Africa Climate Week: How can carbon trading help fund climate action?

Africa has an interest in ensuring that its economic growth prospects are not hurt by trying to do its part for the climate. Carbon trading is one way to do that. [iStockphoto]

There are very few things in life that are truly global. Climate change is one of them. Whatever languages we speak, whatever our religion, whatever smartphone we use, we are all impacted by climate change. Yet it hits us all in different ways, with different costs attached – depending on where we live.

For many of the almost 1.5 billion people who live in Africa, climate change is about basic needs. Not just quality of life, but survival. Food sources are increasingly threatened. Water scarcity is becoming ever more prevalent. And with populations growing across the continent, these pressures will only get more real.

It is against this backdrop that we must see Africa Climate Week. And set our minds on what we can do about it.

Protecting our climate should be on everyone’s agenda. For decades now, we have become acclimatised to the notion that protecting the rainforests of the Amazon is an insurance policy on the world’s supply of clean air. Yet the forests of Congo are never quite seen in the same way. Nor the grasslands of Kenya, which are a huge carbon sink.

There are frameworks in place that can change this if they are applied properly. It all stems from Article 6 of the Paris Agreement. This is a framework that allows countries that are already on track to beat their sustainability commitments to trade carbon credits with other countries that are lagging behind on their own climate goals.

To put it simply, the carbon savings from one country's project is used to offset the emissions of another. It is the tool that can give countries the power to take capital from other parts of the world and put it to work to protect the climate.

It is a country-to-country version of what happens in the voluntary carbon markets, such as RVCMC.

Carbon trading has become a niche topic, full of its own jargon, initialisms and lobby groups. So, let’s strip it back to the simple economics: follow the money, if you will.

RVCMC takes capital from businesses that want to mitigate their hard-to-abate climate emissions and matches that capital to projects that are cutting carbon emissions. It makes a market between those two counterparties, between a willing buyer and a willing seller. And the net effect is reduced emissions, as well as in many cases what we call co-benefits to local communities such as employment or protection of valuable ecosystems. That’s the simple equation.

All companies have a responsibility to look to reduce their carbon impact. They should do that first and foremost by reducing emissions. Yet not all emissions can disappear overnight. It will take time. As we transition from fossil fuels over the decades ahead, carbon markets have a big role to play.

There are many out there who question the legitimacy of carbon trades. They question whether all the projects that have issued carbon credits really did mitigate emissions. And in some cases, they may have had a point.

Like in all young markets, there were mistakes made in the early days. I am confident, however, that the voluntary carbon markets are moving towards a more mature state – and new guidelines coming into force will help to further remove those doubts.

But even if there have been some bad actors, who can really question the logic of the trade?

Most of the buyers of the auction have been Saudi companies keen to support the very ambitious net zero targets that have been set by Saudi Arabia. Most of the credits sold in the second auction originate from projects in Africa.

So capital is flowing from companies in the Global South, towards projects in other countries in the Global South that mostly had negligible contribution towards historic global carbon emissions. And that capital is protecting the environment, by funding projects that either reduce, remove or avoid the creation of emissions. It is also bringing jobs and opportunities to one of the regions that need this most. 

To change the climate, no one group of stakeholders in any part of the globe can act in isolation and expect to make a difference. We need to use every tool at our disposal. Carbon offsetting is one of those. Solutions need coordination. Thus change requires an alignment of interests.

Everyone has an interest in addressing climate change. Africa has an interest in ensuring that its economic growth prospects are not hurt by trying to do its part for the climate. Carbon trading is one way to do that.

Even fast-growing dynamic African economies are suffering from climate change. Look at Kenya, for example - a country that I have come to know well, after hosting the world’s largest-ever auction of carbon credits in Nairobi earlier this year.

On the one hand, Kenyan GDP is growing at around 6 per cent per annum as a young population urbanises and digitises. On the other, last year’s drought, the worst for over 40 years, saw over 2.4 million animals die – creating serious threats to life, and costing the Kenyan economy heavily. The drought got so bad that local Maasai tribes who rely on their livestock, were being forced to sell emaciated cattle for as little as USD10, rather than the USD500-1000 they would expect to fetch.

Carbon credit projects can help get investment to these same rural communities in Kenya that have been hit by climate change. And in doing so, the planet gains too.

This is a win-win trade. For me, that is absolutely clear. And that trade can be central to addressing the issues that will come up time and again during Africa Climate Week.

The writer, Riham ElGizy, is the CEO of the Regional Voluntary Carbon Market Company.