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After COP26: Russia’s Path to the Global Green Future

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COP26 Was Doomed Even Before It Began
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The 26th Conference of the Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in Glasgow from October 31 to November 13, 2021 with delegations from almost 200 countries participating. The strategic goal of the Summit was to sum up the results achieved during six years since the adoption of the Paris Agreement in 2015. Combating deforestation, phasing down of coal and increasing financial support for developing countries are among the successes of COP-26 however it revealed certain disagreements.

Conference of strategic importance

At the opening ceremony of COP-26, Chairman Alok Sharma stated that the decisions made in Glasgow should be more vigorous than those of Paris. In Scotland’s largest city, the parties to the UNFCCC, after several unsuccessful attempts made in previous years, were again trying to hammer out the rules for implementing the Paris Agreement. In addition, the participants were discussing plans for adaptation to the consequences of climate change that can no longer be prevented. The agenda was really demanding.

Ambitious agenda but unfavorable background

There were four issues on the COP-26 agenda. Countries should: 1) submit programs on carbon emissions reduction to net zero by the middle of this century; 2) propose programs to restore affected ecosystems; 3) mobilize finance to achieve all the climate goals; 4) agree on a procedure for reporting on the implementation of the Paris Agreement.

However, a breakthrough was unlikely even before the Summit began. The G-20 meeting that had taken place the day before cast serious doubt on a multilateral climate agreement between the world ’s largest economies. The meeting in Rome resulted in the 20 states failing to reach an agreement on reducing the deadline for achieving zero emissions and abandoning coal-fired power. Although the G-20 states upheld the goal of limiting the temperature rise, some countries avoided making firm commitments on how to keep its growth beyond the threshold of to 1.5°C.

Forest conservation: a step forward

Over 100 world leaders agreed on a declaration on stopping deforestation. The key point of the document was the joint work on stopping and reversing “the loss of forests and land degradation by 2030”. The states plan to increase investments in agriculture, in the conservation and restoration of forests, as well as in support of indigenous communities who are struggling due to deforestation.

This is one of the most significant achievements of COP-26 as among the signatories to the agreement was Brazilian President Jair Bolsonaro, whom environmentalists recently accused in the International Court of Justice for crimes against humanity over the deforestation of the Amazon region.

Meanwhile, Russian President Vladimir Putin in a video address to the forum on the protection of forests expressed confidence that the Glasgow Declaration “will undoubtedly serve the goals of the Paris Agreement on reducing carbon dioxide emissions”. He added that Russia, in an effort to achieve carbon neutrality by 2060, relies, among other tools, on the unique resource of its trees, since about 20% of all forests of the world are located in Russia.

Abandoning coal: modest progress

Another meaningful issue on the COP-26 agenda was the abandonment of coal, and certain results were achieved as well. Firstly, major international banks pledged to stop financing coal-fired power plants by the end of 2021. Secondly, 40 countries made a commitment to gradually abandon coal-fired energy – developed countries by 2030, developing by 2040.

At the same time, the Financial Times characterizes the wording of the declaration as vague as it does not set the exact deadline. The document states that the countries should abandon coal by a certain date or as soon as possible after its expiration. In addition, the main users of coal energy – China, India, the US, Australia, Russia have not signed the declaration.

Alexey Kokorin, head of the WWF Russia Climate and Energy Program called the declaration a “conditional agreement”. The countries-signatories allocate certain financial resources to developing states so that they can abandon coal. If Russia had signed the agreement, it would have become a voluntary donor, not a recipient of climate finance.

At the same time, Jamie Peters from the environmental organization Friends of the Earth maintained that the key meaning of this “unimpressive agreement” was that everyone was allowed to continue using coal for many years to come.

Reducing emissions: methane on the agenda for the first time

Back in April 2021 during the virtual Climate Summit Russian President Vladimir Putin designated the reduction of methane as one of the main directions in combating global warming. During COP-26 the leaders held an event dedicated to the methane emissions reductions for the first time in many years. The US and the EU put forward a joint initiative on reducing methane emissions by 30% by 2030 which was supported by 105 countries.

China, Russia and India, three out of top five states in methane emissions, did not join the agreement. However, the initiative was supported by Brazil, the country which Climate Watch Data includes in the list of leading methane emitters.

The rationale for Russia not to join the initiative of the Western powers may be economy. In the countries that willingly sign up to the agreement, the share of the oil-and-gas sector is significantly lower than in Russia. According to Igor Makarov, head of the HSE Climate Change Economics Research and Training Laboratory, in Russia methane emissions are linked to both natural gas production and transportation. So, it is challenging for the country to take on such commitments right now.

