Countries are increasingly examining the potential of carbon markets to close the gap in climate finance in Africa. In February, the Chatham House Africa Programme hosted a webinar to discuss the practical implications of carbon markets for countries and the private sector, and what needs to happen on the ground, including capacity building to ensure Paris Agreement compatibility. Increased climate finance is critical for African countries to be able to deliver NDC commitments and enhance sustainable development.
On behalf of UNDP and the UN-REDD Programme, I participated in this webinar alongside Professor Josef Malassi from the Democratic Republic of the Congo, Perumal Arumugan from UNFCCC and Andrea Bonzanni from IETA, the International Emissions Trading Association.
Professor Malassi stated at the outset DRC’s commitment to participating actively in climate change mitigation through its 155 million hectares of forests and peatlands. Sharing the experiences of the pilot ERA Congo REDD+ project, he emphasized the importance of involving communities who are the guardians of the forest, especially their role in sustainable agriculture, fishing, and livestock activities that have been introduced to relieve deforestation pressure on the landscape. Payments for emissions reductions achieved through the project (on average. 3.5 million tons CO2/year) support health, education, and social programs that are co-created with local employees and have improved the well-being of thousands of residents.
Carbon markets present an important opportunity for DRC to advance a model that provides benefits to the community, creates alternatives and changes the relationship between people and forests. Professor Malassi emphasized the vastness of DRC’s forests and the huge potential of carbon markets to channel benefits to the country and its communities. To realize this potential, the price of carbon is key. It must be high enough to justify the opportunity cost of forgoing livelihoods that are damaging forests.
From the International Emissions Trading Association (IETA), Andrea Bonzanni confirmed that interest in carbon markets is at an all-time high. IETA’s membership has increased from 120 corporate members in 2020 to more than 300 now. This interest is moving beyond the traditional actors in the sector -- specialized project developers and the oil and gas and utility industry. Everyone, he said, is looking at carbon markets to mitigate the carbon emissions associated with their activities.
The potential presented by carbon markets in Africa is vast, and the view is often that Africa has to catch up. But with the Africa Carbon Market Initiative launched at COP 27, IETA sees Africa as a frontrunner with the estimated potential to reduce emissions by 300 million tons per year by 2030 and 1.5 billion tons per year by 2050.
Sharing experiences from UNDP and the UN-REDD Programme’s 15 years of providing technical assistance to forested developing countries to conserve and restore forests as a climate solution, there are core benefits and sustainable development objectives that can be achieved through carbon markets. To date, 54 African countries have signed up to the Paris Agreement, articulating their mitigation commitments through their Nationally Determined Contributions. The numbers associated with these NDCs are big: $1.2 trillion to achieve commitments up to 2030. To reach this level of finance, a large portion will come from the private sector.
Carbon markets have the potential to channel private sector finance to country mitigation efforts, an opportunity that interests almost every country we work with. UNDP and UN-REDD partners have a wealth of experience supporting countries to meet REDD+ readiness requirements: setting up their REDD+ strategies, safeguard information systems, monitoring systems and forest reference levels. It is this kind of systematic approach to data, transparency, capacity and strategy that is needed for countries to engage effectively and with high integrity in carbon markets.
These systems take significant time to establish, and there are a diversity of pathways by which countries can put these systems in place. Ghana’s Carbon Markets Office is an inspiring example of how a country can establish a centralized approach to address the multitude of aspects associated with carbon market engagement and offers an important opportunity for countries to learn from each other.
UNFCC’s Perumal Arumugan spoke to the opportunity for carbon markets to support low carbon growth as African countries leapfrog to climate-friendly development models. To tap into the potential of carbon markets, confidence investing in emissions reductions projects is required and investors need to maintain demand for emissions reductions credits at the right price. What is needed, he said, is a system that guarantees supplementarity (reduction first, then trading), integrity (including accurate baselines, additionality, reductions or removals and robust reporting), fungibility (consistency of standards and no price differentials for credits of the same quality) and transparency (no double counting).
To view the event in its entirety, and to hear from the speakers directly, visit the recording here.