Africa hopes voluntary carbon markets will fund climate finance and create jobs

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A coalition of organisations have launched an initiative at COP27 to “dramatically expand” the continent’s participation in voluntary carbon markets.

The Africa Carbon Markets Initiative (ACMI) is led by a 13-member steering committee of African leaders and carbon market experts. They say carbon credit revenues offer an opportunity to “unlock billions” for the climate finance needs of African economies. These include expanding energy provision, creating jobs, protecting biodiversity and driving climate action. 

Voluntary carbon markets are where carbon credits are purchased for voluntary use rather than to comply with legally binding emissions reduction obligations. Carbon credits, or carbon offsets, are certificates representing one tonne of CO2 equivalent that has either been prevented from being emitted or removed from the atmosphere.

For example, carbon offsets occur when a polluting company buys a carbon credit to make up for the greenhouse gas it has emitted, according to the World Economic Forum (WEF). That money should be used to fund action elsewhere that removes the same amount of carbon from the atmosphere to prevent carbon emissions.

But not everyone supports carbon offsets.

“Detractors say that offsetting is ‘greenwash’, allowing companies to avoid cutting their emissions while still being able to claim they are, or will be, carbon neutral,” the WEF said. “Proponents say offsetting, if done properly, can help channel funds to conservation and sustainable development projects that will reduce emissions, giving companies time to work towards zero emissions.”

False solution

Mohamed Adow, the director of Power Shift Africa, told The Guardian: “African carbon credits, bought by corporations in the Global North, is a false solution that will create emissions reductions loopholes and won’t deliver the climate finance Africa needs. Paying Africa to allow polluting industries and companies to carry on wrecking the planet is just another type of neocolonialism.”

Friends of the Earth describes carbon and nature offsetting as a “dangerous distraction” while Greenpeace terms carbon offsets as a “bookkeeping trick intended to obscure climate emissions.

Earlier this year, Global Witness said voluntary carbon markets give cover for companies to continue polluting as usual. 

“Rather than aiding the vital reduction of greenhouse gas emissions, it creates a system in which companies delay meaningful action on the false basis of having ‘cancelled out’ their emissions with the credits they purchase. Credits have the appearance of being a relatively cheap fix.” 

This market approach to tackling a global environmental issue – essentially through the commodification of nature – is not a viable response to the climate crisis, it said.

Boosting supply of credits

The ACMI was inaugurated in collaboration with the Global Energy Alliance for People and Planet, Sustainable Energy for All, the United Nations Economic Commission for Africa and the UN Climate Change High Level Champions, Mahmoud Mohieldin and Nigel Topping. At the launch, Kenya, Malawi, Gabon, Nigeria and Togo announced their commitment to scaling voluntary carbon markets. 

The ACMI’s ambition is to reach 300 million credits annually by 2030, unlocking $6-billion in income and supporting 30 million jobs. By 2050, ACMI envisions more than 1.5 billion credits produced annually in Africa, “leveraging over $120-billion and supporting more than 110 million jobs”. 

The ACMI’s report notes how global demand in voluntary carbon markets has grown in the past five years, driven principally by companies buying credits to help meet their climate pledges. Africa credits represent 11% of the global voluntary markets.

“Supply and demand of African carbon credits is also increasing, but from a low base, with the result that the continent currently generates only a small proportion of its potential,” the report said. “Boosting supply of credits would enable much-needed sustainable investment in sectors ranging from renewable energy and clean cookstoves, to agriculture and forestry.”

‘Transformative financing’ 

The ACMI report notes how climate change presents Africa with multiple challenges such as the physical risks caused by the global rise in temperatures and how to manage and finance the economic transformation required to curb greenhouse gas emissions and halt the destruction of nature. 

“Voluntary carbon markets represent a major opportunity to accelerate economic development and simultaneously curb greenhouse gas emissions,” notes the report. “But seizing this opportunity will take thoughtful and deliberate action, especially by African stakeholders.”

The financing available for Africa’s energy transition is nowhere close to what is required, Damilola Ogunbiyi, the chief executive of Sustainable Energy for All and a member of the ACMI’s steering committee, said in a statement. “Achieving the ACMI targets will provide much-needed financing that will be transformative for the continent.”

‘Untapped potential’ 

According to the statement, ACMI is working with carbon credit buyers and financiers such as Exchange Trading Group, Nando’s, and Standard Chartered to set up an advanced market commitment for African carbon credits. It said Africa has untapped potential in carbon credits for nature-based solutions, renewable energy projects and cookstoves.

Bogolo Kenewendo, the Africa director for the UN Climate Change High Level Champions, said: “To maximise the value of Africa’s ecosystems, it is essential that there is a fair price for carbon credits, as well as the ability to be paid for the additional nature benefits beyond carbon, such as biodiversity and water.”

She said the ACMI is focusing on commercialising, valuing and creating value for Africa’s natural assets, adding that many African countries already have strong conservation policies and have preserved some of the world’s protected areas, which will unlock finances for development and ensure that people living around these areas benefit.

Integrity of carbon credits

The ACMI’s report said the initial focus was on voluntary carbon markets because most African origin carbon credits are sold on these markets, with South Africa being the only country on the continent to have a compliance market. 

Voluntary carbon markets also enable cross-border financing transfers from Global North to Global South and support projects that help Africa achieve its development priorities such as expanding energy access, it said.

The integrity of carbon credits was crucial because, without integrity, increasing demand for credits in the voluntary carbon markets “will pass Africa by”.

It said certain credits were criticised because the emissions reductions are difficult to confirm and that voluntary carbon markets are a licence for companies to continue emitting carbon.

“These concerns must be accounted for and addressed to ensure that African carbon markets develop with high integrity,” said the report.

The ACMI will work with the Integrity Council for the Voluntary Carbon Market and the Voluntary Carbon Markets Integrity Initiative to ensure transparency and benefits-sharing standards for both sellers and buyers and that link with the right programmes and projects.

Kenewendo said the initiative is focused on financing a green development pathway in Africa. “We can’t just wait for aid to come. We have to be active in developing opportunities that will make sure that our communities have a clearer path to sustainable livelihoods.”