This post was originally published by the Center for Global Development, and is based on a report published by Breakthrough and Center for Global Development in 2023.

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What counts as climate finance? Analysis of 2554 projects financed by the World Bank between 2000 and 2022 showed not just a bias to mitigation but also a very wide range of activities, some of which looked at best tenuously related to climate, including teacher training in Guyana and civil service payment automation in Afghanistan.

In the last couple of years, patterns of behavior don’t appear to have changed that much. We replicated the scraping technique of the earlier paper to look at World Bank climate projects in FY23 and FY24. Of 925 projects that reported thematic areas, 825 were tagged as climate change-related. 751 projects were tagged as related to climate adaptation and 695 to mitigation.

Country-specific climate change spending, calculated by multiplying the share of the project allocated to climate and the value of the loan, totaled $55 billion, out of a project total of $153 billion for FY23 and FY24—about one third of total spending. Of this, 64 percent was directed towards mitigation and 36 percent towards adaptation. The figure below shows that for every income group, mitigation spending exceeds that on adaptation. It is somewhat of a mystery why the World Bank claims to have spent over $3 billion in two years on mitigation in the poorest countries that account for less than one percent of global emissions.

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Figure 1: Adaptation vs. mitigation spending by income classification

And for climate, it still appears that almost everything counts in small amounts: the pattern of labeling a little bit of a lot of projects as climate-focused continues. Figure 2 shows that 630 climate projects were tagged with less than 10 percent of loan value being related to climate. The problems with unreliability and inadequate documentation also persist. The Bank has launched a new version of the protocols for data exchange on its climate finance data (the API) that has dropped multiple data fields supported by the previous version. Ad hoc changes to the labeling of projects, without any warning to the user, have made the database difficult to use (as we observed when we ran the same analysis twice over the course of a month and got different results).

Figure 2: Number of projects labeled mitigation or adaptation

To be fair, and to repeat, it is utterly justifiable to have a broad sectoral definition of adaptation: economic development is a powerful adaptation strategy. But adaptation finance should be focused on the countries who need it (and deserve it) most: the poorest countries who have contributed the least to climate change but are some of the most exposed to its risks. Meanwhile it is a legitimate question as to how much the Bank should be financing activities that are only justifiable on grounds of their climate mitigation impact: clients have made clear they don’t think the institution should be focused on that. And in all of this it remains very hard to say how much, if any, of what is being labeled climate finance by the World Bank is “activities that wouldn’t happen absent a climate focus.”

Given all of that, World Bank financing justified on the grounds of climate change should be clearly new and additional (remember that phrase?), as part of a climate dedicated capital increase. That would help transparently meet new climate financing commitments while preserving existing finance for client priorities. Any resulting adaptation finance should be directed toward the poorest countries which deserve it most, and the mitigation finance linked to projects that have low-, no-, or negative-emission approaches as a primary focus.

Of course, two years after the initial study, the World Bank (and the world) is in a different place. Look at the average number of mentions of the word “climate” in World Bank President Ajay Banga’s officialspeeches: 3.33 per speech in 2024, 0.33 so far in 2025. That rhetorical shift points to the fact that chances for a climate-dedicated capital increase are extremely slim given the current policy stance of the World Bank’s largest shareholder. But a transparent, additional approach for climate finance should still be the long-term end-goal for the World Bank as much as it should be globally.

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Data centers–the physical infrastructure enabling AI technologies–underscore the challenge of shifting to clean energy grids while also meeting rapidly growing energy demands. Variable renewables alone, such as wind and solar and storage, will not meet demand. The power requirements of data centers reinforce the need for innovative solutions. As nations work to balance digital expansion with decarbonization, the rate of innovation in energy infrastructure, including battery storage, will determine how well clean energy targets can be met.

Most projections anticipate significant growth in electricity consumption by data centers, though estimates vary widely. For instance, the International Data Corporation (IDC) predicts global data center electricity consumption will double by 2028, reaching 857 TWh. Conversely, Goldman Sachs expects a more modest rise to 164 TWh in 2028. The International Energy Agency’s (IEA) World Energy Outlook estimates data centers will account for 223 TWh of global electricity demand growth by 2030—roughly 5% of the total projected increase. Cooling requirements and direct server usage account for the majority of electricity consumption and emissions.

The sector’s short-term growth is already impacting power grids. The United States is constrained by interconnection capacity – the physical and operational links between power generation sources and the main electrical grid. Microsoft and Google have announced partnerships with nuclear power companies to power their data centers, underscoring the importance of steady and reliable generation to support growing infrastructure. Hybrid, decentralized energy systems, along with advancements in technology efficiency, offer promising solutions for meeting the growing power demands. A recent U.S. study highlights the scalability of off-grid solar-storage-gas microgrids for data centers, arguing that a 90% renewable energy mix can offer a scalable, low-cost power supply. Additionally, Deepseek’s lower computing and energy-consumption rates compared to its competitors raises the potential for future AI models to reduce energy impacts while enhancing capabilities.

While these developments attract attention in America and Europe, the expansion of data centers in non-Western and developing countries presents an equally compelling story. Southeast Asia, Taiwan, and India represent part of the next wave of economies that must overcome power constraints to sustain rising digital demand. Countries like South Africa, Kenya, and Nigeria, must develop stable and reliable power grids to meet the growing energy demands of expanding data centers. To this end, clean energy deployment will necessarily include firm, cheap power that can match fast-growing energy demand.

