Three months after causing turbulence in the $2 billion carbon credit market by abruptly canceling projects and claiming half of proceeds, Zimbabwe has announced a more conciliatory stance. The country now plans to accept a smaller portion of revenue and has initiated the process of reinstating scrapped projects.
In the revised regulations released recently, the government stipulated that projects have a 60-day window to reapply for reinstatement. Under the new guidelines, the government will retain 30% of proceeds as an environmental levy during the first decade of project operation. Developers, holding 70% of earnings, are obligated to invest a quarter of their profits in community initiatives. Subsequent negotiations will occur in the eleventh year.
This marks a significant departure from Zimbabwe’s previous decision in May, which dictated that foreign developers could retain only 30% of revenue while allocating a minimum of 20% to local partners. The initial directive raised concerns among investors and prompted neighboring countries like Malawi and Zambia to consider similar measures.
The recent regulatory shift is viewed as a constructive starting point for further discussions, according to the Zimbabwe Carbon Association, a group formed by 13 project developers to advocate for their interests after the initial announcement. The association is associated with over $100 million in planned investments.
Zimbabwe contends that these rules are intended to ensure both the government and ordinary citizens benefit from carbon emission offset trading. The country ranks as the third-largest carbon credit producer in Africa, contributing roughly an eighth of the continent’s total output. The most substantial project, spanning 785,000 hectares in Kariba, involves a forest area and is partially overseen by South Pole, a major offsets seller.
Of the government’s collected environmental levy, 55% will support climate mitigation and adaptation projects, while 5% will be allocated to a “loss-and-damage” fund for climate-related disasters. The Treasury will claim 15%, another 15% will fund a trade oversight authority, and the remainder will cover fees for local and relevant authorities.
A single carbon credit signifies the mitigation or prevention of one ton of carbon dioxide equivalent emissions. These credits are acquired by emitters seeking to offset their greenhouse gas outputs. Often centered around reforestation, programs leverage trees to absorb carbon dioxide, effectively storing emissions. The carbon credit market is predicted to reach $1 trillion annually within 15 years, as per BloombergNEF estimates.
Zimbabwe’s government has a history of sudden policy pronouncements, sometimes followed by adjustments, undermining investor confidence. Notably, in 2000, the seizure of White-owned commercial farms caused economic turmoil, and subsequent mandates disrupted investment in the mining industry. This unpredictable approach was again exemplified when the country abruptly banned lithium ore exports in December.
