Africa’s carbon credit journey: navigating opportunities for advocacy and legal tools

Fahd B Isa
NNPC Limited, Abuja
fahdbisa@gmail.com

Introduction

In the realm of environmental sustainability, the carbon credit market has often been likened to a global chess game, where nations strategically move to mitigate climate change, while promoting economic growth. For Africa, entering the carbon credit market presents both significant opportunities and challenges. With the right legal instruments and advocacy, the continent can turn the tide in its favour, ensuring sustainable development and equitable benefits for its people.

Understanding the carbon credit market

At its core, the carbon market is a regulated system involving different jurisdictions that allows countries and companies to trade permits or rights to produce a specific amount of carbon dioxide (CO₂) emissions. A carbon credit allows the owner to emit one tonne of CO₂ or other greenhouse gases per credit.

Carbon credits are frequently confused with permits; however, they vary in that credits are acquired over time through the execution and independent validation of emission reduction initiatives (carbon offsetting), such as the Humbo Assisted Natural Reforestation Project in Ethiopia.^[1] While reforestation projects involve planting trees to restore degraded areas, some carbon offset initiatives differ by compensating landowners to preserve existing forests. Additionally, some projects extend beyond tree-related efforts by investing in technologies that reduce emissions produced during everyday life. These technologies encompass innovations such as renewable energy systems and landfill gas capture, contributing to a more sustainable and innovative reduction in carbon footprints.^[2]

The carbon market, which involves the buying, selling, transfer and exchange of carbon credits, is a dynamic space that involves a diverse range of participants, each playing a crucial role in its operation. This market has grown substantially over the years with the value of global carbon permits being traded reaching a record €881bn ($948.75bn) in 2023.^[3] It is projected to expand even further, with some estimates suggesting the market could reach between $10bn and $40bn annually by 2030.^[4] This significant growth reflects the increased global commitment to addressing climate change through market-based mechanisms, highlighting a shift towards sustainable practices.

The carbon market is divided into the compliance market and the voluntary market.

Compliance markets are established as part of mandatory national, regional or international carbon reduction regimes. They are driven by legally binding emission reduction targets set by climate agreements, such as the Kyoto Protocol and the Paris Agreement. The annual issuance of credits is generally aligned with emissions targets. These credits are often distributed through a ‘cap-and-trade’ system, where the relevant authorities establish a maximum limit on carbon emissions, referred to as a cap. This cap is gradually reduced over time, increasing the challenge for businesses to remain within the set limits.

Voluntary carbon markets (VCMs) allow environmentally conscious corporations and individuals to offset their emissions beyond regulatory requirements. For example, Microsoft has committed to becoming carbon negative by 2030 and is actively purchasing carbon credits and investing in carbon removal technologies.^[5] Similarly, actor and environmental activist, Leonardo DiCaprio, has purchased carbon credits to offset his travel emissions and supports various environmental projects through his foundation.^[6] The voluntary market operates through the use of standards that certify emission reduction projects, such as the verified carbon standard (VCS) and gold standards. The core carbon principles (CCPs) are meant to ensure that carbon credits represent real, additional and permanent emissions reductions or removals. This helps prevent greenwashing and ensures that VCMs deliver tangible environmental benefits.

Adoption and opportunities in Africa

Africa contributes approximately four per cent of global greenhouse gas emissions, yet is disproportionately affected by climate change impacts, such as rising sea levels that are displacing coastal communities and prolonged droughts that threaten agricultural productivity.^[7]

This means that the continent benefits from a unique position within the carbon market, with the potential to generate significant carbon credits through sustainable projects. With the funds generated from such an initiative, African countries can boost their economic growth, while advancing a just transition to clean energy and net-zero development. According to S&P Global, achieving this target in Sub-Saharan Africa alone will require an estimated $1.7tn by 2030.^[8]

Reforestation and afforestation initiatives across Africa, such as the Great Green Wall project that aims to restore 100 million hectares of degraded land by 2030, can sequester vast amounts of CO2.^[9] This not only combats desertification, but also creates sustainable livelihoods by providing employment opportunities and enhancing food security for local communities.