The Next Wave: India and Taiwan

India is emerging as a major player in data center expansion. Most data centers are concentrated in Mumbai and Chennai due to those cities’ status as onshore hubs for submarine cable networks. India is experiencing a significant expansion in its data center industry, driven by increasing digitalization, cloud adoption, and supportive government policies. The country’s data center capacity is projected to more than double, from approximately 950 MW in 2024 to nearly 1,800 MW by 2026.

India is attracting substantial investments from both domestic and international companies. For instance, Microsoft has announced a $3 billion investment over the next two years to enhance its cloud and AI infrastructure in India, including the establishment of new data centers. Similarly, Yotta Data Services is seeking to raise $500 million to expand its data center portfolio within the country.

The Indian data center market is also witnessing significant activity from global players. Princeton Digital Group plans to invest $1 billion to increase its capacity to 230 MW across major hubs like Mumbai and Chennai. Additionally, companies such as Sify are initiating projects in cities including Chennai, Mumbai, Noida, and Bengaluru, aiming to add 350 MW to their current data center capacity.

Taiwan is actively expanding its data center infrastructure to bolster its position as a technological hub in Asia. Data center investment in Taiwan is expected to increase from $1.42 billion in 2022 to $3.21 billion by 2028, reflecting a compound annual growth rate of 14.57%. In 2024, the Taiwanese government announced plans to invest approximately US$3 billion (NT$97.75 billion) over the next three years to enhance its artificial intelligence capabilities, focusing on AI data centers and related infrastructure. A significant share of China’s internet traffic is routed through Taiwan. The close geographical proximity allows China to maintain tight control of its internet traffic with stringent censorship policies, while taking advantage of preexisting submarine cable infrastructure. Demand for internet services was likely the driver of the first submarine communications cable between mainland China and Taiwan—the Taiwan Strait Express-1 (TSE-1). Major international companies are also contributing to this growth. Apple has plans to develop a data center in Taiwan, potentially benefiting local manufacturers.

AI giant Nvidia is setting up its Asian headquarters in Taipei, with plans to develop customized chips and advanced chip packaging technology. The company is recruiting at least 2,500 employees in Taiwan as the country becomes a key player in its supply chain. In collaboration with Foxconn, Nvidia is constructing Taiwan’s fastest AI supercomputer in Kaohsiung. The first phase is expected to be operational by mid-2025, with full deployment targeted for 2026. This supercomputer will support Foxconn’s initiatives in digital twins, robotic automation, and smart urban infrastructure.

Future Waves: Digital Expansion and Energy Consumption in Africa

Despite the fact that 600 million people are not connected to the electrical grid in Africa, demand for digital services is rising. Mobile data consumption across the continent is expected to increase by 40% annually until 2025—almost double the global average. South Africa, Nigeria, and Kenya are key players in Africa’s data infrastructure expansion. South Africa hosts 100 data centers and is constructing a new 40-MW facility in Johannesburg.

Nigeria, Kenya, and South Africa are already making significant investments in internet infrastructure and cloud service capacity. The Nigerian government is expanding its fiber-optic network in order to increase internet access and drive economic growth. Kenya is doing the same with federal investments in submarine and fiber-optic network expansion. South Africa hosts most of Africa’s data infrastructure, with 100 data centers, and will likely continue leading the continent’s data growth. South Africa recently started construction on a new 40-MW data center in Johannesburg.

Many African nations are yet to build out their grid, making it difficult to expand the supply of cheap and reliable electricity. The South African state-owned utility, Eskom, faces a raft of problems, leading to regular outages. Nigeria and Kenya experience similar power disruptions, though both nations are investing in fiber-optic networks to boost internet connectivity. Expanding national grids will be critical to meet digital demand. However, much of the international community’s current focus remains on small off-grid solar solutions for residential and commercial electricity. While valuable, these solutions cannot replace the need for robust centralized power systems.

Energy Planning for a Digital Future

Addressing energy constraints in Asia and Africa ultimately hinges on expanding the supply of cheap and reliable power. India and Taiwan must build additional capacity to accommodate surging digital demand. Firm energy sources—such as hydropower, geothermal, and nuclear energy—are critical options for policymakers and developers to consider if striving to meet such power demand growth cleanly. India’s data center electricity consumption is projected to rise to 6% of the nation's total power demand by 2030. India’s current data center power capacity stands around 375 MW, this may increase to as much as 17 GW by 2030. India’s extensive hydropower potential and growing nuclear capacity could bolster existing resources. India relies heavily on coal and oil, but the government is requiring three new data centers to use clean energy. A new data center policy emphasizes the need for clean power.

Challenging the paradigm that data centers require baseload power generation to supply their steady, flat electricity demands, the U.S. study on off-grid solar-storage-gas microgrids for data centers offers valuable future insights for developing countries aiming to rapidly expand their energy infrastructure. These systems may provide a more timely solution, particularly for nations grappling with a centralized power grid constrained by unreliable energy supply, ageing infrastructure, and limited resources. New, hybrid energy systems may present opportunities for developing countries to exploit, illustrating the value of looking beyond solely 100%-solar-and-wind options.

Flexible clean energy solutions will be essential as countries face increasing challenges in expanding power supplies to keep up with data center growth. For instance, Taiwan, constrained by its island geography, is struggling to supply power to its data centers and to expand its power infrastructure to support additional data centers. The rapid expansion of AI data centers has led to concerns about power supply stability. As power demands grow, operators are exploring carbon-free energy initiatives and advancing liquid cooling technologies to enhance energy efficiency and reduce consumption. Taiwan is integrating renewable energy sources into its data center operations. The government’s ambitious 20-30-50 plan, to generate 20% of its electricity from renewables, 30% from coal, and 50% from natural gas by 2025, sets clear goals for increasing the use of renewable energy sources in data center operations. Taiwan may also reconsider its nuclear phaseout to ease energy shortages.

