COP28: Voluntary Carbon Markets redesign an urgency
Baboki Kayawe | Monday November 13, 2023 06:00
Having metamorphosed into “the elephant in the room”, climate experts say the subject should be huge at the upcoming UN Climate Change Conference of the Parties 28 (COP28), which will be held in the United Arab Emirates (UAE) from the end of November 30 to December 12.
A carbon credit or offset credit is a transferrable financial instrument (i.e. a derivative of an underlying commodity) certified by governments or independent certification bodies to represent an emission reduction that can then be bought or sold.
Companies can meet their climate targets by purchasing credits for their current emissions while other organisations have cut the bulk of their emissions and used credits to compensate for those they cannot avoid.
Essentially, companies that cannot stop emitting carbon dioxide can ask another entity elsewhere in the world to emit less so that, even as the first carry on producing carbon dioxide, the total amount of carbon in the atmosphere is reduced.
The UAE meeting is earmarked as auspicious for climate action as the first global stocktake process will unfold, as per the Paris Agreement. An assessment of the global climate action will happen, and both the Kyoto Protocol and the Paris Agreement are of key relevance to the stocktake and voluntary carbon markets discussions.
The Clean Development Mechanism (CDM) which sets up the issuance of credits, was established under the Kyoto Protocol, the 1997 global climate treaty. Subsequently, Article 6.4 of the Paris Agreement – the 2016 climate treaty – recognised that parties to the United Nations Framework Convention on Climate Change (UNFCCC) could choose to pursue voluntary cooperation in the implementation of their Nationally Determined Contributions (NDC). This would allow for higher ambition in mitigation and adaptation actions as well as promote sustainable development and environmental integrity.
Climatologists agree that Article 6.4 could serve as the basis for a global carbon market redesign. And a redesign is critically required.
Sunita Narain is the director of the Centre for Science and Environment in India.
“Its design was flawed,” Narain remarked of the CDM during a recent virtual science café by Media for Environment, Science, Health and Agriculture (MESHA) on carbon trade and mitigation.
MESHA is a Nairobi-based association of science journalists and communicators, which is currently hosting a series of virtual engagements toward COP28. “This is important because, at COP28, the world will be discussing the role of carbon markets as it moves ahead in the negotiations. “Currently, we don't have a regulated carbon market, but a voluntary carbon market in the world,” Narain continued.
She added: "The entire voluntary carbon markets is a sophisticated ecosystem, which involves a multitude of players from developers, verifiers, and validators to registries to ensure that carbon-offsets projects reduce greenhouse gas emissions."
Narain, who has been with the Centre for Science and Environment for over four decades, shared the findings of an investigation on carbon markets in India, entitled 'Discredited: The Voluntary Carbon Market in India'. The study highlighted the need for a redesign and transparency of the carbon market, which has exponentially boomed across the world including India.
The study noted that while carbon trade is not bad and could potentially unlock investment, it is an industry wrapped in secrecy.
“There is no government database on the number of voluntary projects,” Narain said. “When we approached individual companies that sell, they said they were under confidentiality clauses. “We got no information on the project site, no information on price beneficiaries. “We built the database looking at global sites and then used the database to identify project developers, project sites.” Another concern was over-crediting, as exemplified by a case study on clean cooking and the supply of improved cookstoves to households. The company involved claimed decarbonisation based merely on stove distribution as opposed to the actual usage of the cookstove. People were found to be using multiple sources of cooking.
"In this way, you are leading to over-crediting of emissions; you are taking credit for emissions reduction that has actually not happened. This is even worse for the planet today,” Narain stressed.
Benefit sharing is also a big issue needing redress, the study further revealed, noting that developers and investors benefited from offset projects at the exclusion of the communities. “And you find that it is a pittance that has gone to the community. "The community has either only received a free cookstove or in certain villages were even asked to pay for the cookstove. “So, the entire credits have gone to the project developer, the verifier, the registry – the whole business is making money and not the community which is supposed to change its food habits, and its cooking habits. “They have got nothing out of it,” added Narain.
In most forestry-based projects, communities had given away the rights to carbon credits to foreign developers. “The rich are being subsidised by the poor,” she said.
The study found that the entire purpose of the current voluntary carbon market appeared to be about mitigating emissions. In fact, it could end up increasing emissions as the buyer, say an airline company, could even increase these emissions by saying they bought credits, and believed they were, therefore, carbon neutral.