According to Alexey Kokorin, there is no point in joining this initiative either ideologically (there is no China and India in it) or technically (it is necessary to deal with mine methane, leaks in gas and oil fields, which is more expensive than energy efficiency, energy conservation and forest fire control).

Russia’s position was also shared by some countries from the Anglo-Saxon world. For instance, Australian Prime Minister Scott Morrison spoke out against a concrete deadline for phasing out coal and pointed out that accelerating the reduction of methane emissions by 2030 will result in high costs for farmers engaged in dairy farming and animal husbandry.

Carbon neutrality: commitments without breakthroughs

Among the main topics at COP-26 was carbon neutrality. Even though many leaders spoke of it the goals set vary both in deadlines and in feasibility. Chinese leader Xi Jinping announced that the PRC would strive to achieve carbon neutrality by 2060. The Prime Minister of India promised to reduce emissions to zero by 2070, setting a zero target for the country for the first time. Environmentalists called the Indian president’s goals “ambitious”, but the Nature magazine noted that it was probably only about CO2, with other greenhouse gases being out of the plan.

Russian President Vladimir Putin, addressing the summit virtually, maintained that carbon neutrality in Russia should be achieved by 2060. The international representative of Greenpeace characterized the goal as not ambitious enough.

Meaning of the final Glasgow Agreement

The stumbling block during the negotiations on the COP-26 final statement was Article 6 of the Paris Agreement. It envisages specific mechanisms for international the regulation of greenhouse gas emissions. This is why the states had to prolong the summit till November 13. Additionally, this very article prevented consensus on the text of COP-25 held in December 2019 in Madrid, which resulted in a failure. COPs are far from punctuality. Out of 26 summits, only seven ended on time (on Friday) 14 ended on Saturday and five were held till Sunday.

The final agreement, published late in the evening on November 13, disappointed many parties. The wording of certain points was softened. For instance, instead of “phasing out” coal and other fossil fuels, the participants made an eleventh-hour decision to use “phasing down”. India, the third largest emitter, insisted on this change. Meanwhile, Special Representative of the President of Russia on climate Ruslan Edelgeriev stated that Russia welcomed the result. Nevertheless, the COP-26 final document has certain breakthroughs:

It calls on the countries to strengthen national commitments and by 2022 renew Nationally Determined Contributions (NDCs) to achieve zero emissions and curb global warming within 1,5°C.The first measure will be combined with an annual political roundtable to consider global progress report and a top-level summit in 2023.The document contains a pledge to increase financial assistance to poor and developing countries to combat climate change.

The participants of COP-26 touched upon the issue of the global green transition based on four principles: energy efficiency, decarbonization, decentralization and digitalization. Many important statements have been made during COP-26. The countries have promised to achieve carbon neutrality by the middle of the century, significantly reduce the extraction and use of fossil fuels, completely stop the processes of deforestation, allocate considerable funds for the green transition. However, COP-26 also has its disappointments: ambitions of many countries remained weak, mistrust between developed and developing countries increased, and the real reduction of emissions was partially replaced by compensations.

Although the declaration was signed by almost 200 delegations, every point of it sparks disagreement. The Glasgow Agreement will not replace the Paris Agreement. It acts as a rulebook on the implementation of the 2015 Paris commitments. It defines more concrete actions in financing measures to combat climate change, mitigating its consequences and adapting to the ongoing climate changes.

What awaits us in the future?

Climate Action Tracker has published a report that shows that the risks of rising temperatures in the world are even higher. Even with the current goals of emissions reduction, by 2100 the temperature in the world could rise by 2.4 degrees. It means that the strategies announced at COP-26 would not meet the goals of the Paris Agreement.

Today, the world can only effect the green transition by a gradual replacement of technologies. It is obvious that electricity has been and will remain the main energy source for humanity. But the question is: how to accumulate it more efficiently and more environmentally friendly in the new realities? Hydrogen is recognized as a viable option. At the same time, the issues of green transition and carbon emissions reduction are over politicized and often do not take into account regional peculiarities of the countries. For now, the easiest step to make is to continue focusing on energy conservation and energy efficiency.

Afterwards, it is necessary to reconsider the attitude to the types of energy generation and modernize them according to the environmental agenda. It is important to use technologies that meet economic needs and cause minimal harm to the environment. It means that Russia should rely on three main areas during the energy transition: nuclear power, hydrogen, and natural gas generation.

