Carbon trading may soon be big business in Africa. But can policymakers overcome the fragmentation and inefficiencies plaguing the market?
PROMISING equity and efficiency in the fight against climate change, yet long scuppered by low prices, patchy coverage, tepid demand and opaque reporting, carbon trading has been a source of enduring frustration for environmental policymakers.
Despite these difficulties, however, voluntary carbon markets are in the middle of a resurgence as a way to facilitate climate action, in large part due to weakening political will and global appetite for the kind of transformative change that underscored enthusiasm for the Paris Climate Agreement in 2015.
A deepening sense of despair, coupled with the increased assertiveness of less-developed countries of their rights to industrialise and exploit their natural resource base given extremely low historical emissions, has led to climate crisis fatigue and growing talk of “pragmatism”.
This has resurrected a package of market-based, financialised solutions such as carbon trading and climate reporting, to spur climate action. This shift in tone is especially evident in a recent series of announcements at Cop27, particularly the new rainforest alliance incorporating carbon trading offsets against environmental protection with the Democratic Republic of Congo (DRC) as a core founding partner, and the new voluntary carbon market (VCM) initiative for Africa.
Both these developments mean carbon trading may soon be big business on the continent, and promise millions of new green jobs and billions in revenue. But is it really possible given the fragmentation and inefficiencies plaguing even the largest carbon markets globally, and the financial sector market expertise needed for it to take off in Africa?