EAC States: Learn from Kenya’s carbon trading

The EAC countries are now beginning to tap into carbon trading by calling investors to invest in this new lucrative business. Carbon credit markets enable industrialised nations and businesses to offset their carbon emissions by investing in ecofriendly projects elsewhere.

The compliance market for carbon credit in EAC is regulated by national and international authorities who determine a cap on the amount certain sectors can release into the environment to achieve their Nationally Determined Contributions (NDC) under Article 4 of the Paris Climate Agreement.

The authorities track the carbon footprints of entities and determine if their emissions go beyond the allowable limit. The East Africa Business Council (EABC), Policy, Standards and NTBs Manager, Mr Frank Dafa, told Daily News that the block boasts a vast resource of forests that support a wealth of biological diversity.

“What EAC needs to do is to incentivise the private companies to continue interventions to offset emissions through Environmental, Social and Governance (ESG) mechanisms,” Mr Dafa said.

The global carbon credit market currently is valued at around 909 billion US dollars. EAC countries can rip this potential through the forest regeneration, and harnessing sustainable energy sources like solar, and wind thus contributing to overall global carbon offsetting.

“This could include investments in sustainable energy resources such as solar and wind generation,” he said.

The EAC governments need also to establish a mechanism that determine the price of the carbon credits, citing Kenya which has played a critical role in offsetting pollution and is among the least polluters in the bloc. Kenya’s annual emissions is to less than 1.0 per cent of the world’s emissions.

The Kenya Carbon Credit Trading and Benefit Sharing Bill of 2023 establishes a regulatory framework for carbon credit trading and benefit sharing. It creates a Carbon Credit Trading Benefit Authority to oversee and regulate carbon trading enterprises and establishes a tribunal to resolve market disputes.

Mr. Dafa highlighted Kenya’s prominent position in the global carbon market, attributing it to the country’s clear approach in resolving disputes related to carbon projects both domestically and internationally.

Additionally, he revealed Tanzania’s government initiatives aimed at promoting carbon credit projects, citing the Tanzania National Carbon Trading Guidelines of 2022 which outline national procedures and requirements for such projects across mainland and island territories, expected to bolster the industry within the region.

In pursuit of fulfilling Article 6 of the Paris Agreement, Burundi, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda joined forces in June 2019 to establish the Eastern Africa Alliance on Carbon Markets and Climate Finance.

The interim secretariat of the Alliance is the UNFCCC Regional Collaboration Center Kampala and GIZ Uganda, supported by the Coordinator of the Alliance in charge of the coordination of all alliance-related activities. However, the expert said that even though there is vast potential for this business also they are challenges because carbon credits are intangible and traded in a voluntary market system.

“These markets are unregulated and skewed to the foreign markets that determine the terms and are recognised. “Companies don’t deal with each other directly and rely on middlemen or brokers. Brokers engage countries willing to trade their forests and negotiate deals with carbon producers” he said.

Additionally, there are no clear standards for determining the credits and prices and also, carbon credit confers the right to continue to pollute. “This may be contrary to the aspiration of the numerous commitments to tackle climate change and greenhouse emissions,” he said.

According to the Intergovernmental Panel on Climate Change (IPCC) 2021 report greenhouse gas (GHG) emissions are still rising across all major sectors globally, albeit at a slower pace. Despite some progress, the world faces a formidable challenge.

Scientists warn 2° centigrade of warming will be exceeded during the 21st century unless the world achieves deep reductions in GHG emissions now.

Effective action will require concerted and sufficient investment, knowing also that the costs of inaction will be far higher. Developing countries will need up to 6.0 trillion US dollars by 2030 to finance not even half of their climate action goals as under NDCs.

The latest IPCC report finds all countries are falling way short, with financial flows three to six times lower than levels needed by 2030 – and even starker differences in some regions of the world.

However, in Tanzania, the country has already started cash in some carbon trading deals, especially in Rukwa and Katavi regions.

For instance, late last year residents of eight villages in Tanganyika district, Katavi region were looking forward to robust carbon trading as a new source of revenue, targeting to earn over 10bn/- annually.

The beneficiaries are residents of eight villages of Katuma, Mpembe, Kipanga, Lwega, Mwese, Lugonesi, Bujombe and Kagunga from three wards of Mwese, Kasekese and Katuma. Katavi Regional Commissioner RC Ms Mwanamvua Mrindoko said the eight villages for four consecutive years from 2019 have earned some 8.26bn/- carbon credit trade through forest conservation.

“At least projects 30 projects of health and education in eight villages have been built whose constructions have wholly funded by earnings from carbon emission trade,” said the RC adding: “I also urge other villages in Katavi to engage in the newly introduced carbon trade …. killing two birds with one stone — conserving the environment and earning extra income from robust carbon credit.” Carbon trading is still a new concept in the country and is growing fast.

For instance, protecting one tree equals or offsetting one metric tonne of carbon.

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