For African nations, the challenge is first to build stable, reliable grids before addressing data center energy demand. Funding for grid modernization is crucial, as is balancing short-term off-grid solutions with long-term, large-scale infrastructure for industrial and digital use. Kenya’s 950 MW of installed geothermal capacity (and significant reserves) and South Africa’s ongoing nuclear expansion highlight potential pathways. Nigeria’s planned 4-GW nuclear project and Kenya’s nuclear projects underscore growing interest in firm power sources.

Data centers are expanding as countries seek greater dividends from digital technologies. As digital economies grow, the challenge lies not just in meeting demand but doing so with resilient and sustainable energy solutions. The future of clean energy in developing nations will rely on a mix of firm power sources, renewables and storage backed with gas, flexible financing, and strategic investments to ensure a stable and efficient energy transition beyond traditional solar-and-wind-only approaches.

It is not likely that data centers will increase global emissions very much, at least for now. But their rapid growth highlights the need for resilient, diversified energy solutions. Efforts to shift away from fossil fuels will need to be balanced with portfolios of energy sources that provide continuous, reliable energy for the modern digital economy.

By Vijaya Ramachandran

In 1992, Al Gore termed adaptation to be “a kind of laziness, an arrogant faith in our ability to react in time to save our skin.” The evidence suggests otherwise. 

Climate adaptation—the set of actions that societies take to protect their populations from extremes, such as storms, floods, droughts, heatwaves, and cold snaps—works. It includes all the things people in rich countries take for granted: well-constructed buildings that withstand disasters, dikes and dams that protect from floods, air conditioning and cold storage for food and medicines, early warning systems, well-equipped first responders, and evacuation routes along well-paved roads.

A society’s resilience to climate extremes is closely coupled, of course, with economic development. That includes access to plentiful energy, better technology, improved agriculture, cheaper and more reliable communications technologies, and the ability to pay for better houses and infrastructure. Even a cursory look at the data makes abundantly clear that development has saved millions of lives over the past century. The average person today is 99 percent less likely to die from floods, droughts, storms, or other extreme climate events today than in 1920—and that’s almost entirely the result of the decline in the number of people living in poverty.

And yet, multilateral development banks–the largest providers of finance to poor countries–remain firmly committed to fund far more climate mitigation than adaptation. By leaving adaptation off the financing agenda, development banks like the World Bank risk keeping impoverished countries poor, and at greater risk of catastrophic natural disasters.

They must do better.

Climate Finance Is Not a Proxy for Development Outcomes

In recent years, the World Bank and its regional counterparts have been under immense public pressure, mostly from the richest shareholders, to expand their climate portfolio. Led by the World Bank, they have set ambitious targets to finance climate change mitigation and adaptation projects in low- and middle-income countries. As a result, their climate portfolios have undergone a significant expansion, especially after the publication in 2016 of the first World Bank Group Climate Change Action Plan. 

Too often, the amount of finance has become a proxy for outcomes when it comes to agenda-setting and strategy at the multilateral development banks. For example, much of the World Bank reform agenda under discussion by the Bank’s shareholders over the past few years has focused on optimization of the institution’s balance sheet to scale up climate finance. Regardless of the merits of this agenda, it should not overshadow the need for a more intensive focus on how the Bank is programming its climate finance.  

An examination of the World Bank’s climate portfolio of over 2500 projects between 2000 and 2024 shows that the Bank has a climate portfolio skewed towards mitigation (Figure 1). Of the total amount of $174 billion, 58 percent of its climate financing was directed to mitigation while adaptation projects received 42 percent. Low income countries—those with annual per capita income between $1086 and $4255–have received over $40 billion in adaptation financing. What is puzzling is that an equal amount has been spent on mitigation, despite the fact that these countries emit very low amounts of carbon. Low-income countries are in need of adaptation finance more than anything else, including investments in steady, cheap and reliable sources of power that can supply homes, schools and businesses with electricity on a continuous basis.

Climate Adaptation Works

We know how to adapt to climate, and therefore, the investments necessary to assist  poor countries in tackling weather and climate events. As my colleague, Patrick Brown, writes:

Humanity has never been close to sufficiently adapted to any climate. Our historical climate, far from being benign and nurturing, was indifferent and often hostile to our well-being, and this is why history is rife with examples of devastating climate impacts on society. 

At the same time, humanity has had tremendous success strengthening our defenses against the climate's inherent hostility faster than negative impacts from climate change have materialized. This climate adaptation (as opposed to climate change adaptation) is not a new phenomenon related to United Nations reports or initiatives of local governments. Rather, it is a continuation of humanity's inexorable impetus to reduce our vulnerability to our environment, driven largely by economic development and technological progress.

Investments in infrastructure are particularly significant. The migration of populations from rural regions to cities has brought with it a shift from unpaved roads and mud houses, which are vulnerable to storms and flooding, to more infrastructure. Improved sanitation and clean drinking water reduce illness and disease in the aftermath of such events. Better irrigation has reduced the frequency of crop failures resulting from droughts. Refrigeration keeps food from spoiling on its way to markets, and air conditioning helps people keep cool during heat waves. Water control, fertilizer, good weather forecasts, cold storage and reliable transportation are central to robust food supply chains that are resilient to drought and variations in temperature.  

