Climate change is one of the biggest challenges the world has experienced. Whilst the burning of fossil fuels such as coal, oil, and gas, which emit greenhouse gases, predominantly carbon dioxide (CO2) and methane (CH4) have sustained industrial activities, these gases act like thermal blankets around the earth, trapping heat and causing rise in global temperature.
Despite global commitments to reduce fossil fuel reliance, many producers have increased their use of these fuels, as indicated by InfluenceMap’s studies on policy engagement. This situation underscores the challenge of aligning the realities of energy sourcing with the principles of environmental sustainability.
Figure 1: CO2 emissions traced to major carbon fuel and cement producers. Note: excluding figures from fugitive methane. Source: Carbon Majors database.
Africans have been at the receiving end of the stick. While the continent contributes only about 4% of global carbon emissions, it “is the most vulnerable continent to climate change impacts under all climate scenarios above 1.5 degrees Celsius.” The physical, social and economic risk that climate change presents to the continent is evident. In Malawi, the 2023 floods that resulted from Tropical Cyclone Freddie displaced over half a million people, causing almost 700 deaths. According to the World Economic Forum, “disasters such as the Horn of Africa’s worst drought in 40 years and Algerian wildfires, resulted in 5,000 deaths and over $8.5 billion in economic damage.” With 95% of the continent reliant on rain-fed agriculture, changing climate conditions pose a significant risk to the productivity of the millions of (especially) smallholder farmers across the continent.
There are options for climate mitigation and adaptation. While mitigation strategies are aimed at reducing climate change, adaptation activities seek to adapt lives and livelihoods to the changing climate conditions. However, these options do not come cheap. According to the Climate Policy Initiative (CPI), African countries need about $2.8 trillion to fund their Nationally Determined Contributions (NDCs), which are pledges made by countries to meet their climate mitigation and adaptation goals.
Carbon markets are able to bridge the NDC funding gaps
Image source: Bigstock
Carbon markets are specialised financial markets dedicated to buying and selling carbon credits. These credits are essentially permits that authorise the holder to emit a specified amount of carbon dioxide or other greenhouse gases. There are two types of carbon markets. On the one hand, the compliance market is a system where organisations must adhere to environmental emission limits set by regulatory bodies to meet international climate goals such as those outlined in the Paris Agreement. On the other hand, the voluntary carbon market is a decentralised market where individuals or organisations buy carbon credits issued by non-regulated, independent crediting schemes and standards to voluntarily offset their carbon footprint. In voluntary carbon markets, participants are under no formal obligation to adhere to a specific limit.
Over the years, the carbon market and carbon trading in Africa have seen significant attention. The establishment of the African Carbon Markets Initiative (ACMI) at COP27 marked a pivotal moment, aiming to dramatically expand Africa’s participation in voluntary carbon markets. ACMI aims to enhance Africa’s role in voluntary carbon markets, with ambitious targets set to accelerate green growth and development. By 2030, ACMI plans to generate 300 million new carbon credits each year, which could translate into $6 billion in revenue and the creation of 30 million jobs. By 2050, the initiative’s goal is to produce over 1.5 billion credits annually, potentially mobilising more than $120 billion and supporting upwards of 110 million jobs.
Although it is estimated that the Paris Agreement at COP21 will open USD 23 trillion in opportunities for climate-smart investments between 2016 and 2030, inadequate access to financing remains a significant barrier to achieving Paris Climate Agreement goals. While countries have fixed initial cost estimates for their NDC targets, the overall costs of meeting these commitments vary greatly. Achieving the objectives of the Paris Agreement necessitates a combination of domestic budgetary allocations, private sector finance (both national and international), bilateral and multilateral finance mechanisms, and development assistance to bridge the funding gaps and support countries in fulfilling their NDC commitments.
Carbon markets offer a potential solution to countries’ funding gaps in implementing their NDC commitments under the Paris Agreement. Through emissions trading, these markets provide a source of finance, particularly for developing countries to fund NDC commitments such as renewable energy projects, energy efficiency improvements, and climate adaptation measures. The flexibility offered by carbon markets allows for cost-effective emissions reductions, enabling countries to set more ambitious NDC targets without imposing prohibitive financial burdens. With the option to achieve part of their required reductions through the carbon market, countries can aim higher without worrying about the costs of meeting those targets solely through domestic measures.
