UK stops funding coal mines and power plants abroad to tackle climate change

Investors are raring to do business in a region held back by state meddling and vested interests

BRITISH foreign aid for coal mines and power plants is to end to help combat climate change, Boris Johnson will pledge today.

The ban, which will slash aid for fossil fuels by tens of millions of pounds a year, will be announced at a Ukafrica investment summit in London attended by officials from 21 African countries.

Last year, research by the Overseas Development Institute found the UK government had spent almost £700 million of its foreign aid budget on fossil fuel extraction abroad since 2010 despite signing up to international agreements to cut greenhouse gas emissions.

The study for Cafod, the international development charity, found nearly a quar- ter of direct aid spending on energy was still spent on fossil fuel projects.

It estimated that between 2010 and 2017, the UK provided up to £8billion of support for energy in the developing world, with more than half (£4.6billion) supporting polluting energy sources.

No 10 said Mr Johnson will use the conference to announce “an end to UK support for thermal coal mining or coal power plants” abroad.

The move is part of the Government’s “green” strategy, which includes a target of net-zero greenhouse gas emissions by 2050, and has already seen aid provide 17million people with more access to clean energy.

In his opening speech to the conference, Mr Johnson will highlight examples such as Dorset-based Low Energy Designs, which is installing smart street lighting across Nigeria, and Diageo, which is building environmentally friendly breweries in Kenya and east Africa.

Dr Sarah Wykes, of Cafod, welcomed the move but added: “Closing the loopholes on current coal investment through UK export finance is a positive step forward.

“But the UK must show it means business by committing to phase out all forms of public support for fossil fuels overseas.

“Almost 100 per cent of current UK export finance energy support goes to fossil fuels and the science shows that further fossil-fuel finance is incompatible with any reasonable chance of keeping below the 1.5C limit for dangerous global warming.”

The Prime Minister will call for the UK to be the “investment partner of choice” for African countries.

This week’s Uk-africa Investment Summit will provide a welcome business-focused forum for leaders to assess the challenges and opportunities for African countries. Investors are eager to have a positive impact on development, while seeking portfolio diversification and sound returns. Significant progress has been achieved in Africa over the past decade, thanks to the efforts of a new generation of policymakers and business leaders emerging across the continent.

In countries such as Ethiopia, people are urging their governments to push forward with ambitious reforms. The spread of new technologies and smarter financial regulation, notably in Kenya, has opened opportunities for digital financial services, providing millions more people, including women and small-scale entrepreneurs, with economic opportunities. Low-carbon energy investments, including those supported by the World Bank Group’s International Finance Corporation, can help unleash growth.

Africa’s success stories prove that countries can grow. Foreign investment and international development assistance – notably from the UK – have each played an important role. But much more work needs to be done.

The building blocks for progress are known. Countries need rules of law that encourage competition and are enforced. Sound money, spending discipline, clean water and dependable electricity are all required for progress. Taxes and regulation must be balanced and encourage sustainable growth – with an early focus on more productive, marketbased agricultural sectors. Adequate capital is important, and human capital is the most valuable. It can be built through sound health and education systems, a strong focus on outcomes, and legal structures that give all the opportunity to succeed.

Many countries in Africa have a long way to go to create these conditions. Too often, top-down and unfocused policies and programmes leave space for vested interests – both domestic and foreign – to further their own agendas and resist opening markets, making Africa’s business environment less attractive for investment. Policy planners are too often influenced by these vested interests. This has held back development, leaving fragility and conflict for many millions of people.

A key obstacle to foreign investment is that some of Africa’s biggest economies – for example, Nigeria, South Africa, and Angola – have not performed well in recent years. Another challenge is that cross-border trade and investment, which is vital for growth, isn’t making enough progress to lift Africa’s average growth rate. Vested interests are at the core of both challenges.

Four areas need urgent attention. First, reforming state-owned enterprises and de-monopolising markets for greater competition. For many nations, the government footprint remains excessive, crowding out private-sector activity in agriculture, transport, and energy.

Second, Africa needs to reduce barriers to cross-border trade. Red tape and excessive regulation keep goods, services, ideas, and resources from flowing freely among countries. More intra-regional trade can generate the pressure and resources for improved infrastructure.

Third, government debts and investments need to be more transparent. This will give people more voice in the contracts and commitments made by their governments, a critical basis for implementing the rule of law.

Fourth, the region must address “learning poverty”. Our recent study reported on children’s ability at the age of 10 to read a basic story. In some African countries, as many as 80 per cent can’t do this. UK leaders, including the prime minister, have strongly supported programmes to keep girls in school long enough to learn skills and break out of poverty.

As donors and investors, we can all agree that the time for Africa is now. We must not wait for every economic condition to be perfect. Let’s seize the moment and start delivering immediate wins that can rapidly transform economies and improve people’s lives.