Carbon markets offer an incredible opportunity to unlock billions for the climate finance needs of African economies while expanding energy access, creating jobs, protecting biodiversity, and driving climate action.
However, Africa currently produces only a tiny percentage of its carbon credit potential.
Launched on November 8, the African Carbon Markets Initiative, led by a 13-member steering committee consisting of African leaders, brilliant business minds and carbon credit experts, aims to expand the continent's participation in voluntary carbon markets.
In a nutshell, a carbon credit is a permit which allows a country or organisation to produce a certain amount of carbon emissions and which can be traded if the full allowance is not used.
The Climate Change Committee explains that “voluntary carbon markets are markets where carbon credits are purchased, usually by organisations, for voluntary use rather than to comply with legally binding emissions reduction obligations. Voluntary carbon markets are growing, driven in part by demand from businesses looking to ‘offset’ their emissions.”
The initiative was inaugurated at the UN climate change conference, COP27, in collaboration with The Global Energy Alliance for People and Planet (GEAPP), Sustainable Energy for All (SEforALL), and the UN Economic Commission for Africa, with the support of the UN Climate Change High-Level Champions, Dr Mahmoud Mohieldin and Nigel Topping.
According to a press release, ACMI announced a bold ambition for the continent, to reach 300 million carbon credits produced annually by 2030. This level of production would unlock $6 billion in income and support 30 million jobs.
Commenting on ACMI’s ambition, the CEO of SEforALL and special representative of the UN Secretary-General for Sustainable Energy for All and co-chair of UN-Energy, and a member of the ACMI’s steering committee, Damilola Ogunbiyi, said, “The current scale of financing available for Africa’s energy transition is nowhere close to what is required. Achieving the African Carbon Markets Initiative targets will provide much-needed financing that will be transformative for the continent.”
Crucially, ACMI is committed to supporting high-integrity credits where an equitable and transparent distribution of revenue goes to communities.
ACMI steering committee member and USAID chief climate officer Gillian Caldwell noted, “The African voluntary carbon market will only succeed if people trust that African credits are driving real climate action and having a positive human impact. As the VCM scales in Africa, USAID and ACMI will ensure that it does so with integrity as a core pillar.”
According to the press release, several African nations including Kenya, Malawi, Gabon, Nigeria and Togo shared their commitment to collaborating with ACMI to scale carbon credit production via voluntary carbon market activation plans.
Together, these seven countries have a maximum potential to generate an estimated 300 megatons of carbon credit CO² equivalents (MtCO²e).
Commenting on the announcement, Vice-President of Nigeria and ACMI steering committee member HE Yemi Osinbajo said, “Carbon markets can deliver tremendous benefits for Nigeria and for Africa – creating jobs, driving green investment, and reducing emissions. Nigeria is putting the groundwork in place today so that in subsequent years, carbon credits become a major industry that will benefit our people.”
ACMI is also working with major carbon credit buyers and financiers, such as Exchange Trading Group, Nando’s, and Standard Chartered, to set up an advance market commitment for hundreds of millions of dollars for high-integrity African carbon credits.
For example, mobilising $500 million, at an average price of $10 per carbon credit, could support the development and delivery of at least 50 MtCO²e, which is equivalent to the total credits retired from Africa from 2010 until 2020.
Following the lead of other ACMs in the space, the African Carbon Markets Initiative intends to send a strong demand signal for carbon credits across all project types – especially those where Africa has untapped potential. These include nature-based solutions, renewable energy projects, cookstoves, and more.
The initiative intends to promote demand for existing credits, or those already in development, as well as for products and innovative project types that don’t yet have a market and can substantially contribute to economic prosperity, livelihoods, and environmental preservation across the continent (for example, diesel decommissioning or biodiversity credits).
Bogolo Kenewendo, Africa director for the UN Climate Change High-Level Champions, noted the importance of adequately valuing both carbon and other nature benefits: “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.”