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Inquiry on General Babangida’s Involvement in Conventional Banking despite Introduction of Islamic Finance in Nigeria

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Dear Editor,

I hope this letter finds you well. I am writing to express my curiosity and seek clarification on a matter that has caught my attention, specifically pertaining to General Babangida’s involvement in the conventional banking industry despite his role in introducing Islamic finance during the financial reforms of his military government in Nigeria. Vide your special article commemorating his 81st Birthday published in your esteemed news website: https://focus.afrief.org/trending/a-salutary-tribute-to-general-ibrahim-badamasi-babangida-architect-of-islamic-finance-in-nigeria/

It is indeed noteworthy that General Ibrahim Babangida played a pivotal role in shaping the economic landscape of Nigeria by introducing Islamic finance principles. It is fascinating to witness the implementation of Islamic finance in Nigeria, as it promotes principles that align with religious and ethical values. General Babangida’s efforts to introduce this form of finance were undoubtedly commendable, reflecting his commitment to establishing an alternative financial system that adheres to Islamic principles.

However, recent observations suggest his active participation in the conventional banking sector in Nigeria. Certainly, it is intriguing to see General Babangida’s continued involvement in the conventional banking industry, which operates under different principles. While some may argue that his involvement in both sectors is simply a matter of personal choice, it raises questions about the compatibility of his actions with the ideals and principles of Islamic finance. While the former is interest driven, the latter prohibits interest related transactions completely.

I wonder if General Babangida has ever publicly addressed this matter or explained his reasoning behind being active in both sectors. It would be enlightening to hear his perspective on how he reconciles his involvement in conventional banking with his efforts towards promoting Islamic finance. This has raised questions in my mind and perhaps in the minds of others as well.

I am keen to understand the rationale behind General Babangida’s dual engagement in both Islamic finance and conventional banking. Does this reflect a strategic approach to diversify Nigeria’s financial sector, or are there specific reasons behind his involvement in conventional banking despite advocating for Islamic finance principles?

Additionally, it would be interesting to explore the potential impact of his dual involvement on the perception and growth of Islamic finance in Nigeria. Does his presence in the conventional banking industry hinder the progress of Islamic finance, or does it have the potential to bridge the gap between the two sectors?

I believe that delving into these questions could provide valuable insights and generate constructive discussions within the Islamic finance community in Nigeria. By shedding light on General Babangida’s dual involvement and the potential implications, we can further enhance our understanding of the challenges and opportunities faced by the Islamic economy in our country.

Thank you for considering my questions, and I look forward to reading more about this topic in your esteemed Focus on Islamic Economy.

Sincerely,

 

Abba Musa Mamman Lagos

Kaduna


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10 Megatrends Shaping the World in 2024

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The report, “Navigating Megatrends Shaping Our Future in 2024”, was launched during the first day of the World Governments Summit (WGS) 2024, being held under the theme “Shaping Future Governments” from 12th-14th February in Dubai. The report examines the indicators that shape these megatrends, supported by evidence from today as well as future expectations. These trends inform decision-makers and foresight experts about various sectors and the potential opportunities in each.

Khalfan Belhoul, CEO of Dubai Future Foundation, said, “This report has been launched in line with DFF’s efforts to identify and communicate those trends with the most potential to shape opportunities and strengthen local and international partnerships to overcome current and future challenges.”

“The challenges that face us on our journey to the future require that we are agile enough to be able to adapt to rapid change. It is vital we pay attention to the signals we detect – only then can we be prepared to overcome challenges and seize opportunities. The World Governments Summit provides a platform for discussing these challenges and exploring the opportunities.”

Materials revolution

New types of materials will create a shift in the industry, with solutions based on artificial intelligence (AI) such as biopolymers, biorefineries, and chemical recycling paving the way. These solutions will facilitate the development of new biological and novel materials that could rival plastics.

Boundless Multidimensional Data

Enabled by developments such as 5G and 6G in addition to advanced connectivity, the availability of raw data will vastly increase. The Internet of Things (IoT) will continue being deployed in healthcare, agriculture, and smart cities, especially in the Middle East.

Technological Vulnerabilities

The cybersecurity sector will boom amid a sharp rise in smart home devices and wearable tech. According to a report by Allianz, the annual cost of ransomware is projected to reach around $265 billion by 2031. Meanwhile, the debate on the future of decentralised finance will continue.

Energy Boundaries

Advances in tech and the growing demand for energy will drive the pursuit of alternative sources of energy. Novel materials and machine intelligence will enhance current sources of energy, including their distribution around the world – and in space.

Saving Ecosystems

Approaches to conservation will be more interdisciplinary and future-focused, taking into account both societal and environmental factors. Driven by resource scarcity, climate change, and shifts in social values, environmental impact management will become increasingly holistic.

Borderless World – Fluid Economies

The world is witnessing a rise in unmediated transactions in finance, health, education, trade, services, and even space, which are blurring boundaries and creating more cross-border communities. Advances in communications, computing, and advanced machine intelligence will accelerate the creation of a borderless world that will change the way we work, live, and connect.