With Africa currently generating only about two per cent of its renewable energy potential. Africa can leverage solar power plants, wind farms and hydroelectric projects to provide electricity to the over 600 million people who still lack access to electricity. By utilising carbon markets, Africa can significantly transform its situation.^[10] This can help by derisking and catalysing financing for renewable energy projects that expand clean and affordable energy access to unserved communities. South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has attracted over ZAR 209.7bn ($14.4bn) in investment, adding 6,422 MW of renewable energy capacity to the country’s energy potential.^[11]

The challenges

Navigating the carbon market is like walking a tightrope suspended in a stormy sky. Without proper safeguards, Africa risks falling into pitfalls wherein the benefits bypass local communities. A significant concern is that participation in carbon market projects in Africa is often not deeply integrated with states’ nationally determined contributions (NDCs). Many current engagements remain high level, without adequately engaging the key stakeholders, such as government officials, environmental experts and community representatives, responsible for implementing the country’s NDCs. As a result, there is a disproportionate focus on financial gains, diverting attention from the primary objective of meeting emission reduction targets. This misalignment poses a significant risk of hindering the primary objective of carbon markets, which is essential for effectively combating climate change. Furthermore, it is crucial that revenues generated from carbon credits are allocated to directly improve the livelihoods of communities most affected by climate change, such as providing access to clean water, supporting sustainable agriculture projects or enhancing healthcare services. In Zimbabwe, for example, projects that generate income from reducing carbon emissions allocate at least 50 per cent of the revenue to the government and local communities, enabling the government to invest in climate resilience projects and empowering communities to implement sustainable development initiatives.^[12]

Key players, such as the Africa Carbon Markets Initiative (ACMI), have highlighted several challenges as follows:

• a lack of enabling policies: many African countries do not have adequate policies to effectively support carbon markets. This lack of supportive policies creates an unstable environment for carbon market growth;
• an uncoordinated ecosystem: the carbon market ecosystem in Africa is largely uncoordinated and lacks essential market information. This current disorganisation in the market results in an inefficient carbon market system;
• the high risk due to limited long-term visibility: buyers and investors are wary of the uncertainty surrounding long-term policy stability in African countries. This creates a high-risk environment, which discourages investment and participation in carbon projects;
• there are no standardised processes for rating/assessing carbon credit benefits: there is an absence of standardised processes for evaluating the benefits of carbon credits. This makes it difficult to assess the true impact of carbon projects and undermines the credibility of the carbon market; and
• insufficient local verification/validation capacity: Africa faces a shortage of local verification and validation bodies (VVBs) and expertise. This knowledge gap means that many projects must rely on international bodies for validation, which can be costly and time consuming.

Other critics and climate activists, such as Mohamed Adow, raise critical concerns about the entirety of Africa’s carbon markets journey r. Adow warns of the dangers of carbon markets becoming a form of carbon colonialism, according to which developed nations continue to produce high emissions, while offloading the burden onto African countries through cheap carbon offsets. He organises the concerns related to carbon markets into three main areas, as follows:

• exploitation risk: carbon markets might enable rich countries to exploit Africa’s natural resources without fair compensation, perpetuating economic imbalances;
• questionable effectiveness: there is scepticism about whether carbon offsets lead to actual emission reductions, as they may allow polluters to avoid making necessary cuts; and
• governance and transparency issues: a lack of robust regulatory frameworks could lead to corruption and mismanagement, with the benefits failing to reach local communities.^[13]

The effectiveness of carbon offsetting schemes is not merely a theoretical debate, it represents a critical practical issue. Many carbon offset companies have been criticised for claiming credits without taking meaningful actions, such as when Shell falsely claimed to be carbon neutral without adopting any sustainable practices.^[14] Moreover, some projects claim to ‘save’ forests that were never actually at risk. The Guardian’s report found that more than 90 per cent of rainforest carbon credits from Verra, the top carbon offset organisation globally, were unsupported, making them essentially worthless.^[15] Bloomberg highlighted that GreenTrees was taking credit for planting trees in Mississippi that already existed.^[16] These instances are classic examples of greenwashing, a practice where companies falsely present themselves as environmentally friendly, while making minimal contributions to combating climate change. Consequently, businesses wear their green badges, while undermining global efforts to address the climate crisis.

