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African Nations Take Big Swing to Rule Global Offset Market

African Nations Take Big Swing to Rule Global Offset Market
Activists demand climate finance and debt relief for countries exposed to the effects of climate change at an impromptu demonstration at the UNFCCC COP27 climate conference on 9November 2022 in Sharm El Sheikh, Egypt. (Photo: Sean Gallup / Getty Images)

As home to the world’s second-biggest rainforest, the largest tropical peatlands, and swathes of mangroves, governments across the African continent appear to be in a good position to benefit from the growing global trade in emissions offsets.

Right now, however, they barely do. And that’s something they want to change.

During a conference last week in southern Africa, Malawi and Zambia confirmed they will follow Zimbabwe’s lead and demand that a share of revenue from carbon offset projects on their territory go to state coffers. Zimbabwe in May roiled the industry by announcing overnight that 50% of all revenue from programs in the country will go to the state.

“This is climate financing that should and must enhance the developing countries’ capabilities to achieve their economic growth objectives in a sustainable manner,” Mangaliso Ndlovu, Zimbabwe’s environment minister, said on the closing day of the conference on July 7 in the Zimbabwean resort town of Victoria Falls, site of the world’s biggest waterfall. “It is not an opportunity for the few to make mega profits, dropping a pittance to African countries and communities. This is clearly unacceptable and unsustainable.”

The conference aimed to showcase Victoria Falls Stock Exchange as a center for carbon credit trading and, more importantly, to get the continent to speak with one voice in a bid to boost its bargaining power.

That sentiment won support.

“African countries must be in the driving seat of this business,” Michael Usi, Malawi’s environment minister, said. “We must have one common platform where we can argue our case.”

Read More on Africa’s Carbon Industry:

A single carbon credit is equal to a ton of carbon dioxide or its equivalent either removed from the atmosphere or prevented from entering it in the first place. They can be bought by polluters to offset their emissions of greenhouse gases.

The plan, ultimately, is to get the newly established carbon offset industry regulators on the continent to adopt similar policies and to establish cross-border carbon registries.

Africa’s share of the global carbon credits market is significant. RippleNami Inc., a California-based data company that presented at the conference, put it at 13%. Kenya, as the biggest source on the continent, accounts for almost a quarter of production. Zimbabwe ranks third, Zambia fifth and Malawi eighth.

But it could be a lot more. Peatlands in the Congo Basin alone hold the equivalent of three years of global annual emissions and the continent has abundant space to develop reforestation and other credit-generating projects. With the global industry forecast to grow to as much as $1 trillion within 15 years as anti-emissions legislation tightens, according to estimates from BloombergNEF, there is a big prize to play for.

‘Very Little’

To date carbon credit production agreements on the continent, at least in southern Africa, have primarily been concluded between developers and local municipalities or traditional rulers known as chiefs. There have been no common standards and little, if any, benefit for the state.

“From what has been happening in the past we haven’t had a good share of revenue,” Collins Nzovu, Zambia’s environment minister, said in an interview. “Very little has gone to most of the players, chiefs and local communities.”

Action is being taken.

Malawi last month created an agency to regulate the industry, while Zambia is looking to put in place laws in the fourth quarter of this year and negotiate with program owners to take a share of income.

Kenya is also pushing ahead with a law to give communities a quarter of profits. In a little reported speech Kenya’s President, William Ruto, in May told the pan-African parliament near Johannesburg that countries on the continent need to stake their claim to a share of the profits.

“The legislators here from different parliaments on our continent must carry this back home,” he said after detailing Kenya’s plans. “Every other government, every other parliament, must internalize, must begin to work along the same lines.”


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