Digital Realities

The spread of 5G and 6G networks will enhance the applications of autonomous technologies and IoT. As quantum technologies become scalable and reliable, immersive experiences will become even more realistic.

Living with Autonomous Robots and Automation

Robotics and automation will increasingly be deployed across industries beyond automotive, manufacturing and supply chain logistics. This will provide opportunities for efficiency and innovation, although there will also be ethical challenges to address.

Future Humanity

New workplace norms will emerge, with people needing to adapt to non-traditional skill sets in areas such as digital literacy, communications, culture and sustainability.

Advanced Health and Nutrition

Accelerated progress in advanced machine intelligence, nano- and biotechnology, additive manufacturing, and IoT will transform health and nutrition, improving health and wellbeing for people of all ages. Technology will reduce, if not eradicate, some communicable and non-communicable diseases and enhance the sustainable use of and access to water and food.


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Africa’s New Online Foreign Exchange System will Enable Cross-border Payments in Local Currencies – what you need to know

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The high cost of making cross border payments on the African continent has driven governments on the continent to seek options of settling trade and other transactions in local currencies. This has given birth to the Pan-African Payment and Settlement System which was formally launched in Accra, Ghana, in January 2022.  Development economist Christopher Adam, who has studied the exchange rate policies of African countries, answers some key questions.

Why are African countries exposed in the international currency market?

Three main reasons. First, African economies are small and as such are highly dependent on trade with the rest of the world. Their exports are dominated by primary commodities including oil and gas, minerals and cash crop agriculture. On the import side, they purchase a whole range of goods – from essential commodities not produced at home such as fooddrugs and medicines, to capital goods and energy. A large proportion of these are sourced from China and other major economies of the global north. But because African countries are small relative to their trading partners they rarely have the power to determine the prices of imports and exports. They are “price takers” in world markets. And with world prices being set in the major reserve currencies of the world (the US dollar, euro, yen and renminbi), African countries are exposed to movements in these world prices. Second, “intra-African” trade is still a relatively small proportion of the total trade of African countries.

Finally, since African countries’ currencies mostly can’t be directly exchanged in international transactions, the dollar remains the most widely used currency in trade, even between African countries.

What’s required for the system to get off the ground?

The basic idea of the system is to be able to settle trade between African countries without having to use the US dollar.  There are two major challenges with that. First, intra-African trade accounts for less than 15% of Africa’s exports at present (although supporters of the African Continental Free Trade Area expect this to grow significantly over the coming decades). The African payment system therefore does not eliminate the role of the dollar (or other foreign currencies) in trade settlement entirely.

The second issue is that trade is not balanced between African countries. For example, Kenya exports goods of higher total value to Ethiopia than it imports from Ethiopia. If Ethiopia paid in its own currency, Kenya would end up with Ethiopian currency that it didn’t need. Some form of settlement currency that is acceptable to all is required – most likely the US dollar.

What are the challenges and potential risks?

Since trade rarely occurs instantaneously, some institution in the trade financing chain carries the exchange rate risk. Because of the gap between placing an order for imports and receiving them to sell in the local economy, there is a risk that the value of local currency will change relative to the currency in which the import is denominated.

In the “old” system, this risk is borne by the trader because everything is priced in dollars. The local currency value of the income from exports or the local currency cost of imports will change with movements between the local currency and the dollar, but the banks and those counterparts pricing in the dollar are protected.

Under the new system the same allocation of risk will remain in “external trade”. This currency risk is also present for intra-African trade.

An important question for the new African payment system is: who bears the exchange risk if one African currency depreciates relative to another? Should the importer carry the risk, or the exporter? Can and should the African payment system bear this risk of exchange rate movements itself? Where both currencies are volatile, traders might still prefer the relative stability of settlement through the US dollar.

The success of this system also depends on scale. The more trade settlement is routed through it, the easier it will be to settle in local currencies. Large currency imbalances will be less common. But until the system achieves this scale, the African payment system will need a strong balance sheet so that traders and participants can have confidence that settlement will be swift and risk free. It is unclear at the moment how this is to be achieved.

What is the best case scenario?

If the system can address the trade imbalance problem, provide clarity on risk management and reach scale, it could be very successful. But this is all going to be driven by underlying economic performance. Improved settlement will help but what is really driving this is the structure of trade. The more the economies of Africa can develop intra-African trade and the less dependent they are on extra-African trade, the less will be dollar dependence in trade. This growth in trade depends to some degree on trade settlement and trade financing but much more on production, consumption, trade policy and fiscal policy.

Christopher Adam is a Professor of Development Economics, University of Oxford


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