Overseas aid to Africa being outweighed by hefty costs of importing oil

Energy Matters0

Overseas aid to Africa being outweighed by hefty costs of importing oil

Sub-Saharan states need to move to renewable energy sources as $15bn in aid is outstripped by $18bn in oil imports, says IEA

  • guardian.co.uk, Sunday 1 April 2012 19.28 BST
  • Article history

    A child stands near a gas flare at the Utorogu facility in the Nigeria. Many poorer sub-Saharan countries are ‘running at standstill’ in development terms because they are paying too much of energy imports. Photograph: George Esiri/Reuters/Corbis

    Developing countries in Africa received less in overseas aid last year than they paid for oil imports, new figures show.

    Sub-Saharan Africa received about $15.6bn (£9.7bn) in overseas development aid last year, but this was outweighed by the $18bn cost of importing oil, according to the figures compiled by the International Energy Agency and seen by the Guardian.

    A decade of soaring oil prices has created huge problems for development efforts in countries whose attempts to industrialise have left them heavily dependent on fossil fuels. Even though overseas aid has increased, poor nations are effectively “running to stand still” in development terms, because they are paying so much for energy imports.

    With oil prices likely to remain high, the only answer is for developing countries to move to cleaner renewable sources of energy, Fatih Birol, chief economist at the IEA, told the Guardian.

    “If you diversify the sources of energy, that is a good thing and clean energy means using free, homegrown resources so that will bring down the import bills,” he said.

    When industrialised economies were developing, oil was the equivalent of $13 a barrel, but now developing countries must pay $120 to $130, noted Birol, which leaves developing countries “hamstrung” – so if more people are to be lifted out of poverty, clean energy must be an imperative.

    The data from the IEA, widely regarded as the gold standard for energy analysis, rang alarm bells for campaigners, and is likely to be closely examined by donor governments, which have not tended to prioritise clean energy in the past.

    A DFID spokesperson said: “The whole world is affected by rising oil prices, but no country can pull itself out of poverty until it has a decent and reliable energy service. British aid is helping to improve the health, education and welfare of millions of the poorest, including providing cleaner, greener energy such as solar power to help grow their economies. Renewable and efficient energy can reduce dependency on fossil fuels, as well as helping to create new jobs in emerging low carbon sectors.”

    Ruth Davis, chief policy adviser at Greenpeace UK, said: “People in poorer countries are being hit twice by the oil industry. They are the first to suffer the impacts of climate change, while their economies are blighted by the rising cost of imported fuel. Instead of giving taxpayer handouts to the fossil fuel industry through World Bank aid programmes and Export Credit Guarantee schemes, countries like the UK should be investing in renewable energy and energy efficiency projects in developing countries, which will improve access to energy for the poor and help build stronger economies.”

    While rapidly emerging economies such as China and India are forging ahead on wind and solar power, little has been invested in Africa. This is not because of a lack of renewable energy resources, but because private sector investors see the continent as a riskier proposition.

    Under the United Nations scheme to give poor countries access to low-carbon technology – the clean development mechanism – the lion’s share of the billions of investment has gone to China, followed by India and other big emerging economies, but a paltry sum has gone to build projects in Africa.

    Birol, one of the world’s foremost authorities on energy economics, added that the problem of oil addiction was compounded by distorting subsidies for fossil fuels, common in many developing countries. These subsidies will reach a record $630bn this year, according to the IEA’s latest data, which Birol said represented not only a market distortion that would exacerbate climate change, but a drain on the Treasuries of poor countries, which could better spend the money on social projects such as in education or health.

    Although such subsidies are supposed to protect poor people from the impact of rising energy prices, in fact they usually disproportionately benefit the better-off, and in some cases are hijacked by profiteers.

    Birol also warned that putting off renewable energy investment because of the financial crisis and recession was “a false economy”. Many countries have scaled back their investment in low-carbon energy – the UK, Spain and Germany have slashed support for renewables, for instance. But Birol’s analysis shows that for every $1 that countries do not spend on cleaner fuel, they will have to spend $4.3 within the next two decades to make up, for their reliance on fossil fuels.

    Developed countries are far from immune to the problems of oil dependence – Birol noted that last year’s bill to the EU for oil imports topped $500bn for the first time, and that these payouts were a substantial drain on European economic resources.

    “That is the equivalent of a Greek crisis – every year,” he warned.

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