COVID-19 Fiscal Policy Response and Climate Change Action in Africa

This paper analyses the fiscal policy measures adopted by African countries in response to COVID-19 and how these impact progress on their climate change actions of the countries. Specially, it analyses the climate friendliness of the immediate fiscal responses that were adopted by six African countries namely: Nigeria, South Africa, Senegal, Tanzania, Uganda and Benin when the pandemic first hit. The analysis focuses on measures that were included as part of the fiscal stimulus packages designed to address the economic fallout from the COVID-19 pandemic while acknowledging that countries may have undertaken more climate change action outside of these packages It is found that while the focus of countries was to minimise macroeconomic vulnerabilities and welfare losses, some of the measures adopted have implications on the climate response of the respective countries. Nigeria, the only country among the six with clean energy spending in its stimulus package, had an overall green stimulus package. South Africa, the biggest polluter among the six countries (and in Africa) adopted a climate neutral package while Uganda, the least polluting country of the six adopted a climate unfriendly package owing to its acceleration of the construction of environmentally unfriendly industrial parks. Lastly, Tanzania, Senegal and Benin had no climate related policies, thus making their stimulus packages climate neutral. Looking at the policy measures in the stimulus packages, opportunities are identified for these countries and others in Africa to exploit and move towards a greener recovery. These include expanding the packages to include clean energy projects financed through green financing facilities, imposing carbon taxes to help consolidate their deteriorating fiscal positions while simultaneously reducing pollution, and contributing to the development of green finance segments by putting in place a regulatory framework to incentivise financial market players to develop and issue green products.