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Biden’s climate law holds promise for Africa’s green economies

Updated: Nov 20, 2022

The Inflation Reduction Act, which the US President signed into law in August, is aimed at Americans but will positively affect African countries looking to plough resources into green technologies and infrastructure.

Steve Umidha, bird story agency

A piece of legislation championed by US President Joe Biden could be a game-changer for clean energy supply chains – and, by association, African economies.

Biden’s Inflation Reduction Act is a climate law aimed at cutting emissions by driving clean technology manufacturing. Although the Act, which Biden signed into law in August, is targeted at Americans, the knock-on effect for wind, solar, battery and other green technologies will be good news for economies across the African continent.

Africa needs more than US$2 trillion of investment in reliable, sustainable, and affordable power infrastructure over the next two decades, according to the International Energy Agency’s 2019 Africa Energy Outlook. This will require more than just conventional private-sector investment agreements.

New financing models, as well as philanthropic capital, will be crucial. Commercial banks will also play a critical role; a number of these institutions across Africa have already created specialised lending facilities to bolster private investment in climate-related infrastructure projects and sustainable businesses.

With their moderately short project lead times, solar and wind energy represent vital planks in Africa’s efforts to reduce and eventually phase out fossil fuels. But the high associated costs of developing such technologies, coupled with supply chain constraints caused by the war in Ukraine and other factors, have hindered African countries’ attempts to set up renewable energy plants.

The Inflation Reduction Act could help to resolve some of those bottlenecks. That, in turn, will pave the way for companies to invest in new technologies, equipment and infrastructure easily.

Lawmakers behind the Inflation Reduction Act have pledged to create a ‘green vortex’ – a climate technology and investment action plan to reduce toxic greenhouse gas emissions significantly, many of which emanate from the United States.

It will set up Investment Tax Credits and Production Tax Credits for clean energy generators, allowing producers to choose between those credits.

Speaking at COP27 in Sharm el-Sheikh, Egypt, Biden termed the Act as a “global climate game- changer” and recommitted his administration to meeting its climate change pledges: “We are going to help with the change for everyone beyond our borders and attempt to meet our mission by 2030.”

US President Joe Biden at COP27 in Sharm El Sheikh. The event has been heralded as "Africa's COP"

The Rockefeller Foundation was among the first institutions to back the Inflation Reduction Act.

Joseph Curtin, the foundation’s managing director on power and climate, has cited its passage as “the biggest thing to happen in international climate diplomacy in decades”.

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