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Unlocking the African Carbon Credit Market

•Novel carbon financing mechanisms are carried out via projects financed with the aim of minimising carbon emissions •Individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions. 

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by KAREN KANDIE

News08 June 2022 - 14:11
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In Summary


•Novel carbon financing mechanisms are carried out via projects financed with the aim of minimising carbon emissions

•Individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions. 

A growing number of governments, businesses and investors want to participate in the carbon credit market translating to an ultimately positive impact in the war against climate change. Platforms such as the international voluntary carbon credit market therefore play a role in enabling climate conscious nations meet their Nationally Determined Contributions (NDCs) to the Paris Accord. These mechanisms are given international credence and recognition by the United Nations Kyoto Protocol, Clean Development Mechanism (CDM), defined in Article 12 of the Protocol, which empowers countries and companies committed to reducing greenhouse gases to invest in emission reduction projects. 

Novel carbon financing mechanisms are carried out via projects financed with the aim of minimising carbon emissions, such us geothermal, solar energy, wind etc. The Paris Accord recognises that developed countries are massive emitters of GHG due to decades of industrial activities and are principally responsible for the huge share of emissions on the planet. These places a heavier burden on developed countries than developing countries to curtail their emissions and attain credit permits. 

This presents an opportunity to African governments and businesses to leverage Africa’s low carbon footprint and in turn generate revenue in the long term. Due to her low or close to zero emissions output, Africa is under no strict obligation to cap her emissions which fall way below her limits. In fact, the idea behind carbon trading is to incentivise lower emissions, provide funding for renewables and pioneer green energy. Further, Africa’s unique ecology as a natural carbon sink presents transformational opportunities to conservation finance within the continent.

Carbon offsets are measured in metric tons of carbon dioxide-equivalent and may represent six primary categories of greenhouse gases: carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons, and sulphur hexafluoride. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases. Currently, two distinct market categories, the compliance and voluntary markets, are at play.

In the larger compliance market, companies, governments, or other entities buy carbon offsets in order to comply with caps on the total amount of carbon dioxide they are allowed to emit. This market exists in order to achieve compliance with obligations under the Kyoto Protocol, and of liable entities under the EU Emission Trading Scheme. In the much smaller voluntary market, individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions. 

Increased participation in both markets would allow Africa to take advantage of its low emissions limit and ultimately channel the proceeds to fund the development of its untapped energy reserves. This will further free up capital for reinvestment into the restoration of Africa’s natural carbon capture ecological systems.

Karen Kandie

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