Innovation and Technology – International Policy Monitors

Africa: The Good News

The press is filled with dire news coming from Africa: in July, riots broke out in South Africa following the arrest of former President Jacob Zuma. In Ethiopia, amidst bloody battles and thousands of deaths, fighters from the rebel region of Tigray are overwhelming the national army and threatening to take the capital Mogadishu. All over the continent, COVID-19 causes deaths amid a chronic shortage of vaccines and concern among the medical community that allowing the disease to advance unchecked could give rise to new variants of the disease. The list of bad stories from Africa could continue.

But while this news is undoubtedly concerning, some important but less headline-grabbing developments offer a much more positive vision of where the continent is heading.

Towards better governance

The riots that caused so much damage in South Africa are actually the result of an unexpected resolve by the government of Cyril Ramaposa to fight back against the corruption that pervaded the country during the Zuma years. The fact that Zuma is actually serving time in jail – limited as it might be compared to the misdeeds he is accused of committing – is remarkable. It will hopefully mark a transition in the country away from tribal-based rule to the building of a modern rule-based state.

In Ethiopia, the hope is that the current tragic civil conflict surrounding the Tigray region will not disrupt other, positive developments in the region. One such development concerns the recent launch of the first major blockchain deal in Africa, whereby 5 million Ethiopian students will be given blockchain-based digital IDs, which by improving the credibility of their credentials, will give them better access to business opportunities and financial assets.

Another country experiencing dramatic developments is Sudan, where following a popular insurrection in 2019 that deposed the Islamist despot Omar al-Bashir, an unlikely triumvirate of an urban civilian, a military leader and a warlord is ruling the country, gradually moving it towards a more liberal, business-friendly legal system. Over the past two years the government has lifted many restrictions on public speech, banned female genital mutilations, and repealed various Islam-based laws, including lifting dress obligations for women, decriminalising apostasy, ending public flogging, and partially lifting a ban on the consumption of alcohol.

Clean African energy

On the energy front, the most important development in the Nile basin is the progress in construction of the “Grand Ethiopian Renaissance Dam” (GERD), which will create a gigantic new reservoir along the river Nile, close to the border with Sudan. In July this year, the second stage of the filling of the dam was successfully completed, triggering a new round of complaints from Egypt and Sudan, the down-river countries that are most impacted by the reduced water flow that the reservoir filling is causing. Egypt has issued veiled threats that it was ready to resort to military means should it feel that Ethiopia is damaging its interests with the dam.

Egypt’s rumblings have a broader geopolitical dimension, given the size of the project. With a planned installed capacity of 6.45 gigawatts, the dam will be the largest hydroelectric power plant in Africa when completed, as well as the seventh largest in the world. It would greatly expand Ethiopia’s role in the region, to the detriment of Egypt, which is currently seen as the regional superpower.

Another aspect of the issue concerns Ethiopia’s decision to finance the dam by internal fund raising through bond selling and persuading employees to contribute a portion of their incomes. This decision came because of Egypt’s efforts to undermine the project by denying it traditional sources of international funding such as through the World Bank. The result is a fully domestic funding scheme, no doubt a source of additional pride to Ethiopians. Ethiopia will be able to use the electricity generated for its domestic uses, but also to export it to nearby countries, boosting the regional economy and meeting many of the “green” goals that the international community is pursuing in the fight against climate change. There are, therefore, many reasons to hope that the current troubles in the region will be resolved soon.

Reducing dependence on imported vaccines

On the COVID-19 front, the situation in Africa remains dire, as vaccination levels remain low and developed countries are reluctant to contribute significant amounts of vaccine doses before their own populations are deemed to be sufficiently protected. Even the limited supplies promised under the UN-backed COVAX scheme have largely failed to materialise. But in the longer term, some important developments are underway, which portends to a much more positive scenario for future pandemics.

In July, the government of Senegal announced the construction of a vaccine facility in the country, with the financial and technical support of the EU and the World Bank. A former French colony, the country is host to the Institut Pasteur de Dakar, part of the international Pasteur Institute network. The plant is scheduled to begin production by the end of 2022. Further good news on the vaccine front comes from Cape Town, South Africa, where the Biovac institute announced that in 2022 it will start production of Pfizer’s COVID-19 vaccine, using large batch ingredients from Europe which it will blend and put in vials for distribution in Africa. These will be the first African locations to have vaccine production capacity, a very important step in raising living standards in the continent.

Africa to the stars

One further area of African progress comes from the aerospace sector. In July this year, Uganda became the latest African country to prepare to launch a satellite. It is one of 10 countries on the continent with such plans, while another 13 have already put satellites into orbit. For 2021, African countries are spending over half a billion dollars on their space programmes, roughly double the amount spent in 2018. Many African countries are located at latitudes that are favourable for rocket launches, with increasing interest among international investors in new and existing launch sites on the continent.

Conclusion

The geopolitical consequences of an African renaissance are to be carefully taken into account. China’s close involvement in many investment projects in Africa should be a warning to western countries that they need to step up their own actions there, to encourage the emergence of modern, pluralistic societies and open economies.