Challenges with carbon markets in Africa
While carbon markets present opportunities for generating revenue for NDC financing and sustainable development in Africa, it also raises concerns about repeating historical patterns of oil exploitation and the adverse impacts experienced by host communities. During the oil exploration era, multinational corporations often disregarded the rights and interests of local communities in their quest to extract natural resources. Toxic discharges from these explorations often led to the degradation of arable land, water pollution, and a loss of biodiversity, which in turn affected local agriculture and fishing—the primary means of livelihood for many oil-rich communities. Moreover, the influx of workers and machinery into these areas frequently resulted in social displacement, with indigenous populations suffering from inadequate compensation for their land and a lack of meaningful participation in decision-making processes. The environmental impacts were equally severe, with oil spills and gas flaring leading to health problems and a decline in the quality of life.
The practice of oil exploration in Africa and the issues surrounding carbon trading in the region share similarities, particularly in their socio-economic and environmental impacts on host communities. Historically, oil exploration has caused environmental degradation and social unrest due to unethical corporate practices and the uneven distribution of oil revenues, often leaving local communities with inadequate infrastructure and basic necessities. Similarly, emerging carbon market initiatives in Africa raise concerns about genuine climate change mitigation and the potential for further dispossession of local communities. Mirroring these past injustices, local communities face vulnerabilities that could perpetuate their exploitation in the context of carbon trading.
Local communities are susceptible to carbon trading exploitation due to several reasons. Firstly, the absence of clear legal frameworks governing carbon credits in many African countries leaves indigenous and local communities susceptible to exploitation. Moreover, a lack of awareness among communities about their rights and the impacts of these projects hinders their ability to make informed decisions. Additionally, the lack of unanimous consent and transparency in carbon trading contracts between local governments and communities can lead to asymmetrical agreements. A case in point is the Northern Rangelands Trust (NRT) carbon credit project in Northern Kenya where indigenous populations were not informed of the modalities of the project. Furthermore, the project relied on major changes to how the area’s indigenous pastoralists traditionally graze their animals and replaced them with a centrally controlled system. Residents have described these developments as culturally destructive and potentially harmful to their livelihoods and food security.
Another notable case exists in Zimbabwe where Blue Carbon, a Zimbabwe- and Dubai-based firm, recently inked a memorandum of understanding (MOU) with the government of Zimbabwe. This deal grants Blue Carbon control over a staggering 7.5 million hectares of Zimbabwean forest, constituting one-fifth of the country’s landmass. While the project aims to generate carbon credits, several issues have raised alarm bells such as the concern that the deal does not adequately consider the rights and interests of local communities and the broader public.
Sceptics of carbon trading are pointing out that the issue of land exploitation and greenwashing in Africa for the sale of carbon credits is a growing concern. They assert that companies and governments may claim to be reducing greenhouse gas emissions through reforestation or conservation projects, but sometimes these projects can endanger food security, lead to the displacement of local communities or fail to deliver the promised environmental and financial benefits such as in the case of the Northern Rangelands Trust (NRT) project in Kenya. Some reporters have defined these practices as “Blood Carbon” and “Green colonialism”, pointing out that this trend undermines the integrity of carbon markets and poses ethical questions about the use of land and resources in Africa.
Avoiding mistakes from the past
While carbon markets present opportunities for mitigating climate change and generating finance for NDC commitments and sustainable development in Africa, they are still valid concerns worth considering. Could the implementation of carbon trading in Africa potentially mirror the dark legacy of oil exploitation in the continent? How can African countries prevent a repeat of the extractive approach to resource trading? As the continent ponders the future of environmental policy, it’s imperative to ask whether it is setting the stage for a repeat of history, where the continent’s rich resources were exploited by mercantilist interests.
To ensure this development does not become another instance of profit trumping sustainability or leading to the commodification of natural resources, any carbon trading systems implemented in Africa must be underpinned by robust governance and transparency with the impact on indigenous peoples and local communities carefully considered. An example of such an initiative is the regulatory framework deployed by the Zimbabwe government to protect its people and the country’s interests. The government has ordered all carbon projects to be registered and it will take 50% of all revenue from such projects, with foreign investors limited to 30% and the balance of 20% going to local communities in a bid to curb climate washing and ensure that climate finance resources, meant to empower the country, accrue to the most deserving. Whilst we do not necessarily recommend the Zimbabwean framework as gold-standard, such clarity is necessary in African communities to ensure transparency, equitable benefit-sharing, prevent exploitation and protect local communities to benefit from carbon trading initiatives, thereby promoting sustainable development and genuine climate change mitigation efforts.
feature image source: Africa-China Centre
