In the context of COP29, Professor David Luke from the London School of Economics emphasizes the critical need for Africa’s Green Deal to prioritize carbon markets and equitable transitions. He argues that while Africa is at the forefront of the global climate crisis, it is also uniquely positioned to leverage its vast natural resources and innovative potential to address climate change. Carbon markets can play a pivotal role in this transition by facilitating investment in sustainable practices and technologies that promote green growth. These markets allow African countries to trade carbon credits generated through emissions reductions, creating economic incentives for countries and businesses to invest in renewable energy, reforestation, and other sustainable initiatives.
However, Luke stresses that the implementation of carbon markets must be rooted in principles of equity and social justice. It is essential to ensure that the benefits of these markets are distributed fairly among all stakeholders, particularly marginalized communities that often bear the brunt of climate impacts. Equitable transitions mean integrating social and economic considerations into the development of carbon markets, ensuring that local populations are not only participants but also beneficiaries of the green economy. This includes providing support for communities to engage in sustainable practices, access to technology, and capacity-building initiatives that empower them to navigate the new economic landscape.
Furthermore, Luke calls for a collaborative approach in shaping Africa’s Green Deal, where governments, civil society, and the private sector work together to create an enabling environment for carbon markets. Policymakers must address existing barriers to market participation and ensure that regulatory frameworks are conducive to sustainable investment. This collaborative effort will also help build resilience against climate change, fostering a sense of ownership among communities and ensuring that their voices are heard in the decision-making process. By prioritizing carbon markets and equitable transitions, Africa can not only meet its climate goals but also drive economic growth, create jobs, and enhance the well-being of its people, making COP29 a pivotal moment for the continent’s future.
As the world enters the final preparations for COP29 (11-22 November) in Azerbaijan, many promises made to African countries during past conferences remain unfulfilled, the continent’s contribution to climate equilibrium stays under-appreciated and confusion persists about its climate priorities, requisites and red lines.
There are two pillars for what Africa’s Green Deal should look like. Before elaborating on these pillars, three foundational points should be made.
First, Africa’s historic contribution to CO2 emissions is negligible but is likely to rise as the continent develops. The challenge is to ensure the emergence of competitive agricultural, industrial and services sectors while transitioning to cleaner energy and production methods. Africa’s future economic growth must be decoupled from negative environmental externalities such as carbon emissions.
Second, the new development pathways that African countries must now pursue will create opportunities as the world transitions to new technologies and patterns of consumption. For Africa, this could include leapfrogging into new and cleaner technologies (which demands technology transfer), encouraging ‘critical mineral’ value chains, harnessing green hydrogen, and developing the continent’s sizable but underutilised renewable energy resources. Achieving these goals requires delicate balancing to reach these objectives without compromising the justified development aspirations of African countries.
Third, the climate transition will eventually require African countries to abandon their abundant fossil fuel resources while also embarking on an expensive transition to a new energy infrastructure. This will be a difficult trade-off for African countries, struggling with extensive extreme poverty, than for more advanced and secure economies.
Finance is key. Yet, global efforts to achieve climate finance at the levels required for the climate transition remain a work in progress.
Robust oversight systems
This brings us to the first pillar of Africa’s Green Deal: engagement in voluntary carbon markets.
Such an engagement can provide a critical source of climate finance for the continent, as I advocated earlier this year alongside Cecilia Wandiga, executive director of the Centre for Science and Technology Innovations in Nairobi. Globally, voluntary carbon markets are currently estimated to be worth some $2bn a year with the potential to reach S1 trillion a year by 2037, according to BloombergNEF. This is a multiple of the $100bn in annual climate finance commitment agreed at COP15 in Copenhagen in 2009 and yet to be achieved.
For African countries, the stakes in carbon markets that work effectively are high
Negotiations for establishing disciplines for the operation of voluntary carbon markets under Article 6 of the Paris Agreement, including pricing and trading of carbon credits and offsets, collapsed at COP 28. They remain on the COP 29 agenda.
For Article 6 objectives to be realised, accountability and transparency must be built into the design of robust oversight systems for the functioning of voluntary carbon markets. These systems must also safeguard the rights of local communities and ensure effective impact on emission reductions.
For African countries, the stakes in carbon markets that work effectively are high. Not only does carbon trading offer a new source of non-debt-creating financial flows, but the continent also possesses unique assets and untapped potential for climate stabilisation. It is to this end that the African Carbon Markets Initiative (ACMI) was launched in Sharm-El-Sheikh at COP27 to work with African governments in cohering national approaches and ensuring high-integrity carbon markets
Debt-for-nature swaps
It should be recalled that the continent is home to the Congo Basin, a vital carbon sink storing over 30 billion metric tons of carbon. This surpasses the combined tropical forests of the Amazon and Asia. The continent is further endowed with a variety of ecosystems that are natural carbon sinks. These encompass oceans, forests, grasslands, and soil.
Yet, Africa’s monumental contribution to climate equipoise remains undervalued in carbon market trades. The continent accounts for just 11% of the world’s recorded carbon offsets and 2% of global carbon market trading. In the Nairobi Declaration adopted at the September 2023 Africa Climate Summit that preceded COP28, African leaders called for measures that “elevate the continent’s share of carbon markets”. Innovations such as debt-for-nature swaps as in the Seychelles and Gabon have been welcomed.
Economic modelling by the African Carbon Market Initiative projects steady growth in Africa’s carbon market transactions during the next 30 years with the retirement of up to 2.5 gigatonnes in CO2 emissions, mobilisation of up to $200bn a year in carbon trades, and creation of up to 190 million green jobs by 2050. While it must be acknowledged that these projections could be upended by advances in carbon removal technologies, even with any such advance, analysts expect that, ultimately, a combination of verifiable avoidance and removal projects will be necessary. The focus is expected to be on the quality of both types of credit as the market continues to mature.
Moreover, the pricing of African carbon credits is relatively low. While the Intergovernmental Panel on Climate Change (IPCC) recommends a base price of $100 per tonne to maintain a safe 1.5°C warming limit, African credits currently fetch as little as $10/tCO2, significantly lower than in Europe and the United States. Increasing both the price and volume of credits is a fundamental ACMI priority.
A continent-wide compliant carbon market
The second pillar of Africa’s Green Deal is engagement in compliant carbon markets. Here, the African Continental Free Trade Area (AfCFTA) can be a powerful platform for integrating African economies and establishing commonalities for meeting changing climate-compliant prerequisites for engagement in regional and global value chains.
In a study on greening the implementation of the AfCFTA, the Economic Commission for Africa has suggested that the free trade area’s objective of driving economic transformation in Africa through increasing intra-African trade can be achieved without adding significant pressure to climate change. For this to happen, the ECA proposes that along with the adoption of AfCFTA commitments, a continent-wide compliant carbon market should also be adopted.
Such a compliant carbon market can be based on two scenarios: either a uniform carbon price across Africa at the $25 per ton of carbon emissions suggested for low-income countries by the International Monetary Fund (IMF) or differentiated implicit national prices derived from nationally determined contributions. The study finds that the IMF proposal may be easier to administer. But a compliant carbon market based on either scenario is more efficient than existing Nationally Determined Contributions (currently unfunded wish lists of climate projects) to meet Africa’s climate objectives and accelerate Africa’s transition to renewables.
Therefore, engagement in voluntary carbon markets and the establishment of a continent-wide compliant carbon market are essential to any Africa’s Green Deal. Not all climate actions are made equal. Some are just more fair.
