Blockchain offers to boost Africa’s carbon market

By Conrad Onyango, bird Africa Story Agency

A recently-launched blockchain-based trading system is just one new initiative offering African nations an opportunity to benefit from carbon-trading and reduce emissions.

The World Bank’s private sector financing arm, the International Finance Corporation (IFC), recently partnered with three US-based technology companies to launch the Carbon Opportunities Fund. The global investment platform allows emerging markets to use virtual currencies in the sale and purchase of carbon credits.

Carbon credits are permits, common in the US and Europe, that allows the owner to emit a certain amount of carbon dioxide or other greenhouse gas. They can be traded to benefit entities working to reduce carbon dioxide emissions.

One of the US-based companies, Cultivo, will source land for regeneration projects in Africa, producing ‘high quality” carbon credits, while another, Aspiration – with over 7 million members, who buy credits to offset their personal carbon footprints – will advise on the green projects. Those include tree planting and solar and wind power investments.

New carbon credit trade initiatives, including the use of blockchain technology, are offering African nations a new opportunity for climate action.

The third, Chia Network, founded by the creator of software firm BitTorrent, will provide the blockchain technology in the form of a secure digital ledger that will be tracked by the World Bank’s Climate Warehouse.

The IFC said this new regime will improve transparency and integrity and allow capital markets to fully engage in global carbon trading.

“This framework that will use new blockchain technologies is an innovative way for capital markets to fully engage in carbon trading in a transparent, secure, fair and beneficial way,” said IFC Senior Global Director of the Financial Institutions Group, Paulo de Bolle.

According to de Bolle, environmental solutions that restore and protect ecosystems can make up to 40 percent of the carbon dioxide (CO2) removal needed to address the climate crisis.

The UN Global Compact says green methods can provide over one-third of the cost-effective climate mitigation needed between now and 2030 to keep warming to below two degrees Centigrade.

The Intergovernmental Panel on Climate Change (IPCC) in its sixth assessment report warned that two degrees of warming will be exceeded during the 21st century unless deep reductions in greenhouse gas emissions are achieved now.

In another carbon trading initiative, talks have also begun on the planned development of an African carbon credit market. The project, led by the UN’s Economic Commission for Africa (ECA), is building on a regional carbon registry and a harmonised protocol for the issuance of carbon credits for countries along the Congo Basin.

Early in August, the ECA hosted a group of experts in Addis Ababa to explore how Africa can take advantage of the rising interest in carbon trading, as witnessed in the surge of offerings on international exchanges.

“Carbon markets would be an opportunity for African countries to leverage the true value of their natural capital and raise much-needed resources for development and climate resilience,” said outgoing UN Economic Commission for Africa (ECA), Executive Secretary Vera Songwe.

A number of other initiatives to promote the sale of carbon credits to finance the distribution of clean cooking systems in Africa have also emerged.

In May, C-Quest Capital (CQC), a carbon finance and private equity business, secured US$ 10 million to support the distribution of environmentally-friendly stoves, to seven million households across 15 countries in Africa.

Among the key beneficiary countries are Malawi, Kenya, Uganda, Zimbabwe Zambia, Mozambique, Tanzania and Angola.

In Mozambique, Maputo-based firm UpEnergy Group, through its initiative Community Carbon, rolled out a credit plan valued at US$ 20 million to deploy 3.5 million cleaner, fuel-efficient stoves.

In July, Paris-based Aera, which markets itself as the largest originator and trader of African carbon credits, renewed its partnership with Ecosphere+, a provider of green methods, to sell carbon credits for clean cooking to more African markets.

“We are delighted to deepen our partnership with Aera and expand into new regions to continue transforming outcomes for climate, nature and people,” said Ecosphere+ Executive Director, Lisa Walker.

In a further initiative, Gabon has also taken its climate action a notch higher with plans to begin collecting “biodiversity credits” to preserve its natural resources.

Among the most forested countries globally with over 88 percent of its total surface area covered by rainforests, Gabon plans to sell 90 million carbon credits ahead of the COP 27 climate summit in November.

In 2021 the country became the first African nation to start earning money from efforts to protect its forests, receiving 17 million US dollars from the Central Africa Forest Initiative.

The country announced in June that it intends to initiate a debate on biodiversity credit in its race to top the world in the preservation of nature.

“We will start working on a biodiversity credit system like carbon credits. The Congo Basin is the heart and lungs of Africa, and it helps to maintain the stability of our continent. Surely we can put a price on this service and put a value on this equatorial forest,” said Gabon Minister of Water and Forests, Lee White.

Congo Basin “forest carbon” currently trades at US$ 5 per ton on international carbon markets but the president of the Democratic Republic of Congo, Felix Tshisekedi, last year began a push to raise that to US$ 100 per ton.

Africa is widely regarded as an untapped market for carbon trading. However, most countries still lack the regulatory frameworks needed to drive carbon pricing.

Currently, South Africa is the only African nation to have implemented carbon tax legislation, through its Carbon Tax Act No 15 of 2019.

A number of other countries, including Cote d’Ivoire, Senegal and Botswana, are considering introducing carbon trade policies.

The World Bank’s annual “State and Trends of Carbon Pricing” report shows that globally, carbon pricing revenue in 2021 rose by almost 60 percent, to US$ 84 billion, highlighting the huge potential for African countries to raise climate finance to pay for its energy needs and transition to a low-carbon future.

bird story agency.

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