To better cope with storms and floods, poor countries need to pave roads, construct dikes, and build resilient homes, schools, and hospitals. Resilient structures require concrete and steel, as well as building codes and regulatory standards. Emergency warning systems must be put in place to save lives. The factors that make people resilient to natural climate variability  are the same as those that build  resilience to climate change. We know how to harden societies against climate extremes. The challenge in the development finance space is to establish  practices that are both evidence-based and accountable to the beneficiaries of development projects.

A clear working definition of climate adaptation coupled with rigorous assessment is important, but staff at multilateral development banks remain under pressure to prioritize ambitious mitigation targets, in keeping with the preferences of their richest shareholders. As such, there is a risk of crowding out adaptation projects in the most vulnerable countries. 

Multilateral banks must build trust with poor countries by acknowledging that adaptation to climate is a serious undertaking requiring substantial resources. Adaptation projects must be chosen in close consultation with client countries and must incorporate indigenous knowledge where possible. Furthermore, best practice case studies in areas such as weather forecasting, irrigation, and flood control offer evidence-based examples of climate adaptation at scale. 

Green growth will require the MDBs to make substantial investments in energy, including in baseload power that may require the use of fossil fuels. Financing cheap and reliable energy is far more important than formulating net zero goals in poor countries that barely consume any electricity at all. Investments in climate adaptation must be assessed for outcomes, both qualitatively and quantitatively. For all the hype, there is still no independent evaluation of the climate portfolio of the World Bank. All of the multilateral banks must invest in rigorous and independent assessments of projects to understand how they might help countries adapt to a changing climate. 

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Amongst the many energy-hungry technologies supporting modern society, artificial intelligence (AI) is emerging as a major driver of energy demand. Data centers—the physical infrastructure enabling AI—are becoming larger, multiplying, and consuming more energy. Environmental organizations such as Greenpeace are concerned that this will jeopardize decarbonization efforts and halt progress in the fight against climate change. AI can track melting icebergs or map deforestation, all the while consuming excessive amounts of carbon-intensive energy. But a closer look at the data shows that fears of AI’s insatiable appetite for energy may be unwarranted.

If we take reports at face value, we might conclude that AI-induced climate stress is all but inevitable. Niklas Sundberg, a board member of the nonprofit SustainableIT.org claims that a single query on ChatGPT generates 100 times the amount of carbon as a Google search. The International Energy Agency predicts that global energy demand from data centers, cryptocurrency, and AI will double by 2026. Even the U.S. government believes that AI will exert a major influence on society: the Department of Homeland Security announced the first 10 hires for a newly formed AI Corps, to provide advice on how best to use AI within the federal government. The Department of Energy has created a working group on the energy needs of data center infrastructure and is talking to utilities on how to meet energy demand. AI’s energy demands, according to the Bloomberg Energy Daily, are “a source of trepidation.” 

Climate activists have raised the alarm. Greenpeace is calling for an official emissions tracking system to quantify AI’s environmental impacts. Climate researcher Sasha Luccioni proposes that governments restrict AI’s energy use, including by the use of AI “sobriety" measures or a carbon tax to deter electricity consumption. Vox warns that the benefits of the modern world—while substantial—come with tradeoffs and that none of these trade-offs is as important as energy: “As the world heats up toward increasingly dangerous temperatures, we need to conserve as much energy to lower the amount of climate-heating gasses we put into the air.” AI’s energy consumption has become yet another way to push back at a high-energy planet. 

But a closer look reveals a more complex relationship between AI use and energy demand, energy efficiency, and decarbonization that isn’t all bad news. First, there is the question of whether businesses are using AI. With data from the US Census Bureau, Guy Berger at the Burning Glass Institute shows that the two most common applications of AI are marketing automation (2.5% of US businesses) and virtual agents/chat bots (1.9% of businesses). Only 1% of businesses have used large language models. Berger’s analysis also shows that labor-saving uses of AI are still quite small, with 1 out of every 4 businesses using AI to perform a few tasks that were previously carried out by humans. And the largest businesses are most likely to say that they are using AI but also the most likely to say that they don’t know if they are using AI. Of course, the use of AI will increase in the future, but for now, it seems mostly confined to a few sectors and activities.

But beyond the eye-catching statistics, estimates of energy consumption are difficult to find, in part because industry data are heavily guarded and researchers have to rely on overly simplistic extrapolations. The Goldman Sachs Group estimates that AI power demand in the UK will rise 500% over the next decade. U.S. data centers could account for 8% of total electricity needs by 2030, up from 3% in 2022. States that house data centers appear to be running out of power. The Boston Consulting Group comes up with similar numbers—electricity consumption by data centers is projected to reach 7.5% of total US electricity consumption by 2030, up from about 2%. Generative AI is expected to contribute at least 1% to this growth. Rystad Energy says that data centers and AI energy use will increase by 177 TWh, reaching 307 TWh by 2030. 

In a detailed thread on X, MIT Innovation Fellow and former National Economic Council director Brian Deese argues that forecasters consistently overestimate electricity demand, in part because they emphasize static load growth over efficiency gains. Deese points out that in the early 2000s, analysts predicted surging electricity demand. Instead, U.S. electricity demand has stayed flat for two decades. And although data center energy use is increasing, energy intensity (energy use per computation) has decreased by 20% every year since 2010. Nvidia—one of the largest companies designing graphics processing units (GPUs) for gaming, professional visualization, data centers, and automotive markets—is continuously improving the energy efficiency of its GPUs. Its new AI-training chip, Blackwell, for example, will use 25 times less energy than its predecessor, Hopper. Deese points out that analysts may be double-counting energy use by data centers because technology companies initiate multiple queries in different utility jurisdictions to get the best rates. 

