On 16 May, Zimbabwe’s carbon credit players were caught off guard when the government introduced mandatory regulations for the sub-sector, stipulating that 50 percent of the proceeds from the sale of carbon credits be allocated to government funds.
The announcement outlined the establishment of a comprehensive Carbon Credit Framework for Zimbabwe, which encompasses the creation of a National Carbon Credit Registry, the implementation of a National Climate Change Fund and the regulation of carbon credit agreements.
This makes the southern African nation the first country in the Global South to move in to regulate the controversial carbon offset market, after it announced the voiding of all existing agreements, giving players 60 days to align their activities to the new regulation.
Carbon credits refer to the mechanism in which companies, governments, and individuals make payments to enable others to reduce greenhouse gas emissions on their behalf, thus allowing them to receive recognition for their contribution towards climate action.
MOVE MEANT TO EMPOWER COUNTRY, COMMUNITIES
The government states the move is meant to curb greenwashing while ensuring real benefits to the nation and to local communities.
Up until now, the carbon credit projects operated by over 30 organisations in Zimbabwe remained largely unregulated, as their registration was limited to local councils and traditional community leaders. As a consequence, the government explains that there has been a lack of reliable data on the scale of the country’s carbon market. Environment and Tourism minister Mangaliso Ndlovu said that moving forward, all carbon projects in the country must be registered with the central government.
Under the new framework, the government of Zimbabwe will take 50 percent of all revenue from carbon projects, with foreign investors limited to 30 percent and the balance of 20 percent funneled to local communities.
“We are determined to make sure that climate finance resources, meant to empower the country, accrue to the most deserving,” Ndlovu said at the launch of the new carbon market policy in the capital, Harare. “We do not want instances of climate washing.”
The southern African country is the world’s 12th largest producer of carbon offsets, with 4.2 million credits generated from 30 registered projects last year. The Kariba REDD+ Project, encompassing a 785,000-hectare stretch of forest in the northwest part of the country on the border with Zambia, is the best known of these projects. Switzerland-based South Pole runs it in partnership with Green Carbon Africa, a local firm.
REDD+, a climate change mitigation solution developed by Parties to the United Nations Framework Convention on Climate Change (UNFCCC), stands for countries’ efforts to Reduce Emissions from Deforestation and forest Degradation and foster conservation, sustainable management of forests and the enhancement of forest carbon stocks.
NEW REGULATIONS TRIGGER JITTERS
The move has caused anxiety among players in the field, with South Pole announcing that it was reviewing the announcement by the Zimbabwean government on the carbon credit framework.
“We are assessing the implications that this new potential regulation might have on the Kariba REDD+ project and the local communities,” the Switzerland-based company said in a 17 May statement. “We will comment further when this review is complete.”
INCREASED MONITORING
The action taken by the government of Zimbabwe follows an exposé by the investigative journalism platform Follow The Money, which raised allegations of significant overestimation of emissions reduction in South Pole’s Kariba REDD+ project, alongside other irregularities.
The investigation further showed that although local communities were supposed to receive a minimum of 50 percent of the revenue, this expectation is far from being fulfilled. Instead, a significant portion of the proceeds is funneled towards obscure intermediaries situated higher up in the value chain. It emerged that the project, which was structured to channel money through several companies registered in tax havens, failed to bring material benefits to local peasant communities.
For example, of the roughly 27 million Kariba REDD project credits (worth at least USD 100 million) that were sold by South Pole, some were priced for as little as a half euro each at the start of the chain where the share of the Zimbabwean peasant communities is calculated. It was discovered that these very same credits were subsequently sold to global brands for as high as 20 euros each, indicating a substantial profit margin along the supply chain.
Analysts state that this type of exploitation makes some form of regulation necessary.
A MONEY SPINNING VENTURE?
While the global voluntary carbon offset market is currently worth about $2 billion, it is expected to grow exponentially, with the African market alone expected to reach $6 billion by 2030.
According to certain analysts, the fact that the financially strained government of Zimbabwe is seeking to acquire 50 percent of the scheme’s revenue clearly indicates that monetary gain is its primary driving force, overshadowing considerations for the well-being of local communities or forest conservation.
