“The pacifists are in the west, the missiles are in the east.” A few days before the conclusion of the COP27 which is being held in Egypt, it is not useless to remember this famous word by François Mitterrand, pronounced nearly forty years ago, in the midst of the euromissile crisis. The French president summed up this truth well known to strategists: any war is ultimately won when the balance of forces is restored, in this case the American Pershing missiles to counter the Soviet SS-20s deployed in the 1970s in Eastern Europe. What if the same applies to winning the war we are waging against the climate crisis?
Because, if there is one merit that this COP27 will have had, it is to shed harsh light on a flagrant imbalance: the lack of financial investment in the energy transition in the southern hemisphere, particularly in sub-Saharan Africa. The president of the World Bank did not go overboard: “Not a penny goes to this part of the world. Period.” This observation is particularly disturbing at a time when global investments in low-carbon energy technologies – renewables, hydroelectricity, nuclear, heat and electric transport… – have never been as high as in 2021, with a record $785 billion, a jump of 24% over the previous year.
However, of this amount, only 8% was invested in the emerging and developing world. A geographical absurdity with regard to the renewable potential of these countries? Obviously. An economic and social aberration in view of the growth needs of regions with strong demographic dynamics? Sure. But it is obvious from the point of view of investors: very capital-intensive, investments in low-carbon energies need a clear and stable regulatory framework, whether in terms of contractual conditions for the remuneration of producers or the issuance land permits. In the absence of such a framework in many countries of the southern hemisphere, the risk premium demanded by financiers translates into a cost of capital three to four times higher than that required in developed countries! The result is final. According to the International Energy Agency, if we only consider renewable energies and associated investments – storage, networks – all financial flows are reserved for developed countries and China.
Silver against metals
And yet, this African COP reminds us of another obvious fact: if the financial resources are in the North, the resources in strategic metals necessary for the operation of the technologies of the transition are, for the most part, in the South. In the midst of the COP, Indonesia recalled to the memory of commodity traders as well as countries of the North which are rushing towards all-electric cars by announcing its plan to create a “nickel cartel”. The world’s largest producer, holder of a quarter of the world’s nickel reserves, this is not Indonesia’s first attempt. Successive embargoes on exports of raw ore to push processors to settle in the archipelago to refine the metal there, announcement of a tax on nickel exports with the same goal, everything is good to develop a value chain which would go from the mine to the electric vehicle. This, despite the lawsuits initiated since 2019 by the European Union before the World Trade Organization.
Other states are following Indonesia’s lead. As Vincent Donnen points out in a recent note from Ifri, in Africa, the recent reforms of mining codes, from the Democratic Republic of Congo to Tanzania, as well as the ban on exporting unrefined PGMs from Zimbabwe go in that Sens. In Latin America, the “lithium triangle”, made up of Chile, Argentina and Bolivia (53% of proven reserves), also uttered the taboo word “cartel”, before changing its mind.
“Resource nationalism”: the expression resurfaces in the north, where we have been obsessed since the health crisis, and even more with the war in Ukraine, by the idea of relocating critical sectors of the economy at home or near from home, failing that in “friendly” countries, to use the neologism in vogue in the United States of friendshoring. “Sovereignty”, answer the States of the South, thus sending the developed countries back to their fantasy of sovereignty in all directions – energy, food, digital, national, European. Silver against metals? What a great subject for COP28 in 2023!