Across Africa, carbon markets are emerging as a powerful tool to combat climate change. These markets entail translating volumes of carbon dioxide reduced through mitigation measures into tradable carbon credits — a valuable commodity that countries, companies and individuals can sell and purchase to offset their emissions.
A promising tool, but with challenges
In simple terms, carbon markets are like trading floors for the fight against climate change. Carbon credits work like a certificate for reducing greenhouse gases. This encourages green activities, from planting trees to shifting from coal-powered plants. These markets are especially important for Africa, as it enables countries to access new technologies and substantial funding. In turn, these can significantly help states in implementing ambitious climate action plans and meeting their Nationally Determined Contributions (NDCs).
Carbon markets also present challenges. For instance, the same emission reduction may be counted twice (double counting), or carbon projects might hurt people or the environment. These concerns should be addressed head-on to ensure that carbon markets become engines for positive change and a sustainable future.
What is Article 6?
Article 6 of the Paris Agreement sets out how countries can work together to reduce greenhouse gas emissions, and includes voluntary cooperation, international regulated (compliance) carbon markets, non-market approaches (NMAs) and ensuring integrity.
It includes two key provisions on carbon market mechanisms. Article 6.2 allows countries to exchange mitigation outcomes bilaterally, such as when country A buys carbon credits from country B’s emission-reduction projects. Article 6.4 establishes the Paris Agreement Crediting Mechanism (PACM) for approving projects and issuing high-quality carbon credits. The third provision is Article 6.8, which promotes NMAs through initiatives such as mitigation, adaptation and technology transfer.
Article 6 thus serves a dual purpose: supporting countries in meeting their emission reduction goals through collaborative efforts; and contributing to the overarching objective of limiting global temperature rise. Financial mobilization should be viewed as a complementary outcome to advancing social, economic, cultural and livelihood issues, and maintaining environmental integrity.
Current practices raise concerns
In recent years, more and more international entities and private sector initiatives across Africa have worked to secure carbon market agreements. These high-level engagements tend to involve ministries that are not directly responsible for the country’s NDCs. The result is that predominant narratives often place disproportionate emphasis on financial gains, rather than achieving their emission reduction targets. This potentially undermines the core purpose of carbon markets, namely, to combat climate change. A crucial question arises: are these markets primarily promoted as a source of finance, or a tool for reducing emissions?
The main focus for carbon markets should be on emission reduction, while finance mobilization should be seen as a co-benefit of investments in green projects that promote sustainable development and environmental integrity. As noted by Achim Steiner, UNDP Administrator: “Carbon markets can help unlock the trillion-dollar gap that is needed for developing countries to carry out their climate action pledges. But they cannot and should not be used to the detriment of climate impact, indigenous communities and human rights. It is important to emphasize integrity of carbon credit supply, equity for host countries, farmers, households and rights-holders, including Indigenous Peoples, local communities and women.”
Participation in carbon markets should be firmly anchored in states’ NDC commitments. Carbon market strategies should align with national climate goals and the development of robust National Carbon Markets Frameworks. Currently, many African countries lack these frameworks, which are essential to ensuring that carbon trading activities contribute positively to environmental sustainability and sustainable development.
The role of national carbon markets frameworks
Many countries are interested in trading carbon credits, but doing this fairly demands clear rules, which should be stipulated in states’ National Carbon Markets Frameworks. Concerns about carbon market integrity and increased interests have underscored the lack of guiding policy and mechanisms. These gaps prevent many African countries from participating effectively in carbon markets of high integrity.
There is, therefore, a compelling need for countries to have robust national carbon market frameworks in place. These frameworks provide a structured approach to carbon trading, ensuring that it contributes meaningfully to emission reductions, NDC commitments and sustainable development objectives. African countries should prioritize developing these frameworks. Specifically, they would enable countries to implement procedures for granting authorizations; registering and tracking Internationally Transferred Mitigation Outcomes; and reporting on their participation in cooperative approaches.
UNDP: Leading the way in responsible carbon markets
The United Nations Development Programme (UNDP) recognizes the role of high-integrity carbon markets in fighting climate change and emphasizes the need for carbon projects to truly reduce emissions, benefit the environment and align with countries’ goals under the Paris Agreement.
To support countries’ effective participation in high-integrity markets, UNDP launched a Carbon Market Offer and initiative in December at the COP 28 in Dubai. The initiative has four offers. The first, on readiness, supports the development of carbon markets access strategies. The second presents UNDP support on Article 6, while the third focuses on voluntary carbon markets at the jurisdictional level. The fourth offer focuses on domestic carbon markets and emission trading schemes. All four offers will be implemented following the high-integrity guardrails.
At its core, the initiative underscores that while carbon markets can help bridge the substantial financial gaps, they must not compromise environmental impact, indigenous rights or human dignity. The approach emphasizes the integrity of carbon credit supply and ensuring equity for all: from host countries, farmers and households to an emphasis on Indigenous Peoples, local communities and women. In this way, the initiative also highlights the transformative potential of well-managed carbon markets.
By prioritizing environmental sustainability and fostering inclusive economic development, particularly in communities disproportionately affected by climate change, UNDP sets a benchmark for responsible carbon market engagement. Since the launch of the initiative, UNDP has supported Ghana, Mozambique, Namibia, and recently initiated support to South Sudan, in developing national carbon market frameworks.
UNDP is also working with the Africa Union Commission (AUC) and United Nations Economic Commission for Africa (UNECA) in developing a common carbon market readiness process.
While carbon markets hold immense potential to drive sustainable development and climate resilience, their success hinges on alignment with the Paris Agreement targets. It is crucial to prioritize emission reduction alongside financial benefits. By developing robust national frameworks and utilizing available international support, African countries can ensure their participation in carbon markets provides leadership in promoting carbon markets integrity.