A (carbon-heavy) query to ChatGPT suggests AI and data service providers have considerable room to improve the energy efficiency of data center infrastructure using various measures:

Virtualization and Consolidation: Virtualization technology can be used to consolidate servers and reduce the number of physical machines running. This can lead to significant energy savings by optimizing server utilization rates.

Efficient Cooling Systems: Cooling accounts for a substantial portion of a data center's energy consumption. Implementing efficient cooling techniques such as hot/cold aisle containment, using free cooling when ambient temperatures allow, and employing modern cooling technologies like liquid cooling can reduce energy usage.

Energy-Efficient Hardware: Energy-efficient servers, storage devices, and networking equipment can be a priority, as can the use of products with high energy efficiency ratings (such as ENERGY STAR certified devices), with use configurations optimized for lower power consumption.

Power Management Software: Power management tools and software can monitor and adjust power usage based on demand. This includes dynamically adjusting server power levels during periods of low activity (e.g., using power capping techniques).

Optimized Data Center Layout: Data center layouts can be designed to minimize energy waste and optimize airflow. This includes proper rack layout, efficient cable management, and ensuring equipment is placed to minimize cooling requirements.

Energy-Efficient Data Storage: Efficient data storage technologies and practices, such as data de-duplication and compression, can be used to reduce the overall storage footprint and associated energy requirements. Continuous monitoring and optimization will also help.

Electricity demand from electric vehicles (EVs) may prove to be comparable or even higher than that of AI. The Princeton REPEAT model estimates the demand for electricity in the United States at 391 TWh for EV transportation (light-duty vehicles and other electric transport) in 2030, which is similar to BCG’s 2030 estimates for data centers (320 - 390 TWh). Rystad Energy predicts EV usage will grow from 18.3 TWh to 131 TWh for the same period. Despite the additional energy demand, policymakers strongly encourage the purchase of EVs and the construction of charging infrastructure, while commentators seem relatively unconcerned about EV charging needs. This may be because EVs are seen to be filling an existing societal need for transportation, as well as a solution to the problem of climate change. Even though AI has potential to raise productivity and improve lives, it is a new and energy-intensive technology whose value runs counter to the priorities of the environmental community. 

Note: Projections are for the United States.

No matter the level of future AI use, AI’s energy demand will make it more difficult—if not impossible—to dismiss the intermittency challenges associated with powering commercial and industrial loads with wind and solar energy. Data centers’ real-time power demand requires continuous, dispatchable power which cannot be provided solely by renewables without significant excess generation capacity and large amounts of cheap storage. 

Technology companies like Microsoft and Google are taking steps to meet their data center energy needs. Microsoft recently inked an agreement with Constellation Energy to supply its data center with nuclear-produced power. Other firm clean energy sources may also play crucial roles in decarbonizing AI energy consumption. Last year, Google partnered with Fervo Energy to power its Nevada-based data center with geothermal power. At least one hydropower developer—Rye Development—is planning to develop hydroelectric facilities to match data center electricity use. 

The bottom line is that we do not need to fear AI’s challenge to the energy grid. Utilities and tech companies will meet increased demand by using a mix of energy sources, including clean and firm electricity supplies like nuclear energy, geothermal power, and even hydropower. AI is not the first—and nor will it be the last—game changer in society’s energy consumption. The discourse on AI's energy footprint must therefore shift from apprehension to proactive problem-solving, focused on energy efficiency gains and diversification of clean energy sources, driven by the notion that a high-energy planet is essential for human progress. 

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In 2023, Blue Carbon, a Dubai-based company, signed a Memorandum of Understanding with the Liberian government for the exclusive rights to generate and sell carbon credits on about 2.5 million acres of Liberia’s forests. Blue Carbon will have those rights—which covers approximately 10 percent of Liberia’s total land area—for 30 years, and will retain 70% of the revenue from the sale of carbon credits. Blue Carbon has also negotiated several other massive MoUs in Africa and elsewhere.

Blue Carbon aims to leverage Africa’s forests to help decarbonize developed countries and multinational corporations. Like other conservation measures—debt-for-nature swaps that pay debt-ridden countries to conserve biodiversity-rich land and sea, or wildlife preserves in poor countries funded by wealthy environmental NGOs—Blue Carbon’s offset programs take advantage of cash-strapped countries willing to cede the rights to their land in exchange for short-term financial compensation. 

Blue Carbon agreements encompass 8% of Tanzania’s land (20 million acres), 10% of Zambia’s land (20 million acres), and 20% of Zimbabwe’s land (18 million acres). In October 2023, Blue Carbon signed its most recent deal for another several million acres of forest in Kenya. The company has also reached agreements with other countries, including Papua New Guinea, Dominica, the Bahamas, Niger, and St. Lucia, and has ongoing negotiations with Pakistan. 

News of these deals has been met with concern. International conservation groups are worried about the potential harm to wild spaces leased out to Blue Carbon. Indigenous groups are worried about what the MoUs might mean for their rights to the land. And skeptics of carbon credits have repeated long-standing concerns about the ability of carbon credit markets to have any effect at all on carbon emissions.

