to be open to emissions trading in the agricultural sector. All sectors should be covered by the European ETS, it was recently said from the ranks of the Federal Ministry for Economic Affairs and Climate Action.
The German Farmers’ Association (DBV), on the other hand, rejects the proposal outright. “An ETS for agriculture is neither reasonable nor feasible. This is because the principle of cap and trade only works if the players have equal opportunities to control emissions and these can be concretely measured or determined”, says Udo Hemmerling, DBV Deputy Secretary-General. But that is not the case in agriculture, he says. This is because emissions of methane or nitrous oxide depend heavily on external factors such as weather or region.
Moreover, the natural processes involved in food production could not be replaced by alternative technologies, as is the case in the energy sector, for example. “In Germany, agriculture has already significantly reduced its emissions in recent years and many farms are willing to reduce their emissions further, but don’t know how. For that, we would need changes in other policy areas, such as breeding or construction law, not emissions trading”, Hemmerling explained.
In view of the numerous challenges, it will probably be some time before an agricultural ETS is actually introduced throughout the EU. On the other hand, emissions from agriculture must already be significantly reduced to meet the 2030 climate targets. Time is running out.
The Potsdam Institute for Climate Impact Research (PIK) goes even further and calls for pricing emissions from land-use changes. With the phasing out of fossil fuels, the market for bioenergy is expected to grow to several hundred billion euros by the mid-century. The agricultural sector will want to take advantage of these opportunities. This could lead to “enormous emissions,” according to the PIK experts.
The CO2 emissions from modern biofuels could be even higher due to the large-scale deforestation for biomass cultivation than those from diesel combustion, as shown in a new study published in the journal Nature Climate Change. “Food production could shift, and agricultural land could expand at the expense of natural areas,” explains Leon Merfort, lead author of the study.
The next partnership between the Global North and the Global South (JETP) to support the energy transition has been concluded: As part of this partnership, Senegal will receive 2.5 billion euros for an ecologically and socially just energy transition. This was announced by Senegal in a joint declaration with the contracting partners on the sidelines of the summit for a new financial pact in Paris last week.
The West African country has signed the agreement for a Just Energy Transition Partnership (JETP) with Germany, France, the United Kingdom, Canada and the European Union. The financing pledge for public and private funds applies for three to five years. Further funding could be provided on a complementary basis, even beyond the five-year period.
After South Africa, Senegal is the second country on the African continent to agree on a JETP. Other such partnerships have already been signed with Indonesia and Vietnam, and India is also a potential candidate. The JETPs between the G7, the EU and poorer countries are intended to ensure an efficient and socially cushioned transition from fossil to renewable energies. According to the Senegalese government, 30 percent of the country’s power comes from solar, biomass, wind and hydropower. According to the newly concluded agreement, the government wants to increase this share to 40 percent by 2030.
One controversial part of the JETP’s planning process was Senegal’s gas production plans. If everything goes according to plan, Senegal will begin production at the end of the year. Eight years ago, deposits were found off the coast in the north of the country along the border with Mauritania. In the future, a floating LNG terminal will produce around 2.3 million tons of liquefied gas per year, according to the main operator BP.
The project is known as “Grand Tortue Ahmeyim“. During negotiations, the government of President Macky Sall had attempted to include gas production in the JETP, but this was rejected. Now Senegal has promised to also use natural gas as a resource for the energy transition. The proceeds from the sale of gas are to be channeled into green energies and technologies. The new JETP agreement also reiterates this intention.
The gas project in Senegal has sparked a dispute in Germany’s government coalition. During a visit to the country in the spring of 2022, German Chancellor Olaf Scholz had proposed a cooperation between Germany and Senegal to expand production. The Green coalition partner and environmental organizations criticized that such a commitment would violate a declaration at the COP26 in Glasgow against financing additional investments in foreign fossil fuel infrastructure.
