The agreement should help countries deliver their climate plans faster and more cost-effectively, and therefore support the progress in reducing global emissions.
Several previous COPs were unable to achieve such an agreement. While some critics call COP29’s rubberstamping of Article 6 rushed, other carbon market experts have urged caution over what the decision means for long-running efforts to turn the UN carbon market into a reality, as several key building blocks still need to be agreed on before credits can be traded.
Voluntary carbon markets (VCMs) are marketplaces in which buyers voluntarily purchase and trade in offsets generated from emissions reduction or removal projects and have long been the subject of divisive discussions and debates.
Those in favour state that such markets enable companies and other buyers to purchase carbon credits to offset their emissions, that they are essential to increase climate finance and enable companies to reach their net-zero targets. With some analysts estimating a market size of $250 billion by 2050, many developing countries have announced ambitious plans to use credit revenues generated from domestic forests to boost their economies.
However, critics have argued that voluntary agreements are little more than so-called “greenwashing” or “climate washing,” claims that have proven true in certain cases, with trading in credits declining during 2023 and companies growing increasingly concerned over potential reputational risks.
Especially VCMs have experienced several problems and issues of accountability. This includes project developers exaggerating the climate benefits of their initiatives, leading to a drop in demand and collapse in prices.
Other challenges include the loss of funds due to administrative costs and intermediary profits that benefit project developers and intermediaries in the Global North. In addition, carbon credit projects may displace local communities in the Global South from their land.
In addition, there is a clear need for globally accepted standards and accredited mechanisms to assist in developing (especially bespoke) deals, avoiding “phantom” credits that do not represent genuine carbon reductions and keeping scammers out.
“Bad actors and cowboys and crooks,” is what Go Green Africa’s Iain Banner calls them, people “who saw an opportunity in the early days to take full advantage of a system that was perhaps underprepared for that attack.” [See full interview here.]
“When you look at the very positive messaging that came out of COP29 around some level of conclusions being reached around Article 6.4, we feel these have introduced much needed clarity on internationally traded mitigation option trading rules as well as authorisation pathways and ultimately cooperative approaches to the building of Article 6 markets,” says Paul Muthaura, CEO of the Africa Carbon Markets Initiative (ACMI).
He continues: “Now, that notwithstanding, we remain conscious that demand for credits remains constrained due to the nascent nature of many mechanisms and some of the system challenges we’re seeing around financing and policy alignment. But we’re very hopeful that a sound interplay between the compliance markets under Article 6 and the evolving voluntary carbon market space will allow for some level of convergence as buyers increasingly seek credits with international authorisation as well as high environmental integrity.” [See full interview here.]
Launched at COP27 in Egypt, the Africa Carbon Markets Initiative (ACMI)—spearheaded by the Global Energy Alliance for People and Planet (GEAPP), Sustainable Energy for All (SEforALL) and the United Nations Economic Commission for Africa (UNECA) with support from the UN Climate Change High-Level Champions—aims to expand Africa’s voluntary and compliance carbon markets, enhancing the continent’s contribution to global carbon reduction under the Paris Agreement.
As the VCM market in Africa remains nascent relative to other regions, it is ACMI’s ambition to unlock US$6B in VCM revenue in Africa by 2030. Currently, most credits issued in Africa are from REDD+ (reducing emissions from deforestation and forest degradation), cookstoves, clean water and community boreholes, large scale renewable energy and ARR (afforestation, reforestation and revegetation).
The global voluntary markets reached US$2B in 2022, primarily driven by Asia (US$765M) and Latin American and Caribbean (US$506M), followed by Africa (US$164M) and North America (US$136M). It is estimated that VCMs need to grow by more than 15 times by 2030. Globally, forestry and land uses’ carbon credits represent more than 40% (the majority) of all credits issued.
Key growth drivers of VCMs include the increasing number of corporate net zero commitments, increased government activity to engage with VCMs and the development of the enabling environment, namely independent standardisation bodies, such as the Voluntary Carbon Markets Integrity (VCMI).
Bianca Gichangi is the Regional Lead for Africa at the VCMI’s access strategy programme and explains how the VCMI’s Carbon Integrity Claims work: “These are claims for carbon credits that companies can make to demonstrate their climate achievement and meaningful climate action. Through these claims organisations acknowledge that they have gone above and beyond their science-aligned emission cuts to accelerate global net zero.”
She continues: “Companies can make these claims using our VCMI claims code of practice, which provides a universal standard for companies to, first of all, use carbon credits as part of their net zero transition, and second, to make verified claims about this use. This now ensures integrity on the demand side. And this means that companies use carbon credits in addition, not instead of, decarbonisation and make these credible claims.” [See full interview here.]
Here is a breakdown of carbon credits issued in Africa by project type: (Source: ACMI)
Some successful carbon market projects in Africa include:
Nairobi carbon market auction: In June 2023, Nairobi, Kenya hosted the world’s largest carbon credit auction, selling over 2.2 million tons of carbon credits. The auction included projects like clean cookstoves in Kenya and Rwanda, and renewable energy projects in Egypt and South Africa.
Gabon: In October 2022, Gabon verified over 90 million tons of carbon credits under the UN-led REDD+ programme.
Durban landfill gas-to-electricity project: This World Bank project in South Africa added three megawatts of electricity to the Durban municipality and issued about 181,000 carbon credits.
Simoshi social enterprise in Uganda: This project installs cleaner cooking technology in schools, which has improved health and reduced firewood use.
Other countries in Africa with successful carbon market projects include Malawi, Mozambique, Togo, Nigeria, Burundi and Rwanda.
– This article first appeared in the GREEN ECONOMY EXPRESS, issued by Africa’s Green Economy Summit.
www.wearevuka.com/green-economy/ages/programme/
www.wearevuka.com/press-release/go-green-africa-iain-banner-ages25/
www.wearevuka.com/press-release/acmi-ages25-african-pds/
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