The EU gets fit for 55

By Giacomo Valentini, 31 July, 2021

On 14 July, the European commission presented its “fit for 55” initiative, a package of measures to ensure that the EU will cut its greenhouse emissions by 55% by 2030.

The plan radically expands and replaces the bloc’s previous reduction plan, which set a more modest 40% reduction target. The new more ambitious goals will allow the EU to boost its international credentials ahead of the COP26 conference to be held in Glasgow on November 1-12. The EU will be able to tell the conference that it is putting itself on a path to complete decarbonisation of its economy by 2050, thus exceeding the goals of the Paris Agreement. It will also be able to claim to be a key player in talks with other major emitters, most notably the US and China, about how to collectively meet the Paris objectives.

The plan addresses emissions from all major sectors of the EU economy:

Industry and electricity generation
Transport (road, air and maritime)
Buildings
Agriculture and forestry

It presents the vision of a European economy in 2030 where all new cars will be propelled by electric batteries or hydrogen, where renewable energy sources provide at least 40% of total energy use, and where coal, oil and gas will be progressively phased out.

The package of measures will have to go through the normal EU legislative process before becoming law. It is likely many of the individual measures will undergo changes as legislators work to produce agreements they can sell to their voters. Already many member states and industry associations have reacted negatively to several provisions of the package, especially the phase out of ICE cars by 2035 and the introduction of emissions trading for automotive and heating fuels. The Carbon Border Adjustment Mechanism is also likely to raise concerns about its trade impacts.

Assuming these negative reactions can be overcome, the individual measures are to start taking effect in a staggered manner, starting in 2023.

Main actions in the EU’s “Fit for 55” plan

Industrial emissions – EU ETS

lower the current cap on EU industrial greenhouse gas emissions, nearly doubling the annual rate of reduction to 4.2%, compared to 2.2% today. This would mean that EU industrial and energy installations would emit 61% less CO2 by 2030 compared to 2005.

Non-industrial emissions

Under the EU’s “effort sharing” initiative, each state will be assigned new, more ambitious reduction targets for buildings, road and domestic maritime transport, agriculture, waste and small industries.

Renewable energy and energy efficiency

The Commission proposes a new target to produce 40% of energy from renewable sources by 2030, while introducing new sustainability criteria for biofuels
EU states will be given new, more ambitious and binding annual targets for reducing energy use at EU level.

Buildings

The public sector will be required to renovate 3% of its buildings each year to drive the renovation wave while creating jobs and saving money for the taxpayer.
Fuel for heating buildings will be included in a new fuel emissions trading scheme that will be launched in 2026.

Cars

Average CO2 emissions of new cars are to be reduced by 55% by 2030, and 100% by 2035 compared to 2021 levels. All new cars registered as of 2035 will be zero-emission (battery or hydrogen). By that year, EU governments will have to install charging and fueling points at regular intervals on major highways: every 60 kilometres for electric charging and every 150 kilometres for hydrogen refueling.
For existing cars and trucks, petrol and diesel are to be included in the new fuel emissions trading scheme that will start in 2026.

Aviation

Jet fuel suppliers at EU airports will be required to blend increasing levels of sustainable aviation fuels in their fuel. This would include biofuels but also synthetic low carbon fuels, known as e-fuels.
The EU will remove most exemptions from its requirement that aircraft flying to or from an EU country are subject to quotas and can trade emissions in the EU ETS.

Shipping

Shipping emissions will be included for the first time in the EU ETS.
To stimulate the uptake of sustainable maritime fuels and zero-emission technologies, there will be progressively rising purity standards for maritime fuels in EU ports, so that by 2050 these fuels emit 75% less greenhouse gas than today.

Agriculture and forestry (LULUCF)

The overall EU target for 2030 will be to remove 310 million tonnes of CO2/equivalent emissions through carbon sinks. This target would be broken down into individual national targets. By 2035, the EU should aim to reach climate neutrality in agriculture and forestry including both CO2 and methane emissions from fertilisers and livestock.
A new EU Forest Strategy will seek to plant three billion trees across Europe by 2030.

Taxation

New legislation will be presented to require the 27 EU states to remove all exemptions and reduced rates that currently encourage the use of fossil fuels.
To make sure foreign countries with lax environmental standards do not benefit from the increased EU carbon rules, a new Carbon Border Adjustment Mechanism would impose a CO2 tax on imports of certain products.

Funding the transition to a zero-impact economy

The entirety of the revenues from the EU ETS scheme will be devoted to funding climate and energy-related projects. This will include a new €72 billion “Social Climate Fund” which in the six years from 2025 to 2030 will help European citizens cope with the costs of installing energy efficient equipment, new heating and cooling systems, and purchasing zero-emission cars.
The EU will increase the funds available under the existing “Innovation” and “Modernisation” funds (intended to help companies meet their EU ETS obligations), and provide new funding to address the possible social impact on vulnerable households, micro-enterprises and transport users.
The EU has established that the €500 billion InvestEU fund (recovery from the COVID-19 crisis) be used in a manner consistent with the EU’s climate and energy goal.s
The EU is also requiring that 35% of its €100 billion “Horizon Europe” (2021-2027) research and innovation fund be spent on climate and energy-related innovation.

