Africa advised to unlock potential in carbon markets
Instead of relying on the developed world for climate financing, African countries have been urged to turn to carbon markets as they have the potential to raise the climate finance required.
Speaking in Nairobi during the just-ended inaugural Africa Climate Summit, William Asiko, Vice President of the Rockefeller Foundation’s Africa Regional Office said that carbon markets will offer a lifeline in developing countries, where the impacts of climate change are often most devastating.
“It is estimated that between now and 2030, Africa could develop enough carbon credits to raise USD$30 billion (Sh4.3 trillion) in revenue. Money generated from the sale of carbon credits could be funneled into climate adaptation and mitigation efforts,” says Asiko.
Carbon credits, also known as carbon offsets, are a unit of measurement that represents the reduction or removal of one metric ton of carbon dioxide (CO2) or its equivalent in other greenhouse gases, such as methane (CH4) and nitrous oxide (N2O).
These credits are awarded to projects and activities that reduce emissions or sequester carbon from the atmosphere. The more emissions a project or activity reduces, the more credits it earns, and the more money it generates by selling them.
Addressing climate change
Carbon credits are sold or traded on platforms known as carbon markets emissions trading systems or cap-and-trade programs. Carbon markets exist at both the national and international levels and are regulated by governments or international organisations. It is believed, that these markets could be a game-changer in the fight against climate change while simultaneously promoting economic growth. “Carbon credits and carbon markets are essential components of strategies aimed at reducing greenhouse gas emissions and addressing climate change. They are mechanisms designed to encourage businesses, organisations, and governments to mitigate their carbon footprint by financially incentivising emission reductions and carbon sequestration,” says Asiko.
According to United Nations Development Programme (UNDP), from 2020 to 2030, the estimated funding required for African countries to cut emissions and adapt to climate impacts is approximately USD$2.8 trillion (Sh40.9 trillion), representing more than 93 per cent of Africa’s GDP. However, African governments have only committed USD$264 billion (Sh38.6 trillion) of domestic public resources towards this mission amounting to 10 per cent of the total estimated costs for implementation. The remaining USD$2.5 trillion (Sh36.5 trillion) needs to be sourced from the international donor community and the private sector.
“These small, often overlooked certificates hold the promise of driving significant change by raising climate finance, ultimately helping the world transition to a more sustainable future,” he said.
Regulate carbon markets
He said though carbon markets are gaining traction for finance, from the whole of the Global South (developing world), Africa needs to make this sector investor-friendly to attract project developers. Apart from that, the continent also needs to put in place regulations that regulate carbon credit markets.
The reason is, that this is something new not only in Africa, but globally, especially on the production side. So we need to put in place regulations that enable these product developers to develop these projects and produce these carbon credits at scale.
“For project developers who can develop those carbon credits to come to our countries and set up these projects we’ve got to make it easy for them by reducing the risk of doing business in our countrie,” he said.
Apart from that, as we develop these carbon markets at scale, we have to ensure that these carbon credits are developed with transparency and most importantly, with integrity. One of the biggest challenges with carbon credits globally has been around integrity and the market is only as good as its integrity.
“There is a need for robust regulatory frameworks, transparency, and accountability to ensure the integrity of carbon markets. Apart from that there is a need for equitable distribution of benefits so that the rewards of emission reductions would reach the most vulnerable communities,”he explained.
On matters of carbon credit verification, Asiko says that this is where the problem is since as a continent we don’t have sufficient capacity for verification from those global institutions because Africa has not been involved in the development of carbon credits.
To solve this challenge, the Rockefeller Foundation is working with the Global Energy Alliance through a platform called the African Carbon Markets Initiative (ACMI), to develop capacity to allow those well-known verification agencies to come and develop capacity in Africa so that they can verify the carbon credits and make them ready for the regulated markets.
ACMI is a platform that brings together all the actors in carbon markets, the carbon markets value chain, and the governments. What ACMI is doing is working with African countries to help them develop what we call carbon market activation plans. A carbon market activation plan is simply a plan for how you look at your landscape today, as regards carbon credits, identify what gaps exist, and develop solutions towards them, which includes regulation.
So far, 90 countries have signed up to be part of the ACMI ecosystem. The partners are working with these countries to develop their country market activation plans and to follow regulations and all the other things that are required to develop a vibrant market. The idea is to have every African country as part of this platform that is working to develop strong regulations in developing the capacity for verification.
To make sure that the carbon credits they’re producing are of the highest quality the highest integrity and produced with the highest level of transparency so that they can be traded effectively in regulated markets or compliance markets as they’re called. “If we embrace carbon markets, carbon credits will evolve from a novel concept to a critical tool in the fight against climate change. They will become an engine that will drive innovation, spur investment in clean technologies, and raise vital climate finance. Carbon credits and markets will play a vital role in achieving emission reduction targets outlined in international agreements like the Paris Agreement, ultimately contributing to global efforts to combat climate change.” he offered.
Asiko said the potential benefits of carbon markets in Africa are undeniable. They can provide financial incentives for countries to invest in renewable energy, reforestation, and sustainable agriculture, all critical components of reducing emissions. Moreover, carbon market revenues can be channeled into vital social programs, helping to alleviate poverty and improve the quality of life for millions of Africans.of our decisions,” she said.
Currently in Kenya, the National Assembly Committee on Environment, Forestry and Mining has been working on the Climate Change (Amendment) Bill, 2023.
The Amendment Bill seeks to amend the Climate Change Act, 2016; a national legislation intended to enhance response to climate change and provide mechanisms and measures to achieve low carbon climate-resilient development.
“This Act shall be applied for the development, management, implementation and regulation of mechanisms to enhance climate change resilience and low carbon development for sustainable development of Kenya,” part of the Bill reads.
During the 27th Session of the Conference of Parties (COP27) held in Egypt Sharm El Sheikh,President Dr William Ruto described carbon credits as Kenya’s “next significant export”.
Expanding the country’s carbon market ecosystem could result in 600,000 new jobs in project development, monitoring carbon generation, and overall economic growth.
In addition, the designated National Authority shall be the custodian of the National Carbon Registry which is responsible for registering on the carbon credit projects and programmes implemented to reduce greenhouse gas emissions in Kenya among others.