Africa Needs Carbon Markets

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Africa Needs Carbon Markets
Africa Needs Carbon Markets

Africa-Press – Namibia. WORLD LEADERS HAVE mounted a resolute response to the war in Ukraine, the consequences of which are felt far beyond the warzone.

They must start showing the same resolve in the fight against climate change, which threatens to cause far greater damage. We already know what this demands: a shift to a net-zero or low-carbon economy, powered by renewable energy.

Building effective carbon markets in which African countries are active participants would go a long way toward advancing this goal.

While Africa accounts for the smallest share of greenhouse gas emissions globally, its fast-growing economies, bold development ambitions, and rapidly growing population mean its energy use will drastically increase in the coming decades.

Ensuring that the continent’s development trajectory aligns with a just energy transition is essential to achieving global climate goals.

It will be expensive. In Sub-Saharan Africa alone, the net zero transition will cost an estimated US$1,7 trillion by 2030.

FAIR TERMS

That is where reliable, efficient carbon markets come in.

Carbon markets unlock funding for the net zero transition by imposing caps on how much countries or companies can emit.

Carbon markets have gained significant traction, with roughly 23% of global emissions now covered by some form of carbon pricing.

The value of traded carbon dioxide permits soared by 164% in 2021, reaching a record $851 billion.

But the global carbon market remains chaotic and volatile. The price can range from less than $10 a ton of CO2 equivalent to more than $100 per tCO2e. Economic hardship and uncertainty, rising oil and gas prices, and growing speculation in the carbon market all fuel volatility.

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.

This is untenable – and not only because of Africa’s expected future energy consumption. African ecosystems store enormous amounts of carbon. Trees in the Congo Basin soak up about 1,2 billion tons of CO2 each year, and Africa’s highest mountain forests can store more carbon per hectare than even the Amazon.

This is far more than previously assumed, highlighting the need for better mechanisms for calculating the amount of carbon stored in forests and soils. (Organic carbon stored in soil equals roughly three times the amount found in living plants.)

CLIMATE FUND

However, Africa largely lacks the skills and technologies needed to perform such calculations, which would enable Africa to monetise its forest and land restoration projects, and other climate mitigation initiatives.

Africa needs more robust climate financing facilities, underpinned by government-to-government (G2G), cross-regional collaboration in carbon markets.

Such cooperation has already proved effective. Since its launch in 2005, the European Union Emissions Trading System (ETS) has grown to cover almost half of European emissions. The EU has also helped China to develop its own ETS.

European countries must launch similar carbon-market collaboration with their African counterparts. But more must be done, with large European emitters channeling investment, based on a premium carbon price, into a climate fund for Africa.

This approach would create certainty and protect all sides from price volatility, enabling participating African countries to finance clean energy transitions while generating large carbon offsets for European companies.

Rwanda has already proved its ability to translate such financing into progress. Investments in the country’s national green fund have been used to restore more than 100 000 hectares of degraded ecosystems, create more than 176 000 decent jobs, and provide over 88 000 households with access to renewable off-grid energy, among others.

A G2G climate-financing facility could foster the growth of innovative clean-energy companies, create more good jobs in sustainable sectors, keep carbon stored in the ground, and enable Africa to develop its technical capacity.

For high-emitting countries, G2G carbon markets offer a means of meeting the climate commitments made under the 2015 Paris climate agreement without relying on an aid-focused approach.

* Ahunna Eziakonwa is assistant secretary general and director of the UN Development Programme’s Regional Bureau for Africa. Maxwell Gomera, an Aspen New Voices senior fellow, is representative of the UN Development Programme in Rwanda.

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