Greening the implementation of the African Continental Free Trade Area Agreement

The African Continental Free Trade Area (AfCFTA) seeks to establish a single market for goods and services, enhance intra-African trade, and promote sustainable socioeconomic development. However, achieving these goals must be carefully balanced against the continent’s persistent challenges, including climate change and limited electricity access. This paper explores the trade–climate–energy nexus in Africa using MIRAGE-Power, a dynamic computable general equilibrium (CGE) model which captures interactions between trade and energy systems. We evaluate several scenarios: the standalone implementation of AfCFTA, as well as combinations of AfCFTA with climate policy measures such as the adoption of countries’ Nationally Determined Contributions (NDCs), a carbon pricing scheme based on the IMF’s international carbon price floor, and a coordinated mitigation effort proportional to national emissions. Our results indicate that aligning trade and climate policies, particularly through power sector decarbonization and regional grid integration, can generate mutually reinforcing benefits. While climate policies pose trade-offs with economic growth and energy access, a well-designed, equitable carbon pricing framework can mitigate these tensions. Reinvesting carbon revenues in renewable energy and cross-border electricity infrastructure can further support Africa’s green transition while improving energy access across the continent. • Trade integration under AfCFTA and climate policies can be mutually reinforcing, driving a shift of electricity production and trade toward renewable sources. • NDC-based carbon pricing tends to reflect heterogeneous national ambitions and capacities, often resulting in inefficiencies and unequal mitigation burdens. • Coordinated carbon pricing mechanisms are effective in supporting the energy transition while minimizing mitigation costs. • Efforts differentiated by emissions levels are more efficient, while a common carbon price in line with IMF’s proposal for low-income countries is a second best. • Redirecting carbon revenues to cross-border grids and renewables improves energy access and supports an inclusive green transition.