The concerns are valid. Offsets are, in effect, payments from the world’s largest carbon emitters to the world’s poorest countries to maintain high emissions lifestyles. Land for carbon deals are likely to stall the development of African countries, cede sovereignty to external actors, and threaten the livelihoods of people living off the land. 

And yet, it is difficult for governments of poor countries to turn down the vast sums of money offered. This is especially true as rich countries have refused to provide new resources for climate mitigation and adaptation while insisting that African countries meet Net Zero goals. The burgeoning carbon credit market lacks domestic and international regulatory oversight, which has resulted in deals that may neither benefit local communities nor legitimately reduce atmospheric carbon levels. The speed and lack of transparency by which transactions are occurring in Africa is problematic and it is not at all clear if the opportunity cost of the land under conservation has been properly evaluated in terms of its alternative uses and income-earning potential.

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Funky Accounting

Blue Carbon was established under the patronage of Sheikh Ahmed Dalmook Al Maktoum, a member of the Dubai ruling family, to generate carbon credits from the preservation of forests that will then be sold to third parties as a way to offset their carbon emissions. Al Maktoum has no experience managing forests or trading carbon. Most carbon credits are traded in voluntary carbon markets, allowing companies to offset emissions. Blue Carbon can potentially sell carbon credits generated by carbon sinks in Africa and elsewhere to governments around the world, enabling them to apply credits towards national emissions reduction pledges. The company has entered into a partnership with First Abu Dhabi Bank, the UAE's largest financial institution, to secure funding for the company's forest conservation and carbon credit projects. 

Carbon markets operate under Article 6 of the Paris Agreement but key issues remain unresolved. At COP28, governments faced challenges in reaching consensus, including on the process for authorizing emissions reductions for transfer to other countries, the potential revision or revocation of such authorizations, the scope for carbon trading to achieve Nationally Determined Contributions, and activities eligible under Article 6.

Carbon offsets remain highly controversial. The carbon accounting process is characterized by technical complexities and political dynamics. Carbon in its various forms is quantified by financial markets but offsets resulting from these calculations often have limited tangible solutions to address atmospheric carbon concentration. A considerable amount of research has highlighted discrepancies between claims and actual emissions reductions achieved. 

Moreover, problems persist regarding "additionality" and the potential for double-counting, further undermining the credibility of offsets. Claiming carbon credits for forests that would, in any scenario, remain untouched by development makes no difference in atmospheric carbon. The problem is exacerbated when companies with little oversight can sell carbon credits for the same region over a decades-long timeline.

A 2023 study found that 90% of rainforest carbon credits approved by Verra, the largest carbon credit standard, did not actually represent emissions reductions. Verra’s rainforest credits claim carbon emission reductions based on the protection and preservation of existing forests. Blue Carbon’s African forest carbon credit plan follows the same logic. The study found that Verra’s estimated emissions reduction did not come close to matching the real emissions prevented by forest preservation. Just months after the study was released, Verra announced that their rainforest credit process would be replaced by 2025. 

Despite concerns about offsets, Africa’s forest carbon is seen to be of enormous value. The Africa Carbon Markets Initiative, launched at COP27 in Egypt, aims to catalyze over $100 billion in new financing, mostly from the sale of offsets linked to forest conservation. Blue Carbon is by no means the only major player in the carbon credits market. Switzerland’s KliK Foundation purchased carbon credits from Thailand's Energy Absolute in December 2023. Singapore’s government has signed agreements with Papua New Guinea and Ghana for the sale of carbon credits. 

Who Benefits?

The deals vary in specifics. 

In Zimbabwe, a portion of the revenues generated from the carbon credits is meant to finance social projects aimed at improving the living standards of the communities residing within the project areas. Zimbabwe will take 50 percent of revenues, with another 20 percent going to communities that depend on the land. 

In Tanzania, Blue Carbon's partnership with the government focuses on conserving, managing, and registering forest resources in the first phase, including approximately 138,000 acres of mangroves. Tanzania's taxation regime for carbon credit trading is among the strictest, having been introduced shortly before Blue Carbon signed its MoU with the country's forestry agency in February. Under this MoU, the Tanzanian government will retain 61% of the revenue from carbon credit sales, with the remainder likely going to Blue Carbon or other stakeholders involved in the project. Local communities and governments are to benefit more than potential foreign buyers or developers. 

No one knows if African governments or citizens will benefit from the sale of carbon credits. Among other things, the opportunity cost of forest preservation and conservation has not been taken into account. While both Tanzania and Zimbabwe will receive financial remuneration for stored carbon, it comes at the cost of limiting economic development of the land through agricultural modernization, industrial production, or urbanization. 

In the Liberia case, there are legitimate concerns about the lack of transparency, and the impact on local communities and customary land rights. Unlike in Tanzania and Zimbabwe, Liberia has no established legal framework governing the issuance, sale, or taxation of carbon credits. And it is unclear how much Blue Carbon plans to invest in the project, how the carbon credits will be harvested, and what methods will be used to verify the credits' validity. The agreement does not specify the type of certification standards that will be employed, nor does it address transaction costs or financing mechanisms. There are also concerns about the number of livelihoods lost as land is converted from human use to conservation.

According to environmental activist and researcher Chris Lang, the Blue Carbon deal potentially violates several key laws in Liberia and contradicts both the United Nations Declaration on the Rights of Indigenous Peoples and the Liberian Constitution.

As governments and corporations around the world feel pressure to meet self-imposed emissions reductions targets, the value of African forest carbon will likely increase. This is the bet that Blue Carbon has made. By getting into the market for African carbon credits early, Blue Carbon can buy low and sell high. 