Europe and the Energy Transition Challenge

September 14, 2016

Energy transition has become a buzzword to indicate the many transformations under way in the energy sector. The term is generally used to denote the transition from traditional forms of electricity generation – mainly fossil fuels and nuclear power – towards renewable energy sources (RES), especially wind and solar. But as a recent Financial Times article (paywall) points out, further transitions are under way in the energy world. I am here highlighting the following:

transitions in the oil and gas markets, which make the west less vulnerable to traditional suppliers in the Middle East and elsewhere;
a transition in energy use, with the prospect of electric vehicles (EVs) taking increasing shares of the market from gasoline- and diesel-powered vehicles
a transition in the patterns and dynamics of power production – with a shift away from large centralised utilities in favour of a variety of alternative production centres, from industrial self-producers, all the way down to individual consumers with their own PV panels – the “prosumers”.

All three these transformations are producing profound changes in the European energy landscape. The interaction between them makes it particularly hard to forecast the exact direction of the energy transition.

In the oil and gas markets, the US has undergone its shale revolution, essentially securing it against the uncertainties of world markets. In Europe, the ripples caused by the US shale revolution, along with gas deals with various countries and enforcement of EU gas transmission and distribution rules, are gradually reducing dependency on Russian gas supplies, though for oil, Europe remains largely dependent on imports from major world producers.

Compared to other OECD countries, the EU countries share a large, liberalised and increasingly integrated energy market. It is EU gas market rules that prevent Gazprom from forging monopoly supply deals with EU countries – prompting European countries to seek new intra-EU pipelines, and Russia to threaten to abandon the EU as a customer for its gas. And it is EU market rules that can facilitate the other transformations under way: large utilities have lost their monopoly status, leaving space for new and innovative market players.

Before the launch of EU liberalisation in the late 1990s, most of Europe’s electricity systems were beholden to centralised, vertically integrated utilities. Market liberalisation helped set the conditions for the expansion of renewables. So far, the main beneficiaries of the transformation in Europe have been RES generators. They have benefited from relatively open markets and from favourable government policies such as feed-in tariffs, which are intended to promote renewable energy but also help Europe’s chronic dependence on imported energy sources.

But Europe’s liberalised energy market can do more than that. It is often said that a common European energy policy is still hampered by the fact that the EU Treaty explicitly grants EU governments the right to set their energy strategies in full autonomy. However, the impact of the limited energy legislation that does come out of Brussels – from the energy market rules to climate legislation and state aids guidelines on RES subsidies – have had a major impact on the continent’s energy landscape. Over time, a convergence of policies is happening, partly because European countries, though autonomous in energy matters, already share so much in terms of economic policy and are increasingly interlocked politically, that energy policy making is is following a more general trend towards common goals.

Thus, energy transition also means transition towards shared European goals.

The current Polish government is an outlier in the EU, being the sole supporter of continued coal development and discouraging renewable energy development. Most other European countries are embracing an approach based on pragmatic support for renewables, combined with due recognition that traditional energy sources will remain part of the energy mix for the foreseeable future.

This common trend towards low-carbon energy and energy security, combined with the EU’s energy market rules, can create fertile ground for the application of innovative ideas, some of which are already being pioneered across the continent.

Energy storage is probably the area of greatest importance right now, and the one where the greatest opportunity for business innovation lies. Storage is necessary to make best use of intermittent energy sources such as wind and sun. It is needed to store power produced by RES installations at times when the sun is shining or the wind blowing while demand is incapable of absorbing all the RES supply. Batteries might never evolve to the point of storing the vast amounts of energy needed to power Europe’s economy during times of low wind and/or sun. But they are already being used for stabilisation of the electricity system, a crucial function to maintain reliability of power supplies as more and more intermittent RES come on the grid. Car batteries are one possible way to store renewable energy. Several Vehicle-to-Grid (V2G) projects have tested the idea of transforming Europe’s EV park into a distributed store of electricity to help manage the transition to renewables.

The European energy market also sets positive conditions for companies to establish their own power production, which they can design to meet their specific needs while selling or purchasing any excess supply or demand.

But for the above energy transitions to succeed in Europe, the European energy policy must evolve further. The Energy Union initiative of Commissioner Maros Sefcovic is reinforcing a trend that has already been under way for some time.

But because all rapid transitions tend to be messy, unfortunately there are some losers in this process. Traditional European utilities are facing a period of crisis. Several are responding, as testified most visibly by E.ON’s decision to rebrand itself as a “green company”, putting its traditional generation activities into a slightly revised version of its former self. But the process of transformation is costing the sector billions.

The current financial weakness of Europe’s utilities could undermine Europe’s economy. While RES are on the rise, they still provide just above a quarter of Europe’s total electricity generation, and 13% of total energy consumption. With EVs set to grow in number, electricity demand is set to increase significantly over the coming decade. For the years to come, Europe will still need varying amounts of coal, gas and nuclear to provide the remaining 75% of electricity. European policy makers should not forget this or they risk putting the future of the whole process in jeopardy.