Nigeria’s vice president, Yemi Osinbajo has said Nigeria could produce up to 30 million carbon credits per year by 2030. Osinbajo said this while announcing his new position as the vice president of the Africa Carbon Market Initiative (ACMI), through his official Twitter account.
Osinbajo’s statements are based on ACMI estimates. According to him, 30 million carbon credits at $20 per credit would be worth over half a billion dollars annually for the Nigerian carbon market.
He wrote: “At this level of production, the industry could potentially support over 3 million Nigerian jobs. And Nigeria has only a portion of Africa’s total potential—the impact on the continent as a whole could be far greater. The committee and the initiative will identify and address the challenges facing African voluntary carbon markets and ensure carbon credits grow into a major African export.”
The ACMI is a new initiative that will be launched during the upcoming conference of parties (COP 27), to be held in Egypt, from November 6 to 18, 2022. The ACMI will be led by a fourteen-member steering committee of African leaders, CEOs, and carbon credit experts. The ACMI aims to dramatically expand Africa’s participation in voluntary carbon markets.
Africa’s developing carbon market at a glance
According to the African Carbon Asset Development, carbon market vehicles can be a mechanism to channel new investment into energy security in Africa. They can also help African countries to meet their voluntary greenhouse gas reduction targets as well as their national renewable energy targets.
- However, unpredictable prices make it impossible for lower-income African countries, which have limited funds and technical capacity, to participate in the carbon market on fair terms. As a result, all of Africa has largely been left on the sidelines of global carbon markets.
- The African Development Bank (AfDB) Group’s 2022 African Economic Outlook says a consensus was reached on a global carbon market mechanism at COP26.
- According to the outlook, there are now more stringent rules to reduce the risk of double counting and improve the transparency, reliability, and liquidity of voluntary carbon markets. 5% of proceeds raised from carbon offsets will be put into a fund for climate change adaptation in developing countries.
- Africa’s participation in global carbon markets is hindered by challenges that are often self-imposed. Fluctuating carbon prices, due mainly to surplus emission allowances and the overlap of climate and energy policies, have created uncertainty and additional financial vulnerability for adaptation and mitigation investments in Africa.
- Some of the main challenges hindering African countries’ fuller participation in carbon markets stem from a paucity of political will, ineffective regulatory oversight, complexity tied to carbon markets, and lack of capacity among potential participants and regulators.
- Based on the AfDB outlook, some assessments project that the price of carbon offsets could increase from $2.50 a ton on average in 2020 to $11–$215 by 2030 and to as much as $47–$120 by 2050.
- If developing countries like Nigeria stay on emission pathways that see a later peaking in carbon emissions, which depends heavily on the aggregation of national climate targets, the global marketplace for carbon emissions could increase from $300 million in 2030 to over $1 trillion in 2050.
- Financially viable carbon projects in Africa could generate an annual return on investment of $2 billion a year.
Possible solutions recommended by the AfDB
African governments should consider creating regulations on risk disclosure and management that will influence these investors in decarbonizing their portfolios.
- Increasing liquidity and scale requires strong verification frameworks and transparency measures to ensure that credits from the continent meet global market standards.
- Exchange platforms can also help ensure transparency of pricing and trading, limiting the risk of underpricing carbon and increasing the chances that returns from trading will benefit the communities that generate these credits.
- Carbon finance in Africa needs to harmonize with domestic policies to scale up high-quality project pipelines in clean energy, urban transport, and buildings, as well as investments in natural climate solutions, such as land use and forest managemen
Some other African leaders on the ACMI committee include Dr. Akinwunmi Adesina, president of the African Development Bank (AfDB) Group, Ms. Damilola Ogunbiyi, chief executive officer, of Sustainable Energy for All (SEforAll), Joseph Nganga, vice president, Global Energy Alliance for People and Planet, and Sitoyo Lopokoiyit, chief executive officer, M-Pesa.