While the initial funds that Blue Carbon provides for the land can be used by African governments, and when possible, local communities, to improve livelihoods, the actual value of the land—whether for carbon credits or other economic uses—is not taken into account. At best, Blue Carbon is monetizing landscapes while providing dubious climate benefits. At worst, these deals take advantage of poor countries by profiting heavily from forest offsets while foreclosing long-term development opportunities.

Land Grabs For Carbon

Blue Carbon’s deals in Africa are notable for their size, but as the carbon market grows, it is possible that even larger swaths of Africa’s forests and land will get bought up for carbon credits. Even if African governments make a pretty penny off of developed countries and large corporations attempting to make their GHG emissions numbers look better, the economic and social impact of these land grabs for carbon could be significant.

Wealthy countries have underperformed on their promise of providing $100 billion to poor countries for climate mitigation and adaptation and development finance has seen a decades-long decline. These conditions make the financial gains from carbon credits seem appealing. But sacrificing the economic development of regions that will be “preserved” for carbon credits for short-term carbon payments is short-sighted, and a disavowal of the ethical responsibility of wealthy countries to address their own high levels of carbon emissions. 

It’s bad enough that the climate benefits of offset programs are dubious. But the real outrage is that even if it's not dubious, it is yet another way that the rich world is balancing its climate agenda on the backs of the poor world, paying pennies on the dollar for offsets that foreclose critical development opportunities for the global poor.

Instead of paying cash-strapped African countries to stay poor and “store carbon,” rich countries and  international institutions must reject cheap solutions and fulfill their promises of development finance for poor countries to escape poverty, invest in energy and infrastructure, and become more resilient to climate change.

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One of the many impacts of Russia’s war against Ukraine was a spike in global food prices. Although food prices are lower today than they were in the immediate aftermath of the invasion, the impact of the war on global food prices remains the most important consequence for the world’s poor countries. For many African states, Russia and Ukraine are the largest suppliers of wheat, corn, and other staples. Disruptions in agricultural trade since February 2022 have not only increased food insecurity, but have also made African countries even more dependent on Russia, the world’s biggest exporter of fertilizer. 

Food insecurity is a major reason so many African countries have been unwilling to fully condemn and boycott Russia for its invasion and war crimes. And while much of the world looks at whether or not food shipments make it out of the Black Sea, continued Russian deliveries of fertilizer are even more important for African agriculture. 

That’s because at the core of African food insecurity are the continent’s notoriously low crop yields—the amount of produce farmers harvest relative to the area of land they farm.

And one of the main reasons for low yield compared to other regions is that African countries, on average, use far less fertilizer to boost their agricultural production than the rest of the world. In 2020, the continent’s use of synthetic fertilizer—containing the three essential plant nutrients nitrogen, phosphorus, and potassium—was only around 26 kilograms per hectare of cropland. This is barely one-fifth of the European Union (135 kilograms per hectare on average), around one-sixth of North and South America (150 kilograms per hectare), and a mere one-seventh of Asia (187 kilograms per hectare). 

The low African number would be even lower were it not for a handful of outliers in the continent’s far north and south. Egypt used 401 kilograms per hectare, and South African farmers applied just over 60 kilograms per hectare in 2020. In many countries in between, crop production is largely based on non-industrial methods and uses substantially less synthetic fertilizer per hectare of cropland. In 2020, for example, the Democratic Republic of Congo, Madagascar, Namibia, Niger, and Sudan all used under 10 kg of synthetic fertilizer, and had an average cereals yield — including rice, maize, barley, oat, rye, millet, sorghum and other grains — of 0.966 tons per hectare. In comparison, in the same year, the United States used just over 124 kg of synthetic fertilizer per hectare of cropland, and had a cereal yield over 8 tons per hectare. 

A recent assessment of global food insecurity performed by The Economist ranked Niger as the 97th (out of 113 countries) in food security, the Democratic Republic of Congo as the 104th, Sudan as the 105th, and Madagascar as 108th. Namibia was not even included. According to the World Food Programme, more than 40 million people are facing severe hunger in just the Democratic Republic of Congo and Sudan. 

Any serious conversation about food security in the global south must therefore start with the state of African agriculture — its poor yields, lack of fertilizer and other inputs, and continued dominance of subsistence farming and other inefficient agriculture. Instead, many Western environmentalists, climate activists, and policy-makers — who often have little knowledge of how food is actually produced — ignore the extent to which global inequality in food security results from drastically uneven access to agricultural inputs, and, above all, fertilizer.

For these Westerners, the No. 1 concern about fertilizer is its carbon intensity. Much synthetic fertilizer is produced, at least for now, in fossil fuel facilities. What’s more, the use of synthetic fertilizer is associated with the adoption of industrial agriculture — large-scale monocultures and other highly efficient production systems that became widespread in the 20^th century — and its detrimental effects, including pollution from fertilizer overuse. In this assessment, low fertilizer application is a win for both the climate and the environment. 

Western NGOs, like Heinrich Böll Stiftung, La Via Campesina, the Institute for Agricultural and Trade Policy and even, the UN Food and Agriculture Organization, have taken aim at synthetic fertilizer use in Africa, and instead have called for “agroecology,” a loosely defined set of agronomic principles that attempt to take a holistic approach to agriculture and food policy. But agroecology tends to glorify existing peasant practices, effectively calling for stagnation, and thus low agricultural yields and increased food insecurity. 