According to the German government, however, there has been no official request from companies for such cooperation so far. Government sources claim that an agreement on how the German government will deal with similar cases in the future is imminent. Only a few weeks ago, the Green parliamentary group in the Bundestag demanded the end of the gas deal with Senegal. The background to this was an expert report by environmental groups that certified Senegal’s potential to cover its energy supply entirely from renewables.
A statement by the German government on the conclusion of the energy partnership stated that the JETP would neither finance nor support gas production. “The JETP only aims at fossil-free energy sources and thus wants to advance decarbonization in parallel. The better this succeeds, the less Senegal’s economic growth will have to go hand in hand with the use of gas.”
The German Government wants to support Senegal financially and with know-how. The German Ministry for Economic Cooperation and Development (BMZ) has a long-standing cooperation with Senegal in the energy sector. “The BMZ is already supporting the modernization as well as rehabilitation of the grid infrastructure, the improvement of the data basis in the field of renewable energies and the development of policies and strategies for the development of the sector. Through KfW, the BMZ has also co-financed the construction of the largest state-owned solar power plant and is now providing funds for additional storage capacities for this power plant.”
The Senegalese government has also promised to provide its population of around 18.4 million people with access to electricity. A 2018 report by the NGO Enda Énergie found that almost one in two people in rural areas still do not have access to electricity. With Bernhard Pötter
The Summit for a New Global Financial Pact in Paris has come to a close. While we are far from where we need to be to make the global financial architecture fit for purpose for Africa today, I am encouraged by some of the steps taken and commitments made over the past few days.
Let me share four examples.
First, we saw a coalition of strong voices agreeing that the current international financial architecture does not work for the world we live in now, especially during overlapping crises, and we need solutions urgently. This wasn’t just global south or global north – these voices came from everywhere, including multilateral development banks, philanthropists, and civil society.
Second, African leaders spoke with one voice. We have been concerned over the last year or so about the apparent lack of a common position from African leaders, which has led to a lack of a strong African voice on how we deal with challenges like climate finance, debt relief, trade, security, and more. But in Paris, we heard very clear asks from our leaders:
Third, the Paris Summit seems to have finally put to bed any real or perceived trade-off between middle-income vs. low-income countries, Bridgetown Agenda vs. African Agenda; and climate finance vs. development finance. It was abundantly clear during those two days that a financing architecture that is truly a fit for today’s world will need to address all of these issues and work hand in hand for real progress.
And finally, it was great to see several long-awaited announcements and actions that followed through on discussions during the World Bank-IMF Spring Meetings in April.
This is a good start but not sufficient. We have a busy road ahead in the coming months to keep up this momentum. The Paris Summit has published a roadmap of actions into 2024 that identifies key moments for delivery on promises made at this Summit and in previous convenings.
For me and for my colleagues at the African Center for Economic Transformation, there are two very important things to focus on as we move toward the Africa Climate Summit in Nairobi, the World Bank-IMF meetings in Marrakech, COP28 in Dubai, and beyond.
We will continue to build a strong coalition of African leaders and organizations that are advocating for specific changes to the global financial system. At the request of Finance Ministers, we are developing a Marrakech Declaration to be adopted in October that will codify Africa’s position and lay out what is needed to make this agenda a reality – with the support of a broad range of civil society, think tanks, and government partners across the continent and globally.
At the same time, we will continue to push for Africa to have an equal voice and equal participation in global forums and global institutions where decisions that affect Africans are being made. One good start will be the AU seat at the G20, which we hope will happen in the next year after encouraging actions from India’s Prime Minister Modi. but this needs to extend to the World Bank, the IMF, and other global institutions where Africa’s voice is too often drowned out by larger shareholders.
We need to move past a situation where whenever Africa has an idea, we must mount a cumbersome and expensive advocacy campaign rather than sitting down with other countries and simply laying out our needs. In Paris, the table was set for Africa, and we made our voices heard loud and clear. Let’s keep that same energy going until we reach a global financial architecture that delivers for all Africans.
Mavis Owusu-Gyamfi is the Executive Vice President of the African Center for Economic Transformation.
