During the past two months we have seen Governments commit more than USD 3000 billion towards stabilizing financial markets. A further USD 2000 billion have already been announced for economic stimulus packages. Never in the history of humankind has so much money been allocated with so little preparation and strategic analyses.

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Demographic growth, industrialisation and the increase of demand resulting from higher living standards is exerting growing pressure on the world’s natural resources. The effects of climate change are also showing their first impacts on some of the regions of the world that are least equipped to manage them. How can these pressures be handled on the long run? What role can public policies play to tackle this rising challenge?

On the occasion of the 6th AFD/EUDN conference on “Population and natural resources: managing pressure”, I evoke in this brief video clip the dual challenge of mounting environmental pressure and demographic explosion in Sub-Saharan Africa – that I think has not sufficiently made its way at the front of the development community’s preoccupations. I also attach some of my recent publications on these two topics, as well as a recent study on the trends of African demographics. I am looking forward to reading your thoughts and experiences on this crucial issue.

Jean-Michel

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Over the last 18 months or so there has been a major surge in the spread of public understanding on the subject of climate change, particularly in respect of human actions being a cause for changes in the earth’s climate system. However, this increase in awareness has not yet translated into action at the global level to bring about a reduction in the emissions of greenhouse gases (GHGs), the increased concentration of which has now increasingly affected the earth’s climate. The impacts of climate change are particularly harmful for some of the poorest societies on earth.

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Oil prices have gone down in recent weeks from the peak reached in mid-summer, but they are still much higher than at the beginning of the decade. With high oil and coal prices, there are stronger incentives to use less fossil fuels. Alternative energies become financially more attractive. These developments can bring about reductions in greenhouse emissions and contribute to mitigate climate change. But it all can go away if the price of oil comes down substantially. So we could seize the opportunity of high oil and coal prices to lock-in these incentive effects on climate change mitigation. This could be achieved by introducing an internationally harmonized floor to the user cost of emitting carbon by using oil and coal. To implement this floor, a variable carbon levy could be enacted by a group of participating countries. The levy would kick in if and when the price of oil and coal were to fall below a pre-agreed threshold. No additional costs would be imposed on anyone above those already being paid now. And this would create certainty to guide consumers and investors in their behavior and resource allocations towards less greenhouse gases emitting activities.

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Images of the Beijing sky-line, seemingly bathed in a soup of smog and haze have been never far from the world’s TV screens over recent days and weeks.

International reporters with hand-held air pollution detectors have been popping up on street corners checking the levels of soot and dust.

Everyone seems keen to prove that the city’s air will be a decisive and debilitating factor for one of the world’s most high profile sporting events.

Without doubt Beijing is facing a huge challenge. There are real and understandable concerns for the health of competitors, especially those in endurance and long distance events such as cycling and the marathon.

But the current frenzied focus is marked by a modicum of amnesia—air pollution was a major concern in Los Angeles 24 years ago.

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On the occasion of the symposium “Investing in Development“, let’s carry on the discussion started in June.

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• What is the impact of private sector activity in development?
• What should the public and private sectors’ respective roles be?

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Having just returned from Senegal, I want to share my thoughts with you on an issue that became strikingly clear to me: the favorable perspectives shaping up for Africa’s agriculture and their complex implications for future energy choices.

While traveling through the irrigated rice production area in the Senegal River Valley, you could see the new opportunities that rising world prices of agricultural commodities could bring to African agriculture. The changes in Senegal are down right impressive. To be sure, the dramatic upturn in world prices is spawning many challenges for net importers of agricultural commodities and for the World Food Program, as Josette Sheeran so emphatically points out in this blog. In addition, it is creating a fair amount of social and political tension in some urban areas. In order to be beneficial for all, this price surge must therefore incite cities to become better suppliers and service providers to their rural peripheries, so that cities also reap the benefits of improving conditions in rural areas. (I will come back to this fundamental relationship in another column.)
I am convinced that if managed intelligently, the rise in world prices can offer real long term opportunity for Africa’s economic development. The prices for African products are once again attractive, and this is opening up new commercial opportunities for both food and export crops. The Senegalese farmers I encountered are starting to invest again, a sure sign of better days to come.