Opposition to increasing fertilizer use in poor, low-productivity agricultural economies is a huge mistake. The use of fertilizer, modern crop varieties, irrigation, and mechanization has all but eliminated the scourge of famine. It is not a coincidence that most of the world’s food insecure countries practice non-industrial agriculture. Synthetic fertilizer ranks as one of humanity’s most beneficial technologies: About half the global human population — roughly 3.5 billion people — owe their sustenance to the increased yields of food crops made possible by synthetic fertilizer use. 

Fertilizer use is not the only thing that drives crop yield, but it is one of the most important. Global data show a correlation between fertilizer use and cereal yields. Numerous studies of fertilizer subsidies in Sub-Saharan African countries have shown yield benefits for farmers who increase the use of fertilizer. 

For countries with high food insecurity, low crop yields, and dependence on food imports — which describes many poor countries, especially in Sub-Saharan Africa — increasing the domestic food supply through higher crop yields is critical if they are to reduce hunger and malnutrition. And yet, opposition to increasing the supply of synthetic fertilizer for farmers in poor countries is common among green groups and policymakers in developed economies. 

In June 2022, the European Commission blocked an initiative to provide financial support for the construction of new fertilizer production plants in Sub-Saharan Africa that depend on fertilizer imports, mainly from Russia. According to the commission, the initiative would run counter to the European Union’s climate and energy commitments. Later in the year, the European Commission offered 4.5 billion euros in grants to Africa for food aid — helpful charity that does nothing to enable Africa to grow its own food — and investments in next-generation fertilizers. 

Next-generation fertilizers can mean multiple things — production of green ammonia, adoption of microbial fertilizers to fix nutrients in plants, or other efficiency-boosting technologies to be tied with synthetic fertilizers, all of which are valuable technologies for the future. None of these have short-term benefits for African agricultural producers, who can’t grow crops today with promises of the technologies of tomorrow or improve nutrient efficiency if they don’t already use enough nutrients.

Delaying any decision to help build urgently needed fertilizer plants, the EU has proposed a task force on fertilizer needs in Africa. That task force was formally announced at a conference of African Union-European Union agricultural ministers in July 2023. The short-term implications of the task force remain unclear, as does the implementation plan for the promised 4.5 billion euros. 

Similarly, while the Biden administration frequently talks about global food security, it has not addressed the problem of low fertilizer use in poor countries. USAID’s Global Fertilizer Challenge raised $135 million in November 2022 to invest in fertilizer use efficiency — not very helpful for countries that don’t have much access to fertilizer to begin with — and soil health. Earlier in the year, USAID head Samantha Power said that the fertilizer price and supply crisis coming out of the Russian invasion of Ukraine was an opportunity for farmers to move toward “natural solutions like manure or compost” and thus “hasten transitions that would have been in the interest of farmers to make eventually anyway.” 

Such a “let them eat organic” claim cheapens the lives of the millions of food insecure people through Sub-Saharan Africa, and fails to understand the depth of the problem. Using manure or other organic fertilizers — often other forms of waste byproducts from the animal agriculture industry — would require a vast expansion of animal agriculture, trading off the environmental and climate impacts of fertilizer production and use with those from animal production. This is made worse by the fact that crops require as much as twice the amount of manure to harness the same amount of nutrients as from synthetic fertilizer. This is not to mention the logistical difficulties associated with transporting and spreading manure — difficulties that often result in overapplication, and potentially even worse nutrient pollution than synthetic fertilizer use. One need not look further than Sri Lanka’s ill-fated decision to completely ban synthetic fertilizer imports to see the high-cost of organic alternatives to agricultural nutrients.

It is not clear that Western countries fully understand the devastating consequences of the lack of investment in fertilizer. Empty commitments to “next generation” fertilizers, and a focus on “use efficiency” do not make up for the massive gaps between fertilizer usage in rich versus poor countries and invariably just kick the can down the road when it comes to increasing food security in Africa. And while 4.5 billion euros sounds like a lot, the newest fertilizer plant on the African continent — built by Nigeria’s Dangote Group in partnership with the Nigerian government in 2022 — alone cost $2.5 billion. 

When rich countries with well-fed populations oppose greater use of synthetic fertilizer in Africa, it smacks of the same green colonialism that is putting a brake on other aspects of African development in the name of climate policy. And it is hypocrisy: European and American farmers use orders of magnitude more fertilizer than producers in Sub-Saharan Africa, letting them enjoy world-leading agricultural yields. But for Western policymakers and activists, African farmers using more than a smidgen of fertilizer would be a climate nightmare. One thing should be crystal clear: These people are asking millions of Africans to go hungry, risk famine, and — at best — be dependent on food charity from rich countries.

What’s more, limiting fertilizer use and maintaining low agricultural yields doesn’t even accomplish the climate and environmental goals rich Westerners purport to support. Feeding Africa’s burgeoning population without sharply higher yields means farmers need more land to produce food. That threatens biodiversity and increases forest loss, which in turn reduces nature’s ability to store carbon. 

Western governments, development agencies, and green groups are putting Africa into an impossible squeeze. On the one hand, they are actively limiting the continent’s ability to raise crop yields and feed itself. On the other hand, they support cordoning off African land for conservation purposes and carbon credits because they don’t like the expansion of farmland, either. 

If the West has any interest at all in improving the wellbeing of hundreds of millions of poor people — instead of leaving them food insecure and dependent on charity — it must overcome its unwillingness to make legitimate investments in agricultural development.