Future strategies and the path ahead

In order to maximise benefits from the carbon credit marketplace, African nations should strengthen their legal infrastructure and frameworks. To achieve this, African nations must enact unequivocal environmental legislation, establish transparent regulatory bodies and ensure communal participation in the relevant governance processes. Empowering local communities through legal entitlements, such as land ownership rights and decision-making authority, is akin to providing them with protective powers against exploitation. For instance, the Ogiek community in Kenya secured a landmark victory at the African Court on Human and Peoples’ Rights in 2017, affirming rights to their ancestral lands in the Mau Forest. This ruling not only safeguarded their livelihoods, but also conserved a vital hydrological catchment area.^[17]

The African Union’s Climate Change and Resilient Development Strategy and Action Plan emphasises the need for comprehensive policies, such as renewable energy targets and emissions reduction plans, which are interconnected and coherent.^[18] Regional collaboration can amplify these endeavours by facilitating knowledge sharing, joint policy development and collective advocacy efforts. The ACMI, launched in 2022, aims to increase Africa’s involvement in carbon markets wherein companies voluntarily offset their emissions, potentially unlocking $6bn in revenue annually by 2030.^[19]

African countries must actively engage with key developmental partners like the United Nations Development Programme (UNDP), leveraging initiatives such as its carbon market offer. Such collaboration can provide essential technical assistance for policy development, enhance access to carbon markets and ensure effective participation in global carbon trading systems. By fostering partnerships with international organisations, African nations can build robust frameworks for carbon pricing, improve transparency and attract investment into sustainable projects.

Cultivating legal proficiency for climate resilience

It is crucial to develop a comprehensive understanding of key international agreements, such as the Paris Agreement, the UN Framework Convention on Climate Change and relevant trade and investment treaties that support the UN’s Sustainable Development Goals (SDGs). African nations are already demonstrating leadership in aligning these frameworks with sustainable development through actionable strategies. Rwanda has integrated climate resilience into national planning through innovative green finance strategies and Morocco is pioneering solar energy through massive investments into projects like the Noor Ouarzazate Solar Complex. These success stories demonstrate how aligning activities with international frameworks can drive sustainable development and climate action on the continent. African nations are already demonstrating leadership in aligning these frameworks with sustainable development through actionable strategies. It is essential to emphasise the need for honing the skills of lawyers through targeted training and courses to ensure effective legal support is available for implementing sustainable development initiatives. Professionals such as lawyers and subject matter experts play a crucial role in developing structured frameworks for carbon trading, ensuring compliance with regulations and maximising the effectiveness of carbon markets. This involvement guarantees that carbon trading significantly aids in reducing emissions, meeting NDC targets, and advancing sustainable development objectives, such as promoting clean energy initiatives.

Conclusion

Africa’s journey into the carbon credit market represents both an immense opportunity and a formidable challenge. Given its abundant natural resources and relatively low historical emissions, the continent is in a prime position to benefit from the global shift towards carbon markets. However, the path forward is fraught with risks, particularly in terms of carbon colonialism, governance challenges and policy gaps.

Maximising the potential of carbon credits for sustainable development in Africa hinges on establishing robust legal frameworks that guarantee transparency, equity and accountability. This involves fostering collaboration across African nations, empowering local communities and ensuring that revenues from carbon credits directly benefit those most affected by climate change.

Legal professionals will be instrumental in safeguarding Africa’s interests in the carbon market by advocating for stronger regulatory measures and ensuring fair participation in global climate negotiations.

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