Though other proposals have been put forth for the CDM redesign, the Zimbabwe government has been commended for recently setting the tone for “an ideal carbon credit deal”. Through the brilliant proposal, as Narain calls it, Zimbabwe announced that it would take 50% of the total revenue from carbon credit projects operating in the country.
“The proposal currently does not include the direct share with communities, and that is left to the project developer. “We think that the original Zimbabwean government proposal should be the one used,” she said, adding that the initial proposal also spelt out the direct community benefit.
Key lessons from Africa emerging from the café included recommendations for the voluntary carbon market to be aligned to every country's NDCs. Moreover, Africa was called to prepare to derive economic and development benefits from carbon capture and storage presented by forestry resources.
The chairperson of the Africa Group of Negotiators, Ephraim Shitima from Zambia, indicated that COP28 will be an opportunity for Africa to advocate for the inclusion of forestry projects, as they were excluded by the Kyoto Protocol in the CDM.
“The sector within which we have comparative advantage was restricted,” he said. “Most of the projects under the forestry sector were not illegible and we are hoping that as we adopt the criteria of projects that are eligible, at COP28 we are going to have important consideration for forestry projects.”
The Africa Carbon Market Initiative (ACMI) was launched last year in Egypt at COP27, with seven countries supporting the initiative. As is the case elsewhere, it was sold as an initiative that was going to catalyse the much-needed climate finance to enable adaptation as well as promote sustainable development. However, Amos Wemanya from Power Shift Africa noted that previous experiences with carbon market initiatives and projects do not point in that direction. Wemanya, who was one of the speakers at the MESHA science café, does not think the ACMI will be any different from “what we are seeing on the ground”.
“They promote a new form of colonialism with rich companies from the global North transferring responsibility to the poor communities, with credit prices not representing the actual price of projects,” Wemanya said.
Wemanya further highlighted that the ACMI aims at attracting only $6 billion by 2030, yet data from the Global Centre for Adaptation has revealed Africa would need more than $50 billion every year up to 2030 to be able to build resilience to the climate crisis.
“So that is a very small fraction of resources coming into the climate finance basket. What we need is global solidarity in helping Africa,” he added.
Reiterating Narain’s argument, Wemanya said voluntary carbon credits in their current design are “pollution permits”, disregarding the rights as well as benefit sharing with local communities in many projects in Africa and beyond.
“Africa cannot dish out pollution permits for polluters to continue polluting as the region affected the most by climate change,” he said.
Carbon markets, in their current state, are seen by the pan-African movement as yet another way of perpetuating the global financial imbalance. More African states are calling for the redesign of the global financial architecture, which is presently characterised by resource flow from the global South to the North annually.
In an interview after the MESHA Café, Botswana climatologist and director of the Climate Change Group, David Lesolle, said carbon markets present an opportunity for Africa to offer the resource and to get the most out of carbon trading. However, he advised that Africa needs to work together to define a set of principles to guide its participation, as well as determine the share of proceeds and modalities for an African goal for participating in voluntary carbon trading.
Lesolle is of the view that voluntary carbon markets should only be used “for feel-good and philanthropy", otherwise, there’s a risk of flooding the market with cheap carbon offsets.
For economic value to be derived, he argued that the viability of any transaction should be driven by the amount, guarantee of supply and availability. Advancing that collectively, Africa has a good quality carbon sink to be able to bargain for a higher premium, especially as the continent’s resources have been historically sold off cheaply.
Lesolle also buttressed that Africa’s carbon potential must focus on addressing nature-based systems for biodiversity conservation, rural livelihoods, and climate change adaptation.
“Africa’s approach must consider the carbon credit potential as a public good and thus requiring a proper market valuation,” he said.
*This article is the first in extensive reportage on the road to COP28, produced in partnership with MESHA and the International Development Research Centre (IDRC). Baboki Kayawe is a development communicator with an interest in science and climate journalism. She has taken keen interest in climate change as it is an existential threat to Africa and the continent’s development aspirations. Currently pursuing graduate studies in Natural Resource Management and Participatory Development Communication with the Okavango Research Institute, Kayawe aims to be among the continent’s science and development communication contributing to solution-based climate journalism.