Africa’s ambitious plan to increase carbon credit production by 19 times by 2030 gained substantial financial support during the inaugural climate summit hosted by Kenyan President William Ruto. Notably, investors from the United Arab Emirates (UAE) committed to purchasing $450 million worth of carbon credits from the Africa Carbon Markets Initiative (ACMI). African leaders advocate for market-based financing mechanisms like carbon credits, generated through emissions-reduction projects such as reforestation and cleaner energy adoption. This three-day summit in Nairobi aims to redefine Africa as a destination for climate investments rather than a climate-vulnerable continent.
African governments view carbon credits and similar market-based financing tools as pivotal to bridge the funding gap from wealthy donors. The carbon offset market was valued at $2 billion in 2021, with forecasts suggesting it could grow to $10 billion to $40 billion by 2030.
However, despite this progress, some speakers at the summit expressed concern about the slow pace of climate financing for Africa, as investors perceive the continent as risky. Africa has received only approximately 12% of the required funding to address climate impacts.
To address this, African nations plan to advocate for expanding International Monetary Fund special drawing rights at the COP28 U.N. climate summit in Dubai, potentially unlocking $500 billion in climate finance.
The private sector is seen as an untapped opportunity for climate investment in Africa, with significant potential in thermal energy, solar, wind, and hydro projects.
Over 20 heads of state are expected to attend the summit and issue a declaration outlining Africa’s climate stance ahead of the U.N. climate conference and COP28.
Notable investments include the UAE’s commitment through the UAE Carbon Alliance, Climate Asset Management’s $200 million investment, and pledges from the UK and Germany. However, some African campaigners argue that carbon credits may not adequately address climate debt and advocate for direct compensation and debt relief from wealthier nations and corporations.
Concerns persist about the lack of commonly-agreed standards in carbon markets, undermining their integrity. A working paper highlights that sub-Saharan African countries face annual debt servicing costs nearly equivalent to their climate finance needs.
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