Africa could mobilize $6 billion a year from voluntary carbon markets by 2030 (report)

(Ecofin Agency) – Continental countries earned money equivalent to only 22 megatons of CO2 Estimated value in 2021 is $123 million. For experts at the Carbon Markets Initiative in Africa, this level can be multiplied by fourteen under certain conditions.

According to a report published last November by Sustainable Energy, Africa is on track to mobilize $6 billion a year from voluntary carbon markets (VCMs) by 2030 if it can overcome the barriers to increasing the supply of carbon credits. All (SE4All) is an initiative launched by the UN in 2011 to double the share of renewable energies in the energy mix and ensure universal access to modern energy services.

This report presents the goals of the African Carbon Markets Initiative (ACMI), a group of 13 African and international leaders, business leaders and experts working to develop carbon markets on the African continent.

Launched at COP27 on November 8, the initiative foreshadows that one of the major challenges facing Africa in combating climate change is determining how to finance the continent’s necessary transformation of economies. Especially since climate finance pledged by rich countries still falls far short of targets.

The report highlights in this context that the solution to the lack of climate finance is to exploit the huge potential of voluntary carbon markets. a huge opportunity to accelerate the continent’s economic development and reduce greenhouse gas emissions at the same time “.

A carbon credit is equivalent to one ton of carbon dioxide or an equivalent amount of other greenhouse gas that is reduced, sequestered or avoided.

Demand is growing at an average of 36% annually

In voluntary carbon markets, buyers acquire these credits to offset their emissions, thereby financing carbon reduction projects. In simpler terms, greenhouse gas emitting actors such as airlines, industrial groups or oil companies receive carbon credits that directly finance specific CO2 reduction projects.2 or avoiding carbon emissions such as planting trees, maintaining a natural biodiversity hotspot, renewable energy projects, reducing methane emissions from open landfills, or regenerating agricultural land.

Globally, voluntary carbon markets have registered an annual average growth of 30% between 2016 and 2021.

Demand for African carbon credits has also grown at an average annual rate of 36% over the same period.

But this growth is coming from a very humble starting point. Countries on the continent have monetized only 22 megatons of CO equivalent2 (MtCO2e) Estimated cost in 2021 is $123 million.

Moreover, only five countries (Kenya, Zimbabwe, Democratic Republic of Congo, Ethiopia and Uganda) accounted for 65% of the loans granted in the last five years. A number of countries with great potential, such as Madagascar, Angola, Nigeria, Sudan and Tanzania, also reported low levels of activity.

Overall, the supply of carbon credits in offset markets by African countries remains limited and well below the continent’s estimated potential of 2,400 megatons of CO2 equivalent.2 (1 megaton = 1 million tons) by 2030.

The report highlights in this context that increasing Africa’s supply of carbon credits will enable much-needed sustainable investment in sectors ranging from renewable energies to clean food solutions, including agriculture and forestry.

30 million jobs can be created by 2030

However, major hurdles remain to be overcome to unlock the continent’s potential in this area. These include a lack of scalable project developers, complex regulations, inadequate methodologies for determining the value of certification credits, and integrity issues.

In this framework, the African Carbon Markets Initiative has identified a number of priority actions to overcome these barriers, including support to African governments in developing national plans for MVCs, capacity building for project developers, development of the marketing of African carbon credits, placement within each Paris climate agreement creation of financing mechanisms and transparent regulation of the sector to reduce the risks of investments, the cost of capital for developers, in accordance with the commitments made by the government.
ACMI also intends to build close relationships with key purchasers of carbon credits and financial institutions, including Exchange Trading Group, Nando’s and Standard Chartered Bank, to create an expected market commitment of hundreds of millions of dollars.

Through these multiple action programs, African countries will be able to sell 300 megatons of CO equivalent.2 every year until 2030, especially since the Working Group on Measuring Voluntary Carbon Markets (TFSVCM) estimates that the size of these markets will increase 15 times between 2020 and 2030.

These sales will then be increased by fourteen compared to 2021 levels (22 MtCO2e). This level of monetization of carbon credits should allow the continent to mobilize $6 billion annually and create 30 million jobs directly or indirectly by 2030, based on a price assumption of $20 per ton of CO.2 Compensation accepted by Standard & Poor’s and the World Bank.

By 2050, ACMI estimates that Africa could monetize 1,500 megatons of CO2 equivalent.2 assuming a price of 80 dollars per ton, it will allow mobilization of 120 billion dollars per year. At such a stage, carbon markets will be a key sector of the continent and could support the creation of more than 100 million jobs.

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