Coal, a necessary precursor to a renewable Tanzania?

Associate, Tax Services

PwC Tanzania

What you need to know:

Although rising coal demand in Europe might put into question the achievement of climate change mitigation, the newly developed trade channel between Tanzania and EU countries paves the way for further collaboration between Europe and Africa in renewable energy projects

Coal exports to Europe have also benefited, particularly from South Africa (surging by +583 percent year on year in the nine months to Sep 2022 to 9.6m tonnes, from just 1.4m tonnes in the same period of 2021). But the impact on Tanzania’s coal industry has also been significant - for example, in the year to 30 June 2022 the volume of coal exports from Mtwara port totalled 592,365 tonnes - more than triple the prior year volume (of 177,388 tonnes)! In terms of financial impact, the Bank of Tanzania Monthly Economic Review for December noted that coal worth $141.6m was exported in the year ending November 2022, as compared to USD13.2m in the corresponding period in 2021 “largely explained by rising demand for alternative source of energy following the short supply of crude oil and natural gas amid the war in Ukraine”.

Although rising coal demand in Europe might put into question the achievement of climate change mitigation, the newly developed trade channel between Tanzania and EU countries paves the way for further collaboration between Europe and Africa in renewable energy projects. Given the urgency of climate change impact, this is a prime opportunity for stakeholders to align net zero emissions interests with the energy demand-driven market, and simultaneously deliver on the global consensus to combat climate change. The partnership is foretelling of the potential in energy harmonization between developing and developed countries to have a “meeting of the minds” so as to achieve energy security and environmental regulation. It is possible that the investment required for Africa’s energy sector to sustainably transition to a globally competitive continent hinges on these newly formed trade channels and how they evolve. This presents us with a new equation for a more inclusive climate change action plan.