Listen to the article
After hosting COP27 in Sharm El Sheikh, Egypt has demonstrated its commitment to combating climate change by updating its nationally-determined contributions (NDCs)—voluntary climate commitments that must be updated every five years—for the second time since signing the Paris agreement in 2016.
Egypt updated its NDCs for the first time in June 2022, and recently announced its second update one year later, on June 26, 2023. The government has heightened its ambitions and increased its original goal of reducing greenhouse gas emissions from a 33 percent reduction to 37 percent by 2030, and has also brought forward the date of its target of generating 42 percent of its energy from renewable sources from 2035 to 2030.
While these changes reflect a recognition of the urgency of tackling the climate crisis, they also speak to Egypt’s growing need for financial support in doing so.
Though difficult to implement, these changes could, according to the World Bank, “strengthen long term growth” by “unlocking private sector investment.”
Minister of International Cooperation and AUC alumnus, Rania al Mashat, stated that by updating its NDCs, Egypt aims to secure additional funding from Germany and the US. “[The updated contributions will] secure grants, debt swaps, concessional finance and catalyze private investments to support the energy pillar within the country-led platform of the Nexus of Water Food and Energy (NWFE),” Al-Mashat said.
Through private investments, Egypt plans on reaching its updated NDC goals by replacing 12 fossil fuel power plants with a power of 5 gigawatts with renewable energy power plants with a power of 10 gigawatts.
Through the NWFE that was launched to support the national climate agenda, Egypt has built partnerships with various stakeholders with a particular focus on the private sector to marshal climate finance. Just one day after the announcement of the updated NDCs, Egypt’s Ministry of International Cooperation, Ministry of Electricity and Renewable Energy, and the Central Bank of Egypt signed an agreement with Germany, exempting it from a 54 million euro debt in order to use these funds for the new green projects.
Egypt’s current debt reached 162.9 billion dollars in December 2022, so the debt swap with Germany is only the first step of a long journey as more significant finance will be needed.
Egypt has stated that it needs to acquire grants and soft financing (a loan given with next-to-no or no interest with extended grace periods) worth 500 million euros (548 million dollars) in order to achieve its updated climate commitments. The new NDCs show donors that Egypt is serious about climate change, which may contribute to further debt swaps and other financing—something the country needs; Egypt’s debt is expected to reach 92.9 percent of GDP in 2023, according to a report by the International Monetary Fund (IMF). Innovative methods of fueling the economy have never been more necessary.
“Debt for nature” swaps were started by the Word Wildlife Fund (WWF) in 1984 to help stabilize developing countries that are highly indebted whilst preserving ecologically diverse areas, Ecuador being a leading example with its recent ground-breaking 656 million dollar bond swap that was arranged for the conservation of the highly biodiverse region of the Galapagos Island.
Clear, thoroughly-executed planning, as well as the support of developed countries is what the fulfillment of the updated NDCs will hinge on. Climate change is a global responsibility, and seeing how developed countries have higher consumption of global energy—In 2021, U.S energy consumption made up 16 percent of total world energy consumption—developed countries have a responsibility to financially support developing states’ efforts to tackle climate change. Egypt contributes only 0.6 percent to global emissions yet is highly vulnerable to climate change.
At COP15 in 2009, developed countries pledged to supply 100 billion dollars per year until 2020 to developing countries to fulfill their climate change goals, but the Organization for Economic Cooperation and Development (OECD) measured that in 2020, they only supplied 83.3 billion dollars, which was 16.7 billion short of their promised climate finance goal. President Abdel Fattah El Sisi stated that developed countries must come through with this pledge, saying that “we are concerned about the gap between the available funding and the actual needs of developing countries as well as the obstacles that our countries face to have access to it,” in COP26 that was held in Glasgow, further relaying the necessity for developed countries to assume their responsibility. NDCs can only be fulfilled with global partnerships and cooperation.
