Carbon credit markets serve as a crucial mechanism for industrialized nations and businesses to offset their carbon emissions by investing in eco-friendly projects worldwide. Each carbon credit or offset represents the removal of one metric ton of carbon dioxide from the Earth’s atmosphere. Africa, endowed with abundant renewable energy sources, stands to reap substantial benefits by strategically engaging in these markets.
Several African nations, including South Africa, Morocco, Kenya, Malawi, Gabon, Nigeria, and Togo, have embarked on various initiatives to harness the potential of carbon credits. These endeavors encompass activities such as forest regeneration and the utilization of sustainable energy sources like solar, wind, and hydroelectric power, contributing significantly to global carbon offset efforts.
During COP27 in Sharm el-Sheikh, Egypt, last November, Kenya, Malawi, Gabon, Nigeria, and Togo pledged their commitment to the new Africa Carbon Markets Initiative (ACMI). ACMI aims to generate 300 million carbon credits annually, unlock approximately $6 billion in revenue, and create 30 million jobs by 2030. Joseph Nganga, a member of ACMI’s steering committee, emphasized the necessity of concerted efforts from governments, developers, and buyers to sustain the rapid growth of African carbon markets. Mozambique, Rwanda, and Burundi are also part of ACMI.
Africa’s vast ecosystems, particularly the Congo forests, often referred to as the world’s second lung, can absorb around 1.2 billion tonnes of carbon annually. The Congo Basin houses approximately 8% of the world’s forest-based carbon. Leveraging nature-based sequestration could potentially mobilize up to $82 billion per year through carbon credits, priced at $120 per tonne of carbon.
To facilitate these initiatives, the UN Economic Commission for Africa (ECA) has spearheaded the establishment of a regional carbon registry and a harmonized protocol for issuing carbon credits among the member countries of the Congo Basin Climate Commission.
Carbon credit markets have gained momentum worldwide in recent years, covering approximately 23% of global emissions and reaching a record value of $851 billion in traded carbon dioxide permits in 2021.
One notable aspect of carbon credit projects is their potential to empower rural communities, particularly in sub-Saharan Africa, where access to electricity remains limited. Carbon credit revenue from renewable energy initiatives has been transformative. For instance, the Olkaria II Unit 3 Geothermal Expansion Project in Kenya added 35 megawatts of electricity to the national grid and issued over 230,000 carbon credits. Similarly, the Earthcare Solid Waste Composting Project in Nigeria is expected to issue about 30,000 carbon credits by the end of 2023.
A noteworthy development is Kenya’s approval of the Carbon Credit and Benefit Sharing Bill 2023, anticipating annual earnings of $6.8 million from carbon credit sales. The global market for voluntary carbon credits could potentially reach $50 billion by 2030.
Several major carbon credit projects have emerged across Africa. Malawi’s Carbon Markets Initiative aims to generate carbon offsets equivalent to nearly 20 million tonnes of carbon per year, injecting substantial economic benefits into the country. Gabon became the first African nation to receive payments for reducing carbon emissions, receiving $17 million as part of a 10-year agreement with the Central African Forest Initiative.
However, Nigeria holds significant potential in carbon offset revenues, with the ability to produce over 30 million tonnes of carbon credits annually by 2030, generating more than $500 million per year. Key projects like the Waste Heat Recovery Project by Dangote Industries Limited and the Save Wildlife project by Access Bank have been leading these efforts.
Nigeria is now scaling up its carbon markets through the Nigeria Sovereign Investment Authority (NSIA), which has partnered with global oil trader Vitol to establish Carbon Vista, a joint venture targeting $50 million of investments in carbon credit projects in Nigeria.
Investing in Africa’s carbon credit markets is not only a moral imperative but also a strategic move as the world transitions to a low-carbon economy. Industries and countries engaging in carbon credits position themselves as sustainability leaders, enhancing their brand reputation and preparing for tightening environmental regulations. The financial potential of these markets is substantial, with the global carbon market valued at $909 billion in 2022.
For Africa’s carbon credit markets to flourish, a multi-pronged approach is imperative. Capacity-building initiatives are essential to empower governments, businesses, and communities to engage effectively in carbon credit markets. Training programs, knowledge-sharing platforms, and mentorship opportunities can equip stakeholders with the necessary tools to participate in this transformative journey