All bets point to a trend of rising agriculture prices that will continue through the coming years. Of course there is an element of speculative buying at present price levels. Current market volatility makes corrections not unlikely, and is a surefire guarantee of short-term price fluctuations, which could prove a bit dicey. But several structural factors (rising demand for agro-fuels, world-wide demographic growth, increasingly meat-based diets, and climate imbalances) indicate that the trend will continue, and this will significantly raise the returns on investments. African agriculture, which has enormous potential, could greatly benefit from this trend in both the short- and mid-term.

The Senegal River Valley offers a perfect example of an agricultural zone where margins of productivity are still quite wide. Irrigated areas could be expanded even further, given abundant water resources, improving technical capacities of traditional farmers, and a rapidly modernizing agro-industry (the latest irrigation technologies, increasingly productive tools). With major investments in infrastructure, Senegal has the capacity to create near perfect conditions for developing a highly competitive agricultural sector in the Valley. Current price trends combined with expanded irrigation capacities, in a country where the agricultural sector already accounts for 18% of the economy, could translate into a highly stabilizing dynamic for the national economy. The same could also be said for other regions, such as Mali, where irrigated agriculture in the Office du Niger zone still offers considerable potential.

But the indispensable expansion of agricultural production in Africa makes the energy capacity a growing problem. Indeed, any modernization in production methods presupposes sustainable access to energy. It is needed for pumping water, exporting food-stuffs, and ensuring effective cold chain facilities for storing and distributing perishable goods. This question made more pressing by the energy crisis currently sweeping the continent. In recent years, this crisis has shaved economic growth for West African countries by 1 - 1.5 percentage points. Senegal’s electricity sector is particularly affected where, even as I write, supply is still falling short of the 8% to 10% annual increase in demand. As for local farmers, they fear that rising energy prices will offset the benefits of rising agriculture prices.

This raises a touchy issue: the choices nations must make in terms of their energy policy. In fact, the current reality of high global energy prices could be the incentive for many African countries to turn to new energy sources. The most rational choice would obviously be to start immediately promoting the development of renewable energy (wind, solar, biomass, hydroelectricity), whether it be for reasons of environmental protection, energy independence, mid-term price competiveness, or the logic of preserving exhaustible resources. But this raises the dilemma of “unfair competition” from fossil fuels, which are lower cost investments and have the advantage of being immediately available, and often are largely subsidized.

This brings us to the fundamental question: Can Africa wait for clean energy given that current trends are offering immediate opportunities for economic growth? Does this question not pit long-term environmental logic against short-term growth logic? In light of our own past energy choices in the developed world, can we legitimately tell Africans that they should not acquire polluting power plants, even if necessary for responding to their pressing energy needs? Do they really the choice of going either for equipment that is readily available and still rather inexpensive or energy options that are wiser in the long-term (including for economic growth) but that are currently very costly and technically more complicated to set up?

While we should not wait any longer to promote renewable energy sources, their effective implementation corresponds to a long-term objective. And it’s quite obvious that developing countries will be unable to handle the entire technical, financial and operational burden on their own. This is why we must offer long-term help by extending financial and technical support to both public and private players. The experience of developed countries could be effectively transferred gradually with the goal of anticipating future needs. But given the scope of immediate global food needs and the commercial opportunities that are available now, we simply can not deny Africa a right to economic growth. An approach that balances short-term economic opportunities and promotes emerging environmental standards seems therefore to be the smartest choice.

Senegal’s electricity sector reforms offer a good example of such an approach. This ambitious project, supported by AFD, consists of a sector recovery plan (2007-2012) based on financial and institutional restructuring. It promotes bolstering electricity output and seeking new investments, as well as a policy that discourages waste and encourages energy efficiency. In addition, the reforms are coupled with a political will to develop renewable energy sources in Senegal, a country where 80% of energy output is currently thermal. Three massive regional hydroelectric projects also are going to be implemented, and several production units devoted to solar and wind energy will be created.

If effectively managed, these reforms will enable Senegal to sidestep the unfortunate position of having to choose between economic growth and environmental concerns.

JMS

I come back from Kenya. AFD and other donors including the World Bank and EIB are financing a large-scale public geothermal investment program that will supply most of Kenya’s future power generating capacity. The power generation mix that will fuel Kenya’s rapidly growing economy over the next decade will be carbon-poor.

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