Farai Maguwu, the director of the Centre for Natural Resource Governance (CNRG), a local watchdog for resources, expressed the view that although the regulation of the carbon credit market is justified, he holds significant reservations regarding carbon credits as an effective climate solution.
“First and foremost, regulating the ever-growing carbon offset trading market is a good idea,” Maguwu told FairPlanet. “Governments must know what is happening and safeguard against unethical practices.”
“But I must point out that carbon trading is a false solution to climate change,” he added. “It is the rich countries paying poor countries for the right to continue polluting.
“In the poor countries it is the rich and powerful who will [reap the benefits] while the vulnerable communities continue to be exposed to climate disasters.”
Maguwu also emphasized that irrespective of the initial intentions behind implementing the new regulations, the pervasive corruption within the Zimbabwean government is expected to impede substantial progress.
“The 20 percent earmarked for the communities will not reach them,” Maguwu said. “Overall, the move is a money-spinning venture. There are no mechanisms in place to ensure the [truly] vulnerable communities will benefit.”
Earlier this year, President Emmerson Mnangagwa hinted at this development when he expressed the need for a revamp in the generation of carbon credits in Zimbabwe to ensure that the government receives “a fair share of the proceeds from the trade.”
‘A RADICAL APPROACH’
“It is an interesting development,” Gilles Dufrasne, a policy officer at Carbon Market Watch (CMW), a Brussels-based non-profit, told FairPlanet, commenting on what the move by Zimbabwe means for the industry.
“As far as I know, there is no other such measure anywhere, although it seems that since the announcement, the Zimbabwean government has now backtracked a little bit and started consultations with VCM (Voluntary Carbon Market) actors.”
He further mentioned that while certain countries have implemented temporary bans on the sale of credits in the past, they have not taken the step of invalidating all prior VCM agreements.
CMW observed that countries in the Global South started developing strategies for domestic carbon trade on a more frequent basis due to a lack of transparency in the market.
Although uncertain about the potential impact of the decision made by the Harare authorities, Dufrasne acknowledged that the rationale behind the move was understandable.
“I think it’s fair that governments are keen to take better control of the emission reductions or removals that are being traded since these are essentially a national asset,” he said.
“I am not sure that the method is the right one,” he added. “It seems quite blunt as an approach and will leave many market actors unhappy. But I think the objective is something we support.
Dufrasne also expects that enhanced transparency within the Voluntary Carbon Market, specifically regarding the allocation of funds and the actual benefits received by local communities and host countries, would mitigate the need for such uncompromising measures.
“For a government that’s seeing a lot of its national assets being sold abroad, without much control over it and without understanding what the benefits for it are, it’s clear that they will want to change course quite radically,” he concluded, “Maybe Zimbabwe’s approach is just a bit too radical. The future will tell.”
AFRICAN PARTICIPATION IN CARBON MARKETS
Zimbabwe’s move aligns with broader efforts across the African continent as it strives to establish itself as a key player in the global carbon trade.
Numerous African nations are actively seeking to expand their participation in the voluntary carbon markets. In support of this objective, the Africa Carbon Markets Initiative (ACMI) was launched in November of the previous year. The initiative aims to foster the growth of carbon credit production and generate employment opportunities throughout Africa.
The new partnership aims to harness Africa’s largely untapped potential to contribute to the supply of carbon credits while unlocking billions in revenue.
Countries such as Kenya, Malawi, Gabon, Nigeria and Togo have already started collaborating with ACMI to scale carbon credit production through voluntary carbon market activation plans.
As it moves to position itself as the continent’s carbon trading hub, Zimbabwe is set to host the Africa Voluntary Carbon Markets Forum in early July. During the event, the country plans to register offset-generating projects on a carbon registry at the Victoria Falls Stock Exchange, denominated in dollars.
“The forum aims to create a pan-African focused register of carbon credits to be traded on the Victoria Falls Stock Exchange,” reads the pamphlet issued by the state-backed organisers of the event. “A key highlight of the forum will be the signing of a Memorandum of Understanding (MOU) between key stakeholders to establish the Pan-African Voluntary Carbon Credit Register and Victoria Falls Stock Exchange Carbon Market.”
The announcement confirmed the participation of guests and speakers from Ethiopia, Uganda and Kenya in the upcoming event, which is scheduled to take place from 3 to 9 July in the resort town of Victoria Falls.
