Hundreds of millions of dollars were pledged for African carbon credits at the climate summit

NAIROBI (Reuters) – An initiative to boost the production of carbon credits in Africa 19-fold by 2030 attracted hundreds of millions of dollars in pledges on Monday as Kenyan President William Ruto opened the continent’s first climate summit.

In one of the most anticipated deals, investors from the UAE committed to purchasing carbon credits worth $450 million from the African Carbon Markets Initiative (ACMI), which was launched at the COP27 summit in Egypt last year.

“We must see green growth as not just a climate necessity, but also a fountain of multi-billion dollar economic opportunities that Africa and the world are poised to tap into,” Ruto told delegates.

African leaders are pushing market-based financing instruments, such as carbon credits or offsets, which can be generated through projects that reduce emissions, usually in developing countries, such as planting trees, or switching to cleaner fuels. (See explanation for more details)

Companies can then purchase carbon credits to offset emissions they cannot reduce from their own operations to help meet climate goals. One credit is equivalent to saving or avoiding one ton of carbon dioxide.

Organizers of the three-day summit in Nairobi say they aim to showcase Africa as a destination for climate investment and not a victim of floods, drought and famine.

African governments see carbon credits and other market-based financing instruments as crucial to mobilizing financing that has been slow to arrive from donors in the rich world.

The offset market was worth about $2 billion in 2021, and Shell and Boston Consulting Group predicted in January that it could reach between $10 billion and $40 billion by 2030.

Several speakers at the summit said they saw little progress toward accelerating climate finance because investors still see the continent as too risky.

Africa has received only about 12% of the money it needs to deal with climate impacts, according to a report released last year by the nonprofit Climate Policy Initiative.

“There has been no success for an African country in attracting climate finance,” said Bogolo Kinwendo, a UN climate adviser and former trade minister of Botswana.

Kevin Kariuki, vice president of the African Development Bank, told Reuters that the agreements announced on Monday were “very welcome” but not enough.

He said that African countries will push at the United Nations COP28 climate summit scheduled in Dubai, at the end of November, for an expansion of the International Monetary Fund’s Special Drawing Rights, which could unleash $500 billion in climate finance, which can be leveraged for up to $500 billion. To five countries. times.

“The private sector remains an untapped opportunity that must now be seized,” said Patricia Scotland, Secretary-General of the 56-nation Commonwealth of Nations.

“If you look at what we have in terms of thermal energy, solar energy, wind energy, hydro energy, this is a power plant waiting to be unleashed,” she told Reuters.

More than 20 presidents and governments are expected to attend the summit as of Tuesday. They plan to issue a declaration outlining Africa’s position ahead of the UN climate conference later this month and COP28.

Investments

The oil-producing UAE is positioning itself as a leader in climate finance in Africa.

Hassan Ghazali, Investment Director at the United Arab Emirates Independent Climate Change Accelerators Authority (UICCA), announced a $450 million commitment by the UAE Carbon Alliance, an alliance of private sector players.

Climate Asset Management – a joint venture between HSBC Asset Management and Pollination, a climate change investment and advisory firm – also announced a $200 million investment in projects that will produce ACMI credits.

Britain said UK-backed projects worth 49 million pounds ($62 million) would be announced during the summit, while Germany announced a debt swap worth 60 million euros ($65 million) with Kenya to free up money for green projects.

Many African activists oppose the summit’s approach to climate finance, and about 500 people marched through downtown Nairobi on Monday to protest.

They say carbon credits are an excuse for continued pollution by wealthier countries and companies, which should instead repay their “climate debt” through direct compensation and debt relief.

Sultan Al Jaber, President of the UN Climate Change Conference (COP28), said carbon markets are an important tool, but “the lack of jointly agreed standards undermines their integrity and reduces their value.”

A working paper from the Debt Relief for Green and Inclusive Recovery Project finds that sub-Saharan African countries face annual debt servicing costs that are almost identical to their climate finance needs.

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