Nigeria and Cameroon set to launch climate credit trade initiative

This article was submitted to TechCabal by Conrad Onyango, bird story agency

With carbon trade initiatives popping up in countries across Africa, Nigeria and Cameroon are lining up besides Gabon to create national projects that can earn significant amounts for reducing carbon emissions.

Two African countries are inching closer to making an entry into the carbon market as more line up to tap into the lucrative billion-dollars trade.

Nigeria has its eyes fixed on the international trade of carbon credits through a continental platform, while Cameroon is developing a strategy that will draw in green financing for the country.

Carbon trading is a programme designed to reduce greenhouse gas emissions by giving firms or countries a right to emit carbon dioxide at an agreed price per tonne- rates vary across jurisdictions with most governments yet to agree on trading rules.

Each carbon credit is tied to an emissions reduction project and represents a defined amount of carbon kept out of the atmosphere, such as preventing deforestation or carbon removal from the atmosphere.

Nigeria has begun pioneering a voluntary carbon market programme christened, the Africa Carbon Markets Initiative (ACMI), it said is part of its government plans to achieve net zero emissions.

The initiative, set for an official unveiling during COP 27, is being spearheaded by a 14-member steering committee which Nigeria’s Vice-President, Yemi Osinbajo joined on October 31.

“Federal Government is pioneering a voluntary billion dollars’ worth Carbon Market on the continent which will create, over the period of energy transition, millions of new jobs in Nigeria alone according to estimates of international experts,” Osinbajo said in a tweet indicating Nigeria’s lead role.

According to ACMI’s projections the west African country has the potential to produce up to 30 million carbon credits per year by 2030, which at US$20 per credit would earn Nigeria alone more than US$500 million annually.

ACMI’s steering committee made up of African leaders, CEOs, and carbon credit experts has tasked itself to facilitating emergence and expansion of the continent’s participation in voluntary carbon markets.

“The Committee and the Initiative will identify and address the challenges facing African voluntary carbon markets and ensure carbon credits grow into a major African export,” said Osinbajo.

Ecosystem Marketplace in its third quarter report, State of the Voluntary Carbon Markets, shows the voluntary carbon market value grew to around USD$2 billion in 2021, quadrupling from its 2020 values.

“This figure is expected to grow rapidly – creating a potential major source of finance for Africa,” said Joyce Hu, who works with an organisation blazing a trail for localised carbon trade in the Democratic Republic of Congo (DRC) Wildlife Works.

Hu, Marketing Communications Director at Wildlife Works, said that more climate financing to Africa – with some of the world’s largest and most important nature carbon sinks – such as the Congo Basin which captures around 2.4 billion tonnes of carbon dioxide a year – will both protect fragile ecosystems and at the same time, fund sustainable development for communities based in and around those areas.

The community-centered wildlife conservation firm protects five million acres of forest through its carbon credit projects. Data from the company shows it reduces over 9.5 million tonnes of carbon emissions annually, with the sale of credits also supporting more than 500 local jobs.

With operations in both DRC and Kenya, the organisation said it was expanding partnerships in key African carbon sinks to help communities gain access to green financing.

Gabon became the first African economy to start earning from its efforts to cut down forest-related carbon emissions in 2021. The country was rewarded 14 million euros by the Central Africa Forests Initiative as an initial installment for managing to remove 127 million tonnes of carbon annually from the Congo Basin forest. Furthermore, Gabon has the potential to rake in 126 million euros by 2025 if it manages to cut carbon emissions by half.

Cameroon has also announced it is developing a strategy that will see the country begin to earn money on carbon markets, starting in 2023.

Cameroon’s Minister of Finance, Louis Paul Motazé was quoted by local media saying the country also located in the Congo Basin, is assessing its carbon balance sheet before making an entry into the trade.

“Our plan is to assess our current situation, identify solutions and implement them to finalize the carbon market entry process,” said Motazé.

In East Africa, seven countries are looking to transition away from a Clean Development Mechanism that restricts developing countries from implementing emission reduction projects within their jurisdiction.

A report on carbon markets and climate finance by the Eastern Africa Alliance, shows that Burundi, Ethiopia, Kenya, Rwanda, Sudan, Tanzania and Uganda are ready to begin trading in voluntary carbon markets. Internationally traded credits between governments and private sector players are acceptable, under Article 6 of the Paris Agreement.

“Eastern Africa is getting ready for engaging in a new generation of global carbon markets,” said the report titled, ‘Revitalizing Eastern Africa’s Institutional Capacity To Engage In Global Carbon Markets.’

However, these countries lack the regulations and guidelines to give them the capacity to fully track all market activities including carbon exports and to transfer mitigation outcomes across borders.

According to the report, no country has developed a clear policy or legislation on the continued operation of Voluntary Carbon Market (VCM) activities and their relationship to Nationally Determined Contributions (NDC) implementation.

There is also a lack of clarity on whether mitigation outcomes resulting from VCM activities can be exported abroad and whether that would require corresponding adjustments.

“There is a clear policy gap on the relationship between voluntary carbon markets and NDC accounting and reporting resulting from uncertainty around these issues at the global level,” according to the report.

Africa remains an untapped market for carbon trading with most countries still lacking regulatory frameworks to drive carbon pricing- most climate change frameworks used by countries being executive instruments.

Hu singles out transparency around carbon credit pricing as a key challenge.

“More transparency will minimize greenwashing and ensure more high-quality credits on the market,” she said.

According to Hu, the pricing of carbon credits varies with the type of carbon project the credit will fund, the volume of credits traded at a time, the geography of the project, and how long the credit has been on the market. usually, the longer it has been on the market, the lower the price. However, some projects can attract a premium.

“If a carbon project supports the UN’s Sustainable Development Goals, the price of that credit may be higher as it may be seen as more valuable to potential buyers,” she explained.

Currently, South Africa in the only African country to have implemented a carbon tax, through Carbon Tax Act No 15 of 2019.

A number of other countries including Cote d’Ivoire, Senegal and Botswana are considering introducing carbon trade policies.